Bernstein analyst Toni Sacconaghi, a fixture on Apple’s quarterly earnings calls, has suggested that Apple consider purchasing privacy-focused search engine DuckDuckGo as a way to apply pressure on Google. Reported by Street Insider, Sacconaghi believes that acquiring the fourth most popular US search engine DuckDuckGo for approximately $1 billion would put pressure on Google and allow Apple to capture lucrative advertising revenue.
Google currently pays Apple $7 to $8 billion annually to be included as the default iOS search engine and would probably like to keep that money. However, if Google were to stop paying Apple, Microsoft could easily step in with its Bing search engine and a similar amount of money, something that would benefit both both Apple and Microsoft.
That $1 billion amount tossed out by Sacconaghi is only about a week’s worth of Apple’s cash flow, a mere pittance for the company. Sacconaghi stated in the article that:
“Google is clearly the dominant force in search today. However, we suspect the company’s fear of “rocking the boat” – which could compromise $15B in profits it captures today from iOS – may ultimately limit its freedom of action with Apple. Conversely, Apple may be in a stronger position than at first glance, given it controls the keys to the kingdom on who can monetize iOS search. However, it remains uncomfortably dependent on Bing to act as a counter weight to Google – hence our suggestion that Apple acquire its own search engine. Finally, Microsoft Bing may (counterintuitively) have the most “option value” vis-à-vis the status quo – although it remains to be seen how aggressively it will pursue this opportunity.”
Will Apple take Sacconaghi’s suggestion to heart? Only time will tell, but Apple is becoming increasingly more aggressive in acquiring companies with value to its operations.
