Google may have paid Apple $3 billion to remain the iPhone's default search engine

Apple won't say what the exact number is, but Google pays a substantial amount of money to Apple in order to remain the default search engine on iPhones and iPads.

A new analysis from Bernstein analyst Toni Sacconaghi estimates that Google might be paying Apple as much as $3 billion per year.

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Based on that estimate, Google may account for 5% of Apple's total operating profits this year, and up to 25% of total operating profit growth recently, according to the Bernstein research.

The only hard number we know is that Google paid Apple $1 billion in 2014, thanks to court documents. That $1 billion was derived as a percentage of revenue generated by Google through iPhone and iPad users, as much as 34%, according to some reports.

But recently, Apple has been drawing investor focus to its "Services" line item, which could amount to as much as 13% of Apple's total revenue this year. When Apple executives talk about Services, they like to focus on the fee Apple collects from software sold on the App Store, or the money they make through subscriptions like Apple Music.

How Steve Jobs saved Apple from disaster:

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How Steve Jobs saved Apple from disaster
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How Steve Jobs saved Apple from disaster

In late 1996, Apple announced plans to bring cofounder Steve Jobs back into the fold 11 years after he left the company by acquiring his startup NeXT for $429 million — just in time for Jobs to join then-Apple CEO Gil Amelio on stage at January 1997's Macworld Expo, a convention for Mac enthusiasts, as a keynote speaker.

(Photo by Lou Dematteis / Reuters)

Steve Jobs' NeXT found its niche selling graphically intensive PCs with cutting-edge screens to universities and banks. Apple hoped that Jobs would revitalize the Mac maker, whose stock had hit a 12-year low under Amelio's leadership and experienced crippling losses.

(Photo by Ann E. Yow-Dyson/Getty Images)

On July 4, 1997, Jobs persuaded Apple's board to oust Amelio and make Jobs the interim, and then permanent, CEO. In August 1997, Jobs took the stage at another Macworld Expo to announce that Apple had taken a $150 million investment from its long-time rivals at Microsoft. "We need all the help we can get," Jobs said, to boos from the audience.

(Photo by Jim Bourg / Reuters)

In fact, by 1997, Apple's financial situation was so dire that Dell CEO and founder Michael Dell, one of Microsoft's biggest partners, once said that if he were in Jobs' shoes, he'd "shut it down and give the money back to the shareholders."

(Photo by Mario Tama/Getty Images)

But in early 1998, at yet another Macworld Expo in San Francisco, Jobs ended his keynote with the first of his soon-to-be ubiquitous "One More Thing" announcements: Thanks to Jobs' product direction and Microsoft's help, Apple was finally profitable again.

(Photo via Reuters)

Also in 1998, Jobs hired an executive named Tim Cook to head up Apple's worldwide operations. Cook would stay with the company, eventually becoming chief operating officer.

(Photo via REUTERS/Kim White)

Jobs needed the help. At this point, Jobs was CEO of both Apple and Pixar Studios, of which he had become chief investor in 1986 after funding it with $10 million. Jobs is actually credited as an executive producer on 1995's "Toy Story."

(Photo by Gabe Palacio via Getty Images)

Behind the scenes, Jobs was making some big changes for Apple employees, too: Under Jobs, the Apple cafeteria got much better food, and employees were barred from bringing their pets to the campus. He wanted everybody focused on Apple.

(Photo via REUTERS/Noah Berger)

Almost exactly a year after that Microsoft cash came in, in August 1998, Apple would release the iMac, an all-in-one, high-performance computer codesigned by Jobs and new talent Jonathan Ive.

(Photo via REUTERS/Mousse Mousse)

The iMac came in multiple colors, the first time the world would get a taste of Ive's computer design sensibilities. This first iMac was a much-needed hit, selling 800,000 units in its first five months.

(Photo via Reuters)

Jobs had originally pitched the name "MacMan" for this new Mac. It was Ken Segall, an executive with Apple's ad agency at the time, who suggested "iMac." The "i" is for "internet," since it took only two steps to connect to the web, in case you were wondering. But Apple has also said it stands for "individuality" and "innovation."

(Photo via Reuters)

The naming scheme would stick around. In 1999, Apple introduced the "iBook," a funky machine that tried to replicate the iMac's success as an entry-level laptop.

(Photo via Reuters)

But Apple's next really dramatic move would come in 2001, when Mac OS X was released. Where Apple had been treading water with Mac OS 8 and 9, OS X was a drastic redesign, based largely on the Unix and BSD technology at the core of Jobs' NeXT Computers.

