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Google spent $19 billion on traffic acquisition in 2016


Most Android smartphones come pre-installed with a full suite of Google apps, whether it is Drive, Docs, Sheets, YouTube, Duo or the Google Photos app. Some may see it as convenient, and some may see it as a clutter, but did you ever wonder why this set of app always exists on a new Android smartphone? Well, it’s because Google pays for it.

Reportedly, in 2016, Google paid out $7.2 billion to OEMs so that these applications are included on their devices. Basically, each year, Google pays Android OEMs for features such as search bar placement and pre-loaded Google apps like YouTube and Chrome. In fact, Google also pays Apple to be the default option for built-in web search boxes on Safari. Google calls this cost “traffic acquisition costs”, for which the company pays $19 billion each year. This cost has been seen increasing year by year.

In 2012, Google spent around seven percent of its total expenditure on traffic acquisition costs, which has increased to 11 percent in 2016. This is a three time increase in the money spent on the strategy. And the reason why there is such an increase in the cost spent by Google can easily by pointed to the growing usage of smartphones since 2012. This means that most of the searches are going through phones, so the increased expenditure makes sense. It is also believed that that the recent deal between Apple and Alphabet is also one of the reasons behind increased expenditure. The deal is estimated to be worth $3-$4 billion.

This means, that when a company that manufactures Android smartphones wants to add the Play Store onto their Android devices, they have to voluntarily agree to install other Google apps on their phones as well. This naturally has raised questions, if by doing so Google is abusing its powers. Antitrust authorities in Europe and the USA are currently investigating to determine whether or not Google is abusing the power it has over these companies with its ownership of Android. But enhanced regulation in the US and Europe can prove to be dangerous for Google as it can lead the OEMs to negotiate agreements with Google, and also to walk out of the contracts if needed.

The article originally appeared on BGR India


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