In a three and a half hour testimony yesterday, Microsoft CEO Satya Nadella assailed Google’s alleged monopolistic practices, which he said hurt Bing unfairly.
Nadella argued that Microsoft’s search engine, Bing, has been unable to compete fairly in the search engine market, mainly because of the deal Google has struck with Apple to make Google the default search engine in their devices and browsers.
“You get up in the morning, you brush your teeth, you search on Google. With that level of habit forming, the only way to change is by changing defaults.” Nadella said, according to the Wall Street Journal.
Google’s default search agreements with partners like Apple, Samsung, AT&T, and Verizon is a key issue that the U.S. Department of Justice (DOJ) is eyeing in this landmark antitrust lawsuit, which started earlier this month.
The deal with Apple is the most eyebrow-raising, noted Shane Greenstein, economist at Harvard Business School, in a blog.
“Google pays Apple in proportion to the number of searches Google gets from those searches. The amount of money exchanging hands over time is huge,” said Greenstein.
He added, “Apple and Alphabet compete in the smartphone market and yet, here they are, exchanging money to change the design on a competitor’s product.”
According to the Wall Street Journal, equity firm Sanford Bernstein estimated Google is paying Apple US$18 billion to US$19 billion this year to make Google the default on iPhones and other Apple products.
Nadella revealed that Microsoft was willing to pay “north of 10 plus billion a year” to convince companies to make Bing the default over Google, but they would not give in.
He complained that Microsoft is trapped in a vicious cycle due to Google’s massive market share, which allows it to improve search results and revenue, bolstering its monopoly.
In response, Google maintained that Microsoft’s inability to compete is because of its inferior product. The company’s lawyers also argued that AI platforms like ChatGPT have increased competition in the search engine market.
Microsoft also gave a major AI makeover to its search service, Bing, but Nadella downplayed its success.
“Even the app store downloads are interesting but not … something you write home about,” Nadella lamented.
He highlighted the fact that Microsoft’s Bing Search accounts for a single-digit market share in mobile search, and only slightly more in desktop search, adding that one of his dreams has been to see Bing account for at least 20 per cent of the market in both segments.
This ongoing trial is biggest that the DOJ has brought to court in nearly two decades. Its last one, stretching back to the 1990s, accused Microsoft of having an illegal monopoly in the PC market, and saw the DOJ prevail.
Ironically, while Microsoft was mired in that trial, Google outdistanced Microsoft to become number one in the search engine market and, practically, became synonymous with looking up things on the internet.
Nadella acknowledged that Google would not be in its dominant position if it weren’t for Microsoft’s own antitrust battle with the DOJ.