A company that achieves its monopoly status by offering better products or services has not broken any law; but the situation changes when it willfully acquires or maintains that power. With a federal judge ruling that Google has crossed the line, the future of internet search is now an open question.
By Katharina Pistor
NEW YORK – When confronting the choice between truth and power, Shakespeare’s Hamlet poses his famous existential question: “To be or not to be?” The search for an answer will confront heroes and villains alike with the prospect of death or despair.
Like Shakespeare’s tragedy, battles over the infrastructure that everyone uses to search the internet are also steeped in intrigue and abuse of power. The villain is Google, which is not only a search engine, a company, and a brand, but also a verb. “To search is to Google,” noted a witness in the recent antitrust case brought by the US government and 38 state attorneys general against Google.
On August 5, a federal judge handed down a verdict of “liable.” Google was found to have engaged in unlawful conduct as a monopoly in two markets, including – most critically – the one for general-search services. The remedies have yet to be announced, but commentators are already speculating that the case will reshape internet search.
The finding that Google dominates internet search hardly came as a surprise. Most people start queries for information or products by plugging their terms into Google’s general search engine (GSE). They understand that when they use Google on their computers, phones, or tablets, they are “googling.” But many users fail to appreciate that they are also googling when they use Apple’s Safari or Mozilla’s Firefox browser, because these companies have made Google’s GSE the default search engine – albeit garnished with some privacy screens.
For its part, Google argued that its dominance is the result of superior products and services. It likened the web to an “ever-growing library with billions of books and no central filing system.” These treasures can be accessed only with a GSE that crawls the internet, indexes sites, ranks them, and presents the results to users almost instantly.
The critical input for GSEs comes from the users: the topics they search, the terms they use, the links they click, the products they buy, and so forth. Scale is key to the success of the service. More information about user behavior enables better search results, better results bring more searches, and more searches bring in more revenue as advertisers flock to Google to boost their sales by “funneling” products to end users.
Few dispute that Google’s GSE is the first among equals, with Microsoft’s Bing representing the only plausible alternative. It rivals Google’s GSE in quality and speed when accessed on a desktop, but not on mobile devices. The numbers presented in the trial are telling. As of 2021, over 89% of queries flowed through Google, and only 6% through Bing. This translates into $146 billion in ad revenue for the former, and less than $12 billion for the latter.
A company that achieves a monopoly by dint of offering better products or services has not broken any law. But the situation changes when it willfully acquires or maintains monopoly power, and, according to the court, the evidence established that Google crossed this line.
Google realized early on that commanding information at scale would lead to market domination and monopoly profits. Unlike Microsoft – which tried to gain dominance in the 1990s by bundling a browser with its operating system, only to be stopped by antitrust enforcers – Google used carrots rather than sticks to deal with potential competitors.
Its relationship with Apple is a case in point. Back in 2002, it offered Apple a deal that was hard to refuse: make Google’s GSE the default on Safari and get a cash reward. What started with a flat $10 million fee plus 50% revenue sharing evolved, by 2022, into an estimated $20 billion annual payment to Apple. Along the way, the terms of the contract tightened as Google demanded exclusivity for its GSE, turned down requests to give Apple more flexibility, and made it impossible for Apple to terminate the contract unilaterally.
Just as Hamlet’s mother had some good reasons to marry her husband’s killer, Apple’s deal with Google made sense, owing to the high up-front costs of launching a new GSE and maintaining and managing the ad business. Even switching to another GSE has become economically impossible. As one top manager at Apple put it, there was “no price that Microsoft could ever offer to Apple” to make the switch to Bing. Google, of course, understood this. In a 2020 internal study, it found that losing its exclusive status on Safari would cost the company between $28.2 and $32.7 billion in revenue.
Moreover, Google maintains similar relations with Mozilla and DuckDuckGo, and it has entered revenue-sharing arrangements with all the leading cell carriers in the US: Verizon, AT&T, and T-Mobile. The carriers get Google’s Android technology but must pre-install 11 Google applications on the phones they sell. Six of these cannot be deleted by the end users.
All told, Google pays more than $26 billion annually to other tech companies to ensure that its GSE remains effectively the only game in town. It is the spider overseeing all the threads of a sprawling web of contracts.
But we shouldn’t pity these other companies. The real victims are internet users. The more Google expands its grip over the internet, the less incentive it has to innovate, much less to care about end-users rather than advertisers. The internet library is not a public repository, but rather a private, profit-seeking enterprise that pays off handsomely for companies in Google’s orbit. Internet users may believe that they are able to search for facts and truths like no previous generation could, but they have no voice in this game and can only take what they get or leave it.
It took a lawsuit launched by the US Department of Justice to challenge Google’s monopoly, and we have yet to hear what might replace it. One hopes for a better ending than the one Shakespeare gives Hamlet, whose last words are: “The rest is silence.”
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