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Comment by wmf | Hacker News Reader

Am I the only one who thinks 36% customer acquisition cost is not crazy?

Definitely not the only one. Both Google and Apple (and their very highly paid economists, analysts, and CXOs) are betting that this deal is more beneficial to them than the alternatives.

>Both Google and Apple (and their very highly paid economists, analysts, and CXOs) are betting that this deal is more beneficial to them than the alternatives.

That's tautological

Or consensus.

Framing the practice as customer acquisition is extremely generous.

it's not customer acquisition though, Google can most likely get lot of users off safari to chrome for cheaper but issue would be that Apple would then get incentive to build search (and like apple maps, they can just embed it into everything without option to change default)

disclaimer: Googler here(not in search PA), this is my personal opinion.

> and like apple maps, they can just embed it into everything without option to change default

The EU would have serious problems with that because of the way Apple used the Music.app > Apple Music transition to basically crowbar themselves into the music streaming market.

They still do it on maps (someone texts you address it ll only open in apple maps and even if you change default app you cant change that), idk if that's any different in europe

Not trying to be a dick or anything — how is it not customer acquisition?

Google knows that there is some percentage of iPhone users who will only ever search with the default Safari engine. Google really wants those users. Google is paying to make sure those users use Google.

I mean, that is definitionally “customer acquisition cost,” right? Or am I missing something?

I think you described customer acquisition in different words.

It’s only 6% crazier than the 30% cut Apple gets from developers selling their apps through the App Store.

I think it is crazy. Lots of businesses would be destroyed if it was that high.

Not all of those users are incremental, though. If your iPhone came with Bing as the default search provider, would you just leave it like that?

Only if you consider CAC on a per-query basis, against top-line revenue, in perpetuity. There's a word for this and it's not CAC, it's tax. And that's what this is, it's a tax on advertisers due to Google's monopoly power. How do we know they have monopoly power? because they can afford to give 36% of top-line revenue in perpetuity to another party and still make money. This implies >80% gross margins, which let's face it, scream monopoly power.

Don't all SaaS companies target >80% gross margins?

Maybe it's just me and my bad attitude toward products today but this could explain why everything seems to be turning into low-quality garbage. I'm not a millionaire business man so I must be doing it wrong, but spending over 1/3rd of your revenue stream on customer acquisition rather than anything product-related seems like a bargain I don't want as a consumer.

For SaaS companies, 30-40% sales and marketing expense ratio is totally normal with R&D 20-40%. You need to keep up (in both) if not competitors will eat at your revenue which means even less dollars for product/R&D, running businesses is hard!

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