25 years after ‘don't be evil’ a judge has found that Google is abusing its monopoly in search.
But no-one knows what happens next, and whether this ruling will change anything.
Everyone uses Google because it has the best results, and it has the best results because everyone uses it, and hence it has the money to invest in getting even better results. That is compounded by the scale of the infrastructure needed to index and analyse the entire web , which largely precludes venture-backed startups from entering the market.
In tech this is called a network effect; in competition theory it’s called a natural monopoly.
However, there's another virtuous circle: everyone uses Google because it's the default, it's the default because it’s the best and because Google pays other tech companies billions of dollars a year in revenue shares as ‘traffic acquisition costs’ (TAC) to make it the default, and it’s the best and Google has those billions to pay because everyone uses it.
And this was the center of the US competition case that was decided this week.
50% of search in the USA happens on channels where Google has a contract to make it the default: 28% on Apple devices, 19.4% on Android and 2.3% on browsers like Mozilla - and then another 20% happens in user-downloaded Chrome on PCs.
It’s obvious that the court will order Google to stop its TAC payments and abandon the contracts or at a minimum radically reduce their scope, which means it saves $30bn in cash each year and Apple loses $20bn.
But then what?
The court might order ‘choice screens’ in user-downloaded Chrome, but it has no power to order a choice screen in Safari, since Apple isn’t a party, and it’s not clear whether it can do that on Android, given that Samsung and Motorola, and the telcos, aren’t parties either.
Google has a much better brand than Bing, let alone any of the other alternatives. A lot of people given a choice screen would just choose Google anyway.
What will Apple, Samsung and Motorola choose as the default if Google can’t pay to be the default ? Will Apple build a search engine? Probably not.
It’s easy for the DoJ to explain TAC and to ask the court to block it, but much harder to say what would change.
But one rather deterministic lesson we might draw from all the previous waves of tech monopolies is that once a company has won, and network effects have become self-perpetuating and insurmountable, then you don’t beat that by making the same thing but slightly better, and getting a judge to give you an entry point.
You win by making the old thing irrelevant.
Google didn’t build a better PC operating system or a Win32 office suite, Facebook didn’t do better search, and Apple didn’t do a better Blackberry. And OpenAI got 100m users in two months without going to a judge.
#Google #Search
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Monique Bonanno