Google’s traffic acquisition costs rise, likely due to the Apple search deal

A long-running deal with Apple that makes Google the default search engine in the mobile and desktop Safari browser is becoming more and more expensive for the search giant.

As Business Insider notes, Google told analysts on an earnings call following its stellar third-quarter earnings report that traffic acquisition costs, or TAC, are expected to increase as a percentage of revenue going forward.

TAC is basically the money Google pays other device vendors and websites to promote its services and steer more clicks to its sites. “TAC growth continues to outpace accelerating Google sites growth, due in part to recent changes in partner agreements (presumably Apple),” wrote Baird analyst Colin Sebastian in a note to investors on Thursday.

“It is not an existential threat, but it is a cost that will continue to rise,” he added.

Although Google itself didn’t attribute the rise in TAC costs to the Apple deal, Macquarie analyst Ben Schachter said the increase was “clearly very likely from mobile and Apple overall.”

Google paid Apple an estimated $1 billion in 2014 to be the default search engine choice on iPhone, iPad and Mac. However, its total payments to Apple may now be closer to $3 billion, Bernstein analyst Toni Sacconaghi estimated in August.