(Photo by Lou Dematteis / Reuters)

From here, things started moving fast and furious for Apple. Later in 2001 Apple would open its first retail stores, in Virginia and California.

(Photo by Mario Tama/Getty Images).

In October, Jobs' Apple would take its first steps beyond the Mac with the iPod, a digital music player that promised "1,000 songs in your pocket." The iPod actually got off to a slow start, largely because it started at a pricey $399 and worked only on Macs.

(Photo via REUTERS/Susan Ragan SR/SV)

In 2003, Apple opened up the iTunes Music Store, with its novel pricing model of $0.99 per song, to turn the iPod into the center of a digital media universe. Around the same time, both iTunes and the iPod hit Windows, jump-starting Apple's music play.

(Photo by Justin Sullivan/Getty Images)

But in 2003 Jobs received some news that would cast a shadow over the good times at Apple: He had pancreatic cancer. He kept it a secret until sharing the news with employees in 2004.

(Photo via REUTERS/Matt Dunham MD/ACM)

In just six years, Apple had gone from a laughing stock in tech to a serious player. And from 2003 to 2006, it went from around $6 per share to about $80 per share. Apple was still lagging behind Microsoft in marketshare, but it was making serious money. Celebrities like U2 and John Mayer were tapped to help out at company events.

(Photo via REUTERS/Monica Davey MD/JDP)

Over the years, Jobs' Apple had been asked to extend its design expertise to creating a new touch-screen device. In 2004, Jobs convened Project Purple, under his supervision with Ive in charge, to develop a touch-screen device. Originally, Jobs was envisioning a tablet, but it eventually turned into a concept for a cell phone.

(Photo by Matt Dunham / Reuters)

The iPod lineup slowly grew, too. By 2005, there was the iPod, the iPod Mini, the iPad Nano, and the iPod Shuffle, in descending size order. That same year also saw the introduction of the first iPod with video, alongside the ability to buy movies and videos on iTunes.

(Photo by Dino Vournas / Reuters)

In 2005, Motorola introduced the ROKR, a phone that it made in partnership with Apple. It was the first phone that could play music from the iTunes Music Store. But it was limited to being able to store only 100 songs because of a limit in its software.

(Photo by Kim Kulish/Corbis via Getty Images)

In 2006, Jobs made a big move that probably saved the Mac. Former CEO John Sculley had banked Apple's future on the pricey PowerPC processor, while the major Windows PC manufacturers stuck with Intel. It meant Macs were both more expensive to buy and harder to develop software for. But in 2006, Apple introduced the first MacBook Pro alongside a new iMac, both of which came with Intel processors.

(Photo by Lou Dematteis / Reuters)

It also meant that for the first time you could install Windows on a Mac.

(Photo by John Schults / Reuters)

Apple was on the upswing. In 2006, the flagship Apple Store opened in Midtown Manhattan. Its unique glass-cube structure makes it a modern New York City landmark.

(Photo by James Leynse/Corbis via Getty Images)

But at this point, Jobs' health was starting to fade, and observers started to take notice. Note how thin Jobs looks here, shaking hands with Disney CEO Bob Iger at a 2006 Apple event.

(Photo by Justin Sullivan/Getty Images)

Still, 2006 also marked a personal victory for Jobs. He got to send this email to every Apple employee: "Team, it turned out that Michael Dell wasn't perfect at predicting the future. Based on today's stock market close, Apple is worth more than Dell. Stocks go up and down, and things may be different tomorrow, but I thought it was worth a moment of reflection today. Steve."

(Photo via REUTERS/Dino Vournas)

After years of speculation, Jobs would officially unveil the iPhone at January 2007's Macworld Expo. It combined the music features of the iPod with a slick, responsive touch screen that didn't need a stylus, unlike most mobile devices at the time. And the iPhone's Safari was the first full-featured web browser on a phone.

(Photo via REUTERS/Kimberly White)

An excited media dubbed it the "Jesus Phone." Excited fans camped out in front of Apple Stores nationwide.

(Photo by Curtis Means/NBC/NBCU Photo Bank via Getty Images)

The iPhone was a massive hit, taking only 74 days from its August 2007 launch to sell a million units.

(Photo by Sean Gallup/Getty Images)

In 2008, Apple released the first big iPhone update: the iPhone 3GS. It had faster network speeds, sure, but the biggest change was that it came with this thing called an App Store to let you install software from non-Apple developers. At launch, the App Store had 500 applications.

