Thoughts on the DOJ vs Google
In 1999, as a senior Microsoft executive, I was a witness in the United States v. Microsoft: Anti-Trust Trial. I was more nervous testifying in that trial than I have ever been in my life. I was not sleeping well. The news cameras—CNN, Fox, MSNBC--followed me nearly everywhere. While sitting in the courtroom waiting for my turn in the hotseat, I watched two disparate, seemingly unrelated scenes: the judge falling asleep during the trial, and my colleagues getting grilled on the stand. When my turn as a witness came, the judge managed to stay awake, and, despite my exhaustion, my testimony seemed to go over well. A Fortune story said the attorney the DOJ used, David Boies, seemed "flustered" when cross-examining me. Not that it mattered since Microsoft lost the case. A friend of mine called me after my testimony and said, “Brad, I have good news and bad news. The good news is that you just scored three touchdowns. The bad news is that your team is losing 56-21.”
My suppressed and depressed memories of that trial have resurfaced because of the recent announcement that the DOJ is suing Google. What lessons could be drawn from the Microsoft trial of over two decades ago that are still relevant today? There are more than you might think.
Looking back at the issues at the core of that “tying” case, Microsoft using its “monopoly” with Windows to gain an advantage with its browser, Internet Explorer, seems bizarre, almost quaint now. An operating system without a browser? Inconceivable! Just imagine if Windows, the Mac OS, Android, iOS etc didn’t include their own browsers. .The Chromebook is basically just a browser wrapped in hardware. Sure, Microsoft was trying to compete, and Windows was an advantage, but not an insurmountable one since any user could download a browser. Microsoft always said its Windows advantage would be challenged by technology changes and that turned out to be truer than Microsoft could even imagine. Now
Windows is just one of many operating systems people use. Smartphones, just smaller powerful computers, are around 5x the shipments of traditional PCs. Even Microsoft is focusing more on its cloud platform than Windows.
I expected the DOJ would treat the Google case like the Microsoft one. Google, with 90% market share, should not be able to tie search deals to other Google products or favor its own products in its search results. After all, none of those products are fundamental to search like an internet browser is to an operating system. Similarly, Google should not be able to do exclusive bundles with phone manufacturers to only provide Google search or prevent handset makers from selling Android “forks” (their own iterations of the Android phone operating system) because if they do Google will deny them access to Google apps and the Play Store. Finally, though it does not relate to tying, I expected Congress would, and I think they should, seriously consider a law to prevent Google (and others) from collecting personal data unless the user explicitly opts IN every six months.
It turns out though that the DOJ/Google case is not primarily about tying search to other products, it is about distribution. Quoting from the complaint, Google pays “billions of dollars each year and “has entered into exclusionary agreements, including tying arrangements, and engaged in anticompetitive conduct to lock up distribution channels and block rivals.” The complaint continues, “Google’s exclusionary agreements cover just under 60 percent of all general search queries. Nearly half the remaining queries are funneled through Google owned-and operated properties (e.g., Google’s browser, Chrome). Between its exclusionary contracts and owned-and-operated properties, Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States. Largely as a result of Google’s exclusionary agreements and anticompetitive conduct, Google in recent years has accounted for nearly 90 percent of all general-search-engine queries in the United States, and almost 95 percent of queries on mobile devices.”
Google of course will rightly claim that users can choose to use other search engines. They can download them from the App Store or Play Store, or just use a web browser to go to the website for one of Google’s competitors. On the iPhone, the default Safari search engine can be changed, though few users do so.
It is instructive to explore what will happen if the DOJ is successful going after distribution rather than focusing on tying. What if all phones sold in the US, whether iPhone or Android based phones, had no default search engine and gave users a choice? My bet is that Google’s mobile market share would change very little, if at all. To take this hypothetical a bit further, what if the default was Bing or Duck Duck Go? I suspect that Google’s share would change a bit more in that case--but again, most users would end up switching on their own to Google. While some users are satisfied with Duck Duck Go, which provides built in privacy protection, I tried using it for over a month as my default search and I constantly had to do a second search with Bing or Google to find a better result. Bing is my current default search engine and from my experience close to the quality level of Google, but the fundamental problem is that no one has built a search engine superior to Google. A core part of the reason for Google’s leadership is that Google’s dominant market share means Google has access to significantly more personal data to use to provide better search results for users and better targeted advertising for advertisers. The nature of the internet is that sometimes size matters and helps companies build better products for users. It is unfortunate, but it is a reality. Amazon is another example of that. Amazon, as an aside, is an interesting search competitor for Google as shoppers sometimes just go to Amazon to search for things they want to buy.
Barring huge missteps from Google, it is extremely hard to decouple Google’s success from its further success. To displace Google from search leadership will require a fundamental dramatic new technology or sea change in how users search (and when that happens watch for Google to try and buy that new technology the way Facebook bought Instagram and WhatsApp). Even if the DOJ wins the part of the case on Google’s mobile agreements, I don’t think much will change.
In the end though, I am willing to bet that technology and user changes, not any action by the DOJ, will be the driving force to shift the search market just like it changed Windows and the personal computer. It may not come fast enough for most people, but it will come.
This blog post was also published on Medium.