Analyst Scott Devitt at Morgan Stanley estimates that Google pays $1B a year to Apple to be the default search engine in iOS devices. Given that iPhone and iPads are often estimated to make up for a large majority of mobile web traffic (we’re seeing close to 80% here on Ubergizmo), this is very important for Google to stay in, despite the current friction between Apple and Google, and despite the fact that late Apple co-founder Steve Jobs wanted to destroy Android at all cost.It’s probably safe to say that Google is making money from the deal as iOS users browse its site and clicks on its ads, and even if it was just breaking even, it may just be worth it to prevent players like Bing to grab some market share while everyone tries to figure out how to make mobile views more profitable. The industry’s standard metric is CPM or cost per thousand views, and on mobile, it is typically much lower because the advertising space is so small. The Business Insider cites the Morgan Stanley report when saying that both companies have a revenue-share deal in which Apple gets 75% of the revenues collected in search ads.
This “cost of traffic acquisition” has not been confirmed by Apple and Google, but this estimate seems plausible enough to discuss, and give you a peek behind the scene on how the world’s largest companies fight, and pay, for market share. Do you think that Bing would ever get into iOS?