2024-08-07
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Key Points
Tencent Technology News, August 7, according to foreign media reports, the US Department of Justice's ruling on Google's monopoly has been announced. In the 286-page ruling, US Federal District Judge Amit Mehta made detailed factual findings and legal judgments on Google's monopoly in the search engine field. This ruling not only reveals the various strategies Google has adopted to maintain its market dominance, but also exposes the heated debates between the company's executives involved, embarrassing internal research, and the shocking details of the multi-billion dollar contract between Google and Apple.
Google pays Apple billions of dollars each year to ensure its search engine is the default option on Apple's Safari web browser.
But during the trial, Eddy Cue, Apple's senior vice president of services, said: "No matter how much Microsoft offered, Apple would not consider making Bing the default search engine for Safari." He explained: "Even if Microsoft offered Bing for free, even with the company, we would not consider it."
For Google, this suggests that they have earned this default position, although Google does have to pay a lot of money to maintain it. "This highlights the indisputable fact that Google has become the only choice in the default general search engine space," Justice Mehta noted.
Google has a close partnership with Apple, and has also signed agreements with mobile phone operators and device manufacturers to ensure that it is the default search engine on Android devices. Although the operating mechanisms of these agreements are slightly different, they are all based on Google's dominance of the app store.
It is worth noting that not only has Cue expressed his rejection of Bing, but almost all technology companies also regard Google search as the only option. Even the "Fortune 500 companies" lack real alternatives when it comes to the choice of default search engine.
Judge Mehta pointed out in his ruling: "Google understands that its market position is secure and has little competition when it comes to the default search engine, because partners know that giving up Google also means giving up the huge revenue share it provides - which is often in the hundreds of millions or even billions of dollars. Therefore, after repeated weighing, partners believe that from a financial perspective, it is not wise to change the default search engine or seek greater autonomy in search products."
According to the ruling, “In exchange for exclusive and non-exclusive default search engine positions on Apple devices, Google paid Apple a significant portion of its net advertising revenue, which reached $20 billion by 2022. This figure is almost double what Google paid in 2020, when it accounted for 17.5% of Apple’s operating profit.”
The current contract between Google and Apple dates back to 2016, and the partnership between the two parties goes back much further. It is worth noting that around 2016, Apple also launched a new feature called Suggestions, which had a big impact on Google. Google's analysis shows that due to Apple's Suggestions feature, its query traffic on the Safari browser has decreased by 10% to 15%, and its advertising revenue on iOS Safari has decreased by about 4% to 10%.
To deal with this situation, Google specifically included a specification in the contract signed in 2016, requiring Apple to "maintain substantial similarity" to previous versions in implementing the default search engine for Safari, thereby limiting Apple's further expansion of search capabilities and preventing Google from losing more traffic due to Apple's innovations.
Today, on the iPhone, “Google receives almost 95 percent of all general search queries.”
The terms of the 2016 contract seemed to be good for both companies. Google and Apple extended the agreement in 2021, and the contract will expire in 2026. However, Apple "can unilaterally extend the agreement for two years", and if it does not make sense for both parties, they can further extend the contract until 2031. According to the contract agreement, both Google and Apple are obliged to defend the agreement "in response to antitrust regulatory actions similar to those filed by the Department of Justice."
Judge Mehta said the huge sums Google pays Apple not only weakens Apple's desire to challenge Google's search dominance, but also creates insurmountable obstacles for Apple to do so even if it wants to. Both Google and Apple conducted relevant studies and disclosed internal estimates at trial.
Apple estimates that in order to operate a comprehensive general search engine, in addition to current search development expenses, it will need to invest up to $6 billion per year. Google's assessment at the end of 2020 showed that it would cost Apple at least $20 billion to replicate Google's current technical infrastructure.
TikTok is clearly not, and neither are Amazon and Meta.
In the Google antitrust case, the court proposed two concepts: general search engine (GSE) and specialized vertical provider (SVP). Among them, general search engine is the common search engine that everyone understands, including Google, Bing, DuckDuckGo, etc.
There are also thousands of “little search boxes” on the Internet that are used to find specific information or purchase items. However, services like Booking.com and Amazon.com are not general search engines, which are very different from the general search engines that index the World Wide Web.
There are also search boxes on social media platforms, such as TikTok's search function, which operates slightly differently from general search engines in terms of user behavior and has never been seen as a competitive threat to Google Search. However, Google's 2021 research found that among Generation Z (18-24 years old) users who use TikTok daily, 63% said they use TikTok as a search engine.
However, Judge Mehta noted that social media platforms are different and can be considered "walled content gardens." More importantly, "there is little evidence that they actually compete with general-purpose search engines." He said the TikTok study did not explore whether the platform's search quality competes with Google's, and just because young people like TikTok does not mean it is competitive in the relevant market for Google search.
In addition, TikTok is not the only social platform that dominates the market. Judge Mehta mentioned that studies have found that the use of Facebook and the growth of Google searches show a positive correlation trend.
When it comes to antitrust analysis, Judge Mehta believes that the online habits of Generation Z users are not a key consideration. He wrote: "Imagine that if Google's search quality declines significantly, whether intentionally or negligently, can we reasonably expect that Facebook's senior vice president or any other social media platform can quickly allocate resources to launch a product that is comparable to Google's search engine and absorb a large number of dissatisfied Google users? The answer is self-evident. This is extremely difficult. Even industry giants like Amazon or Meta will face huge costs and expenses to fill this market gap."
AI-powered search may be a harbinger of the future, but that future has yet to materialize, at least under the scrutiny of antitrust law. "Artificial intelligence may eventually fundamentally disrupt the search space, but this process will not happen overnight," Judge Mehta wrote. "At present, artificial intelligence cannot fully replace the basic components of search, namely web crawling, indexing, and ranking mechanisms."
Justice Mehta added:Generative AIThe reliance on user data to maintain high-quality search results has not been eliminated or significantly reduced (at least not yet). This conclusion was supported by Sridhar Ramaswamy, co-founder of Neeva: "The process of determining the most relevant pages for a query in a specific context is still highly dependent on user click behavior data." He emphasized that AI models will not eliminate, but rather strengthen this data requirement.
In other words, when you search for "golf shorts", Google not only presents relevant results, but also accurately captures the user's preferences through the pages they click, thereby continuously optimizing the relevance of search results. This kind of loop mechanism based on user feedback has not yet been seen in artificial intelligence chatbots.
In addition, the ruling also cited the views of Pandu Nayak, Google's vice president of search, who believed that it was crucial for Google to continue to maintain "an infrastructure that can be understood and effectively operated" - the traditional ranking system. He said: "It does not make sense to completely hand over the ranking to the emerging system at this stage. We still need to maintain a certain degree of control and understanding."
Google conducted an internal study in 2020 to explore the potential impact of "significantly reducing search quality" on its profitability. The results of the study showed that even if Google deliberately degraded the search experience, the revenue from its search service would not be greatly affected.
Judge Mehta commented: "Google is free to adjust its products without risking losing users, something only a monopolist can do."
The core of antitrust regulation is to maintain the fairness of market competition. Competition is the cornerstone of driving market prosperity, promoting corporate growth and protecting consumer rights. In the Internet era, although the applicability of "consumer harm" as a yardstick for measuring monopoly behavior is controversial, the Google antitrust case undoubtedly provides us with a powerful example: even industry leaders known for innovation may inflict invisible harm on consumers through traditional means of stifling competition - that is, after eliminating competitors, even if the service quality declines, Google can still maintain considerable profits. (Compiled by Jinlu)
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