Google’s antitrust loss set to reshape search and mobile industries
Summary
Google’s loss in a historic antitrust trial is reverberating across Silicon Valley. The ruling is likely to affect the search giant and its largest collaborators and competitors.Google’s loss in a historic U.S. antitrust trial is reverberating across Silicon Valley, where the ruling is likely to affect not just the search giant but also its largest collaborators and competitors.
Google parent Alphabet’s deals to get its search engine in front of users by paying to be the default on browsers and mobile phones have been declared illegal by a federal judge.
If Google doesn’t successfully appeal Monday’s ruling, the landscape will change for a search industry long dominated by one company and for partners that have shared in its plentiful advertising sales.
Google’s planned appeal could take years. The company’s head of global affairs, Kent Walker, told employees he expects U.S. District Judge Amit Mehta to rule next on potential remedies to Google’s behavior—which he had found to be monopolistic—a process that should take at least a few months.
Walker on Monday said Mehta’s decision “recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available."
Here’s what the ruling could mean for some of the biggest companies in the tech industry.
Google now faces a range of potential consequences—almost all of which would reduce the number of search queries it handles.
The most extreme possibility, pushed by some antitrust activists, would force Google to sell its Chrome browser or Android mobile software businesses, ending its ability to directly integrate search into both.
Herbert Hovenkamp, a professor at the University of Pennsylvania’s Carey Law School and Wharton business school, said Mehta’s ruling suggests he is more likely to put an end to Google’s practice of paying to be the default search engine on devices and browsers from companies like Apple and Samsung.
“That would effectively leave each device or browser maker to select its own default search engine, or to impose a choice screen," Hovenkamp said. A “choice screen" refers to a menu that prompts users to select between several search engines.
Google predicted in 2020 that if it wasn’t the default search engine on Apple’s Safari browser and iOS devices, it would lose between 60% and 80% of queries on iPhones and iPads, resulting in net revenue losses of up to $32.7 billion, according to Mehta’s decision. That figure accounts for the money Google would save by not paying Apple.
The analysis assumed Google would be replaced by another search engine. If users are given a choice screen and most select Google, it might save more money in payments to Apple, Samsung and others than it loses in search advertising, analysts said.
Microsoft
Long an also-ran in online search, Microsoft’s Bing would be the most likely beneficiary if fewer people search on Google.
Microsoft repeatedly tried and failed to convince Apple to make Bing its default search engine, according to court documents and testimony.
At one point, it proposed giving 100% of its search ad revenue on iPhones and iPads to Apple, or even selling it Bing. But Apple executives concluded the 36% share of revenue they received from Google was more beneficial, partly because that company’s search advertising business was more robust.
If Mehta forbids Google from paying to be a default search engine, Microsoft might become the most attractive replacement for Apple and Samsung. Even if the outcome is users being forced to choose search providers, it could benefit Microsoft. An increase of just a few percentage points in market share would be a big deal for Bing, which has struggled to crack 4% for many years, according to Statcounter data.
Microsoft Chief Financial Officer Amy Hood said on a conference call with analysts last year her company would get about $2 billion in ad revenue for every percentage point Bing gains in market share.
Apple and Samsung
Mehta’s ruling threatens the billions of dollars the two biggest mobile phone makers collect from Google.
In 2022, Google paid Apple about $20 billion for the default placement on its Safari browser and iOS-run mobile devices.
It also pays Samsung an undisclosed amount to be the default search engine on that company’s phones. Samsung gets 80% of its on-device search revenue from queries through a Google search feature on home screens and Chrome, the pre-installed browser, according to Mehta’s ruling.
Instead of turning to Bing or making users choose, either company could create their own search engine. Building the technical infrastructure to match Google would cost Apple as much as $20 billion, according to a 2020 internal Google estimate cited in Mehta’s ruling.
OpenAI
The uptake of generative AI sparked by the debut of OpenAI’s ChatGPT in late 2022 has caused many to question whether traditional internet search engines will become a dying breed.
People can get answers from ChatGPT and other AI applications, including one from Google, that they have traditionally turned to search engines for. In addition, OpenAI in July debuted an early version of a search engine it said would become part of ChatGPT, further threatening to disrupt a landscape long dominated by Google.
If Google is no longer the default search engine on phones and browsers, more people could turn to AI as they seek alternatives.
OpenAI has also secured a prime position for ChatGPT in a revamped version of Apple’s voice assistant Siri, an arrangement that could siphon search traffic from Google. The iPhone maker has said it also plans to make Google’s Gemini chatbot available through the service, called Apple Intelligence.
Mehta sounded a note of caution in his ruling on the potential for companies like OpenAI to compete with Google. “AI has not supplanted the traditional ingredients that define general search," he wrote.
News Corp, owner of The Wall Street Journal, has a content-licensing partnership with OpenAI.
Write to Miles Kruppa at miles.kruppa@wsj.com
