Revenue from services was a major contributing factor in Apple's revenue growth even though iPhone sales have plateaued in various countries. However, according to the latest estimates by Goldman Sachs, Apple received a lot of money from the search engine giant to remain the default search engine of Apple's Safari browser.
An analyst for Goldman Sachs wrote in a note to investors:
“Apple will need to add mid to high single digits growth back to Services revenues through successful launch of the 'Apple Prime' bundle including original video that we expect to be rolled out this Spring/Summer.”
Estimates tell us that Google paid Apple anywhere near $9 and $10 billion which is a lot of money to spend to remain as a default search engine. Having said that, Apple is probably one of the biggest source of traffic for Google and in order to maintain those numbers, Google has to pay Apple a substantial amount every year. To put things into perspective, Apple accounts for roughly half of all mobile revenue and traffic.
The payment basically ensures that Google remains as the default search engine on every iOS device. Apple is in a very good position where the company can demand more money over the years. Apple can obviously approach other search engine websites like Bing if Google choses not to pay the price in the future.
This payment ensures Google will continue as the default search provider on iOS devices rather than a rival search engine. The downside to the agreement is that Apple can continue to push prices up each year and, if Google ever refuses to pay the amount, the Cupertino firm can simply approach a rival such as Microsoft and make Bing the default search engine.
This is pure profit for Apple as the company's install base is increasing to grow even though sales of iPhones may have staggered.