August 15, 2017 at 7:23 AM by Dr. Drang
Yesterday, 9 to 5 Mac published an article that was obviously wrong by almost any interpretation. The problem seems to have started with numbers and the words used to describe them, but is primarily because people don’t have a sense of Apple’s size.
The article is entitled “Google pays $3 billion for default search on iOS, estimated to be bulk of Apple services business,” which is not so much a title as a topic sentence. Given that Apple released its latest quarterly financial report just a couple of weeks ago, the combination of “$3 billion” and “bulk of Apple services business” should have raised a red flag. Apple reported over $7 billion in services revenue in the last quarter alone. There’s simply no way $3 billion from Google (regardless of whether that speculative figure is right or wrong) could make up the bulk of Apple’s yearly services revenue.
I doubt it could even make up the majority of Apple’s services profit. I agree with the article that whatever Apple receives from Google for having it as the default search engine is almost pure profit.1 But Apple’s collected almost $28 billion from services over the past 12 months, and the $25 billion that didn’t come from Google surely produced a profit well above Google’s $3 billion.
So where did this nonsense come from? The CNBC report that 9 to 5 Mac links to says this:
The firm [Bernstein] believes that Google will pay Apple about $3 billion this year, up from $1 billion just three years ago, and that Google’s licensing fees make up a large bulk of Apple’s services business.
So CNBC’s “a large bulk” got turned into “the large bulk” in the body of 9 to 5 Mac’s article and then just “large bulk” in its title. I can’t fully blame 9 to 5 Mac for this: “a large bulk” is not a meaningful English phrase. “Bulk” means “the main or greater part.” You can’t have “a bulk of,” only “the bulk of.” CNBC needs a copyeditor as much as 9 to 5 Mac needs a fact checker.
By the way, Bernstein—the analysis company making the $3 billion estimate—is basing its figure on court documents (presumably from the Apple-Samsung suit) that showed Google paying Apple $1 billion in 2014. Is it reasonable to think that number would triple in three years? I wouldn’t know, I’m not an analyst. I do know that the Mozilla Foundation was making tens of millions of dollars from Google a decade ago, and that’s before mobile search took off.
One of my favorite professors used to tell us that the most important part of engineering is developing a sense of scale. As you gain experience—and you’re paying attention—you’ll come to know when a structure or a machine looks right (or wrong) for its purpose. Indeed, before engineers had decent analytical tools, that sense of scale was all we had. Anyone writing about Apple’s finances should have a sense of its scale, and should know that “$3 billion” and “bulk” almost never go together.
The only expenses are portions of the salaries of the people who negotiate the deal and the software manager who makes sure a certain part of Safari’s code doesn’t get deleted. ↩︎