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Google is poised to lose billions in annual revenue if Apple does not renew a deal making Google the default search engine in iOS, according to a new memo by analysts at UBS, which attempts to predict the real-world impact of such a decision.
An existing search deal is due to expire this year, and Google investors are reportedly worried that Apple will reject a new one. In a research note to investors obtained by AppleInsider, UBS estimates that Google will generate $7.8 billion in revenue from its iOS deal this year, or about 10 percent of gross revenue.
Losing that much or more going forward could inflict substantial damage to Google. However, in practice, UBS suggests that at least some people would want to switch back to Google even if it was no longer the default search service.
Assuming a 50 percent "switchback" rate, that would roughly halve the impact on gross revenue, and reduce the net revenue hit to 3 percent, in part because Google would no longer be paying Apple a lump sum.
"We believe this is a much smaller headwind that many investors expect," UBS writes.
Mozilla recently switched the default search engine in Firefox from Google to Yahoo. That helped drop Google's desktop search share in the US below 75 percent, while simultaneously spurring Yahoo numbers.
The two companies have a conflicted relationship, hampered not only by growing competition across segments, but also the aftermath of a long series of lawsuits against Android device makers, first instigated by former Apple Chief Executive Steve Jobs.
Jobs infamously referred to Google's Android operating system as "stolen," and threatened to go to "thermonuclear war" over the matter; his successor, Tim Cook, initially continued the campaign, but has claimed victory in some cases or cooperated in dropping legal action in others.
Apple has several options to choose from if it decides to go with an alternate engine. Apart from Yahoo, it could also go with Microsoft's Bing, which is already in place for Siri queries. If it decides to emphasize privacy and security, it could go with Duck Duck Go, which was added an option for iOS users just last year.