Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Google and Apple: Apple Making Plenty of Money From Google

Google and Apple: Last week, we published a piece about Yahoo turning to Google Inc (NASDAQ:GOOG) for help. Today, we are going to take a closer look at a partnership between Apple Inc. (NASDAQ:AAPL) and the search engine giant.

According to a Business Insider article, “Apple is getting $1 billion per year from Google to make Google the search default on iOS devices, according to a Morgan Stanley report.”

Google Inc (NASDAQ:GOOG)It is safe to say that Morgan Stanley analyst Scott Devitt feels good about Google Inc (NASDAQ:GOOG) as an investment, as he “put Google on his best ideas list for investments on Friday, in a reported titled The Next Google is Google.”

Here is some more information from the Business Insider article, including Devitt’s thoughts on how Apple Inc. (NASDAQ:AAPL) would approach a deal with Google.

“In the past, some analysts have estimated that Apple has a revenue sharing deal with Google on iOS search. So that for every one dollar of search advertising collected on an iOS gadget, Apple gets 75 cents.”

“Devitt thinks Apple wouldn’t do a revenue sharing deal with Google because it’s too messy. He thinks Apple would do a fee per device because it’s easier for accounting and it gives Apple upfront payments. It’s also a hedge against users going to and searching from there instead of the default search box on iOS.”

While some investors continue to worry about the traffic acquisition cost associated  (TAC) with Apple Inc. (NASDAQ:AAPL) devices, this is not something that Devitt believes to be an issue. He doesn’t feel that traffic acquisition costs are going to skyrocket in the future.

“He believes the TAC will only increase at 5% per year, and in terms of Google’s overall TAC, he thinks it’s steady at 30-35%.”

All in all, the article goes on to state that this works out to just around $1 billion per year for Apple with more to come in the future.

Yes, this is a good deal for Apple Inc. (NASDAQ:AAPL) but as the article explains Google Inc (NASDAQ:GOOG) is benefiting as well:

“For Google, it’s a pretty good deal. Devitt estimates Google controls 95% of the mobile search market. When you consider that Apple and Android are swallowing the mobile market, paying $1 billion a year for a monopoly on the most lucrative online business in the world is a no-brainer.”

What are your thoughts on this partnership?

Check back here for more updates on Google and Apple.

DISCLOSURE: I have no positions in any stock mentioned.

Additional Apple news stories can be found below:

App Wars: Apple Inc. vs. Google Inc, Betty Liu Reports

An Update on the Apple Inc. iPad Market Share

Two More Patents Awarded to Apple Inc.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.