Microsoft (MSFT) CEO Satya Nadella testified in a federal court in Washington, D.C. yesterday (Oct. 2) that Google (GOOGL)’s total dominance in the online search business makes it difficult for competitors, even his company, to gain market share. Nadella’s testimony raised an important question: If Microsoft can’t challenge Google, who can?
Nadella was called as a witness in the Department of Justice’s antitrust trial against Alphabet (GOOGL)’s Google. The government alleged that Google squashed competition in online search with its web of exclusionary business agreements—such as paying smartphone makers and web browser companies to set Google as their default search engine. The DOJ filed its case against Google in 2020, and the trial is expected to last into November.
Microsoft is Google’s primary rival in online search, but Microsoft’s Bing poses little threat to Google, which claims more than 90 percent of the online search market, according to SimilarWeb data. Bing owns only a little more than 3 percent and other players, such as Yahoo and DuckDuckGo, share the rest of the search market.
Nadella said in court Microsoft had plans to spend billions of dollars to build a partnership with Apple (AAPL) to make Bing the default search engine on iPhones and other Apple devices.
Nadella said he had “focused every year of my tenure as CEO” since 2014 “to see if Apple would be open” to signing a deal with Microsoft and the two companies had had “a series of dialogues on it.”
“It’s a hard game to make any breakthroughs, but no one can accuse us of not being persistent,” Nadella said. Microsoft introduced Bing in 2009. Nadella estimated the company has invested about $100 billion in Bing over the past two decades.
For now, Google is Apple’s exclusive search engine provider. Google reportedly pays Apple billions of dollars every year for making Google the default search engine on all of its devices. This year, Google could pay Apple as much as $19 billion, according to an estimate by asset manager Bernstein.
In court, Nadella called the agreement between Apple and Google “oligopolistic.”
Google’s search engine is also ubiquitous in Android phones, which are preloaded with a host of Google applications that can’t be deleted.
Google has argued that it’s easy for smartphone users to change to a different search engine on the web browser. Nadella refuted the argument as “completely bogus.”
“You get up in the morning, you brush your teeth and you search on Google,” he said. “Everybody talks about the open web, but there is really the Google web.”
This year, Google and Microsoft have been locked in a race to integrate artificial intelligence into their search engines. Microsoft, an investor in OpenAI, launched a new version of Bing enhanced by OpenAI’s GPT language models. Google has introduced an in-house chatbot called Bard, but hasn’t incorporated it in Google Search yet.
“Despite my enthusiasm that there is a new angle with A.I., I worry a lot that this vicious cycle that I’m trapped in could get even more vicious,” Nadella said.