(Photo via REUTERS/Kimberly White)

Famed venture investor John Doerr of Kleiner, Perkins, Caufield & Byers took the stage to announce a $100 million iFund for app developers. It was the start of the app economy, and Apple was leaving Microsoft in the dust.

(Photo by David Paul Morris/Getty Images)

Still, Jobs' health continued to loom over Apple. In August 2008, Bloomberg accidentally published a 2,500 word obituary of Jobs. At a September 2008 keynote, Jobs poked fun at the idea.

(Photo via REUTERS/Robert Galbraith)

In 2009, Tim Cook was tapped as interim CEO while Jobs took the first of three extended medical leaves. Even on Jobs' return, Cook became a regular at Apple keynotes. When Jobs returned, his prognosis was listed as "excellent."

(Photo via REUTERS/Kimberly White)

In 2010, Jobs finally introduced the Apple iPad, the tablet he had been wanting since the early 2000s.

(Photo via REUTERS/Kimberly White)

The iPhone and the iPad accidentally started an internet standards war. Jobs thought Adobe's Flash, then the de facto standard for interactive web content, was slow and insecure. And so Apple's mobile devices didn't support it. A jilted Adobe, recognizing the threat this posed to its business, took out magazine ads begging Apple to reconsider, to no avail.

(Photo Illustration by Justin Sullivan/Getty Images)

In early 2011, during the last of his medical leaves, Jobs would give his final two product-announcement presentations: one in March for the iPad 2, and one in June for the iCloud service.

(Photo via REUTERS/Beck Diefenbach)

Jobs made his last public appearance in June 2011. He proposed a new Apple Campus to the Cupertino City Council. After years of construction, Apple is planning to move into the "spaceship campus" in early 2017.

(Photo via REUTERS/Noah Berger)

Jobs stepped down as Apple CEO on August 24, 2011, accepting a role as chairman, after his pancreatic cancer relapsed. Not long after, Jobs died on October 5, 2011, working for Apple until the day before his death. That night, the flags at Apple flew at half-mast.

(Photo by Kevork Djansezian/Getty Images)

Tim Cook got the nod as full-time CEO after Jobs' resignation. Apple has continued to grow under Cook, becoming the most valuable company in the world. And the rest, as they say, is history.

(Photo via REUTERS/Stephen Lam)

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But Bernstein dug through Apple's filings and found that licensing revenues, like those Google pays Apple, is actually the biggest or second biggest contributor to services growth.

Because of this, it believes the amount Google will pay Apple this year "will be closer to $3B." Here's how Sacconaghi and team came to that number:

Our estimate is triangulated in a number of ways: (1) third party market research suggests that Google's total mobile revenues have increased from $16B to $50B (i.e., have tripled) from CY14 to CY17 (Exhibit 3); accordingly, payments to Apple likely have increased commensurately (to $3B) since then; (2) In the last two quarters, Apple's Services revenues have increased YoY by $2.4B, with the App Store being the biggest contributor (which we model has increased $1.35B YoY), and Licensing revenues to be up by the second largest amount, which could be up $500M or more – suggesting that total licensing in the last two quarters is increasing at a rate of $1B per year this year; and (3) Google's distribution Traffic Acquisition Costs (TAC – the amount it pays OEMs and carriers for search placement) is 2.2x what it was in 1H 14 (Exhibit 4), again suggesting that if Apple held share, payments from Google to Apple might be up a similar amount to $2.2B (or more assuming Apple gained share). We note that press reports have indicated that the revenue share between Apple and Google was at one point 34%, which if true and still the case today, would point to a much higher than $3B in payments from Google to Apple today.

Basically, this means that the analysis started out with the $1 billion payment in 2014, and then extrapolated for Google or Apple's growth in the relevant line items in the three years since then to come up with the $3 billion estimate.

Bernstein points out that the whatever money Google pays Apple is likely all profit — a pretty great deal for Apple and a strong sign of the importance of the iPhone ecosystem.

And unless Google changes the deal, Apple will collect larger and larger checks every year as its installed base grows.

Bernstein analysts even see a possibility that Apple could double-down on licensing revenue by selling off app placement on the iPhone, which could be profitable "particularly if Apple offered to make them default applications within iOS – think Uber (vs. Lyft) or Amazon (vs. Jet) or Facebook (vs. Snapchat/Twitter) or Google Maps (vs. Mapquest) or WeChat (vs. Line) or Netflix (vs. Hulu)," Sacconaghi wrote.

