Global tech titan Alphabet Inc. (GOOGL) pays smartphone maker and fellow Silicon Valley FAANG peer Apple Inc. (AAPL) to remain the primary search engine for iPhones, iPads, and Macs. Goldman Sachs estimates that Google currently pays over $9 billion per year in traffic acquisition costs (TAC), representing a larger revenue stream for the Cupertino, Calif.-based company than both its Apple's iCloud and Apple Music businesses, as reported by Business Insider. According to the investment bank, Google could shell out a whopping $12 billion to maintain its deal with Apple in 2019. 

TAC Fees Still Large Bulk of Apple's Services Business

In a note to clients on Friday, Goldman Sachs analyst Rod Hall noted that while the payout may seem hefty for Google, its investment has generated a high ROI for the search engine in light of the money it makes on iOS through paid searches. 

"We believe this revenue is charged ratably based on the number of searches that users on Apple's platform originate from Siri or within the Safari browser," wrote the analyst. "We believe Apple is one of the biggest channels of traffic acquisition for Google."

The last time that Google disclosed its payment amount to Apple was in 2014, due to court filings which revealed that the firm paid the smartphone maker $1 billion to remain its primary search engine, as noted by Business Insider. In 2017, Bernstein pegged the number at $3 billion per year. 

Apple bulls have applauded the company's transition away from its core iPhone segment, which still accounts for roughly 60% of its total revenue, as it doubles down on software and services businesses that offer recurring revenue streams. Earlier this year, the tech titan became the first U.S. corporation to surpass $1 trillion in market value, in large part thanks to optimism surrounding its high-growth Apple Music, iCloud and App Store businesses. Yet according to Goldman's model, traffic acquisition cost (TAC) fees still account for 24% of Apple's services segment, while AppleCare, Apple's repair and warranty program, comprises 17% of the $31.3 billion in services revenue that Apple generated in 2017. 

"We don't believe Apple Services should be valued standalone at a higher multiple than the combined company," wrote Hall. 

Goldman's 12-month price target of $240 on Apple shares implies a 6.3% upside from current levels. Trading up about 0.4% at $225.74, Apple stock reflects a 33.4% gain year-to-date (YTD), compared to the S&P 500's 9% return over the same period.