Bernstein analyst Toni Sacconaghi has a suggestion on how Apple could put pressure on Google’s Search business: acquire privacy-focused search engine DuckDuckGo.
As reported by Street Insider, Sacconaghi says Apple should acquire DuckDuckGo for approximately $1 billion as a way to put more pressure on Google and capture the advertising revenue that comes from the search industry.
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.
Google reportedly pays Apple upwards of nearly $10 billion to be the default search engine option on iOS devices. Sacconaghi says that Google generates around $15 billion in profit from being the default search engine.
While Sacconaghi says Apple should purchase DuckDuckGo, that would mean giving up the current arrangement with Google, which contributes greatly to Apple’s Services revenue each year.
Of course, Apple could use the DuckDuckGo acquisition to put pressure on Google to make changes in the terms of their agreement.