RELATED: 8 apartments that cost less than an iPhone 7

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8 Apartments That Cost Less Than An iPhone 7
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8 Apartments That Cost Less Than An iPhone 7

1. Florida lakeside luxury

From $585/month, Sailwinds

Often, a studio feels like a sacrifice. That’s not the case at Sailwinds in Winter Haven, FL. The studio apartments have a savvy, space-conscious design and premium materials like plank flooring. Plus, if you’re looking to get the most out of your rental budget, the community offers two-bedroom apartments for less than an iPhone 7 too: $730/month! Whichever unit you choose, you’re guaranteed to enjoy the serenity that comes with being nestled next to picturesque Lake Deer.

Photo credit: Trulia.com 

2. Clever redesign in downtown Sioux Falls

From $593/month, YMCA Apartments

Enjoy a hip, refurbished apartment within walking distance to everything in downtown Sioux Falls, SD, without breaking your budget. Located in the old YMCA building, the newly renovated apartments have a classic design, with some industrial-chic touches (like exposed air-conditioning ducts) that give plenty of character. Plus, unlike typical affordable apartment communities, this one has a few special extras, like a fitness center, clubhouse, and pool.

Photo credit: Trulia.com 

3. Active amenities in Houston

From $595/month, Westchase Creek Apartments

If you’re the type who’s always up for a good time, this amenity-filled community in Houston, TX, is for you. The 24-hour HarborFit fitness center lets you squeeze in workouts that fit your schedule, the swimming pool and sun deck were designed for relaxation, the bark park lets your pooch get to know the neighbors, and the business center sets a heavenly scene for work-from-home days with its free Wi-Fi and coffee bar. When you finally retire to your apartment, you’ll enjoy a spacious layout and chic modern design — perfect for relaxing after an action-packed day.

4. Cozy (and quiet) in Chattanooga

From $619/month, The Grove at Hickory Valley

The biggest luxury of all has to be peace and quiet. The Grove at Hickory Valley in Chattanooga, TN, was designed just for that, with a concrete structure and noise-reducing walls and floors. But don’t mistake “concrete” for “industrial” style. The all-new interiors are warm and cozy, with dark cabinets and countertops, hardwood-style floors, and on-trend hardware. Since neighbors will be seen and not heard, socializing at the community center and gym will be a joy.

5. Surrounded by nature in North Carolina

From $639/month, Carolina Woods Apartments

Nature lovers will adore this place, which is located on a wooded ridge in the historic Bethabara Park area. But just because the setting is serenely rustic doesn’t mean you’re far off the beaten path. Since the community is located between I-40 and Winston-Salem, NC, you’re only a short drive to Wake Forest University and other major employers. In the summer, walk the mature, landscaped grounds and nearby park, and when the weather turns cool, head to the newly renovated fitness center for a high-intensity workout. Or just sit back and enjoy the views from your apartment.

6. Vegas views

$760/month, Avion at Sunrise Mountain

Here’s proof that you can live in a bustling city and still save on rent. These apartments are located in northeast Las Vegas, NV, which means you get to enjoy spectacular views of both downtown and the always-fabulous Las Vegas Strip. The biggest draw, however, is the community amenities: sparkling pools and heavenly outdoor spa tubs, a 24-hour-access fitness center, a billiards room, a community library, a business center, and a tot lot for little ones. Basically, it’s the closest thing to living in one of the great Vegas resorts.

7. Southern comforts

From $763/month, The Links at Georgetown

From the looks of this stately community, you’d expect a seriously high price tag. We also wouldn’t blame you if you thought the same thing after seeing the pet-friendly units, which have private entries, garages, ceramic tile foyers, electronic alarm systems, fireplaces, renovated gourmet kitchens, and stylish details like brushed-nickel finishes. Oh, yes, and the high-end gym and deluxe outdoor dining area. But the down-to-earth monthly rent makes it possible to enjoy these features, along with all the fun of nearby historic downtown Savannah, GA, without breaking your budget.

8. Fabulously Fresno

$845/month, Renaissance

You usually have to go far from campus to find an affordable apartment that isn’t geared to students (read: tiny), but Renaissance gives you surprisingly spacious digs close to Fresno State University’s campus in Fresno, CA. You’ll find roomy 700-square-foot one-bedroom apartments at this price, which also include a private balcony or patio, custom carpet and window coverings, generous closet space, and an upgraded kitchen with gas range. Even if your student days are behind you, you’ll love the convenient location near Highway 41 and all the major shopping centers.

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SEE ALSO: Google's CEO and Apple's CEO were spotted together at a restaurant

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