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Google used Microsoft’s monopoly playbook to crush Bing — now Microsoft cries foul

Google used Microsoft’s monopoly playbook to crush Bing — now Microsoft cries foul

With hypocrisy on full display, Microsoft CEO Satya Nadella takes Google to task for using the same tactics his own company perfected decades ago.

Credit: Microsoft

The US Department of Justice’s antitrust suit against Google has a familiar ring to those who remember a similar suit against Microsoft 25 years ago. In both cases, the government claimed the companies illegally used their monopolies to kill competition, maintain their dominant market share, and reap billions of dollars in return.

In a strange twist of fate, the DOJ last week called on Microsoft CEO Satya Nadella as a key witness against Google. Nadella outlined the ways in which he says Google has unfairly used its search dominance and deep pockets to make Google the default search engine on hundreds of millions of smartphones around the world, which won’t allow competitors to catch up, or even survive.

Missing from his testimony was this simple fact: Google was following the playbook Microsoft perfected decades ago when it used its globally dominant Windows operating system to kill countless competitors and attempt to become the internet’s gatekeeper.

Now it’s Microsoft’s turn to cry foul. Google has illegally used its market muscle, Nadella claims, not only to own the search market, but to potentially extend its monopoly power to AI as well. And he wants the government to act to stop that — fast.

Google’s search dominance

How dominant is Google in search? As I write this, the latest Statista figures, for July 2023, show that Google had 83.5% of the search market, while Bing had 9.2%. But forget the numbers for a moment. Here’s an even better picture of Google’s ubiquity, taken from Nadella’s testimony in the Google suit: “You get up in the morning, you brush your teeth, and you search on Google.”

How did Google build and maintain such a monopoly? If you believe Google, the answer is simple: Google’s search engine is better than anything out there, and by a wide margin. People flock to it for that reason alone. Build a better search engine and the world will beat a path to your door.

If you believe the DOJ, Nadella, and Google’s other detractors, there’s a very different explanation: Google has strong-armed its way into building and maintaining its search monopoly.

How does it do that? Google pays an estimated $10 billion a year to smartphone manufacturers, browser makers, and wireless carriers, including Apple, Samsung, Verizon, and others, to make Google their default search engine. Kenneth Dintzer, the Justice Department’s lead courtroom lawyer, said on the opening day of the trial that the payments were a “powerful strategic weapon” used to kill upstarts and fend off search rivals.

He added, “This feedback loop, this wheel, has been turning for more than 12 years. And it always turns to Google’s advantage.”

Nadella, during his testimony, said the same thing. Because of those payments and Google’s resulting monopoly, he said, the internet should now be called the “Google web.”

There’s more than a little irony in a Microsoft CEO complaining that Google extended its monopoly by cementing its position as the default choice on operating systems and devices. That’s exactly what Microsoft did with Windows decades ago — it forced manufacturers of Windows PCs to make its Internet Explorer their default web browser in an attempt to kill competitive browsers and become the keeper of the gateway through which most of the world uses the internet.

The DOJ went after Microsoft for that — and eventually the company had to accede to some of the government’s penalties. Now Internet Explorer is dead, and its replacement, Microsoft Edge, is an also-ran.

Defaults matter

If you’re looking for more hypocrisy from Microsoft about this issue, it’s easy to find. On the witness stand, Nadella admitted he tried using the same tactics as Google by negotiating with Apple to make Bing the default search for Safari, the built-in iOS browser, but Apple rebuffed his offer. He said he was willing to lose $15 billion in the deal and give Apple all the profits from it. He went so far as to tell Apple that he would hide the Bing brand in iOS and agree to any privacy limits Apple wanted.

He did all that, he told the court, because “defaults are the only thing that matter in terms of changing user behavior.” As for the idea that it’s easy to switch from one search engine to another, he called that claim “bogus.” This is the exact opposite of what Microsoft told the court in its antitrust trial 25 years ago.

Why was Nadella willing to go so far to become iOS’s default search engine? He admitted something fairly shocking on the stand: Google is a better search engine than Bing. The reason, he said, is that many more searches are done on Google than are done on Bing, so Google has more data that can be used to improve its search. By displacing Google as the iOS search default, he believed Microsoft would improve its search and become better than Google.

As to why Apple chose Google over Bing to be the default for iOS despite Nadella’s offers, Nadella claimed it was because Apple was worried if it made the deal with Microsoft, Google would use its many services, including Gmail and YouTube, to convince people to replace Safari with Chrome. However, he provided no evidence of that. Apple claims it chose Google because its search engine is better than Bing’s.

Will Google dominate generative AI as well?

On the stand, Nadella said he worries that Google may use its search monopoly power to dominate generative AI as well as search. AI is only as powerful as the content it uses for training — and he fears that Google will make exclusive deals with content owners to use their data to train its Bard AI.

He testified, “When I am meeting with publishers now, they are saying, ‘Google’s going to write this check to us, and it’s going to be exclusive and you have to match it.’”

Given that he’s been meeting with publishers to buy their data for AI training, he’s trying to do the same thing Google is, so it’s not clear what he’s complaining about. And Microsoft can more easily write large checks than can Google. Currently its market capitalisation almost $70 billion larger than Google’s — $2.45 trillion versus $1.75 trillion — and its earnings are $15.51 billion more than Google’s, $89.31 billion compared to $73.80 billion.

The upshot

Microsoft’s hypocrisy in all this is on full display. It wrote the playbook for how to use defaults to create and extend a monopoly, and it’s now complaining that Google is following that playbook better than Microsoft itself can.

That’s not to say that Google should be let off the hook. Monopolisation was wrong when Microsoft did it 25 years ago. It’s wrong when Google does it today. The court should rule in the DOJ’s favor.


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