Google Is Officially a Monopoly. Here’s What That Really Means.
Reading Time: 6 minutesGoogle Is on a Real Losing Streak. The Latest Blow Is the Most Brutal Yet., Don’t get it twisted: This is nothing short of historic., Google antitrust ruling: A judge said the company is a monopoly, in a blow to the tech industry.
On Monday, a judge ruled that Google holds a monopoly on the markets for online search engines and text-based search advertising services. The decision for U.S. et al. v. Google by Judge Amit P. Mehta is likely to be one of the most consequential antitrust defeats for a tech giant in decades, with a wide-ranging impact on how millions worldwide search for information online.
Don’t get it twisted: This is nothing short of historic.
Of course, there are some caveats. It will likely take years to feel the full effects, since Google has stated in response that it will engage in a lengthy appeal. Another legal process to decide actual company damages won’t kick off till next month, so we don’t know what this means for Google in the near term. The ruling’s potency will also now depend on how legislators and regulators address the market shake-up and on what changes the search giant makes in response. This internet-transforming decision will not, cannot, upturn all of cyberspace overnight—the overall tech-stock plunge notwithstanding.
Still, this is a big freaking deal. The federal government’s case against Google marks its first antitrust victory against a Big Tech giant in 25 years, following the successful litigation against Microsoft in 1998 (a precedent that Mehta amply cited throughout his almost-300-page ruling). The decision leaves open the possibility that Mehta may force Google to change up some of its deals—especially the exclusivity agreements with other tech companies that make for the heart of the case—or spin off some of its subsidiary businesses and programs.
Perhaps most consequentially, it makes for a promising indicator as to how the Biden administration’s other tech-antitrust actions may fare, including its ongoing litigation against Apple as well as its other case against Google’s hold over the ad-tech market—which is scheduled to head to trial next month.
For more, here’s a breakdown of some of the biggest takeaways from Mehta’s long U.S. v. Google filing:
The decision found that Google was an effective monopolist in two specific markets, defined by the court as ‘general search services and general search text advertising.’ The former refers to the broader-internet search engines that scrape the web and surface relevant results in response to user questions—of which Google owns nearly 90 percent market share.
Mehta notes that Google effectively tied up both tech companies’ and consumers’ hands by paying boatloads of money to make itself the default choice on major software applications like Safari, Android, and Firefox. Internal communications revealed that Google recognized the power of cornering these defaults early on, as well as the hit the company would take should it lose any of them, having recognized that companies like Microsoft were likewise eager to incorporate Bing as a default in rival companies’ tech.
Signed agreements with phone-makers required that Google Chrome, the Google Search Widget, and the Play Store for apps come preloaded, as internal research led them to believe that users would be dissuaded from using Google otherwise. Further, a 2020 study from Google cited in the case concluded that ‘far fewer users search directly’ through Google.com—showing that the defaults drive outsize shares of both Google searches and resultant revenue.
Now for the much narrower ‘general search text advertising’ market. What’s important here is that Mehta does not view Google as a monopolist for all digital advertising or even all digital search advertising, such as the visual previews that appear in results only when people search for things to buy.
However, Mehta agreed that Google does have outsize capture of the market for those sponsored, text-based URLs that appear at the top of certain results pages and can be bought for all types of sales—so, for listings for physical products and also services. Due to this capture, Google is able to overcharge text-ad clients and shroud its actual terms in secrecy in a way that it hasn’t with more visually oriented ads.
Google’s signing of multibillion-dollar agreements to be the search engine of choice for various tech companies prevents these vendors from potentially working with other search-engine operators. As a result, it crowds out potential search competitors from the market altogether, while dissuading others from even getting into the search game.
The examples provided to this effect are eyebrow-raising.
In 2009, when Apple ‘sought greater flexibility’ to allow its users access to other search engines, Google leveraged its revenue share with Apple—a provision it had itself granted to Apple in their first agreement—to maintain Google as the exclusive default search engine for Safari.
Google retained an entire ‘behavioral economics team,’ which conducted multiple studies as to consumer behavior when it comes to various search trends and default arrangements. Not something a lot of other places, especially scrappy startups, can afford to have!
A one-time search-default agreement between Yahoo and Mozilla Firefox required that the former pay the latter hundreds of millions of dollars for the privilege. But it didn’t last for one reason: Yahoo couldn’t keep up with Google in terms of ready cash. This resulted in Yahoo increasing the ads on search results, ‘degrading the user experience and ultimately resulting in Mozilla changing the default back to Google.’
It’s also important to note that Google is now essentially propping up Mozilla. In 2021 the search giant’s revenue share to Mozilla was about 80 percent of Mozilla’s operating budget.
The lawsuit points out that there have been only two new search competitors ‘of note’ in the past 15 years: DuckDuckGo, which after more than a decade in existence has a mere 2.1 percent of the market share; and the now defunct artificial intelligence–powered Neeva. The reason Neeva didn’t survive was because it couldn’t break in to becoming a default provider on ‘major browsers or operating systems,’ according to the suit, despite raising an abundance of cash and developing a potent competitor in just a few years. Without the ability to even enter the market, Neeva couldn’t hope to attract advertisers and recoup costs.
With all this considered, it’s no wonder that ‘venture capitalists and other investors have stayed away from funding new search ventures,’ according to the lawsuit. Google itself stated in court that the payments make its partners ‘exceptionally resistant to change.’ As Mehta put it: ‘No one would ever describe a competitive marketplace in those terms.’
When again citing that very statement, Mehta noted that ‘that is the antithesis of a competitive market’ and pointed out: ‘These are Fortune 500 companies, and they have nowhere else to turn other than Google.’
Considering that ‘the majority of Google’s revenue is ad revenue,’ the details behind the ad business are especially pertinent to an antitrust argument. Text ads are the majority of advertising on Google, making up ‘about 80% of Google’s search ads by revenue.’
In court, advertisers such as Home Depot and JPMorgan Chase ‘consistently testified that shifting significant ad spending from Google to Bing would be ineffective (and unwise) because of Bing’s lack of scale,’ a result of Google’s crowding it out of wider use via default agreements. Advertisers have no choice but to use Google or lose money: ‘When advertisers have experimented by turning off search ads for a portion of queries or products, they have lost revenue.’
Google also implements and deals with ads through an auction system—a rigged one. Google regularly makes runners-up for an ad spot seem ‘more competitive’ than they truly are, causing the actual top-rated bidders to pay more than what market pricing would normally dictate. Advertisers can’t opt out of these systems or from Google’s decision processes, even though the search giant understood that this ‘might occasionally come at a cost (or no improvement) to advertisers’ who came to it for premium placement. And it kept inching up ad prices even further over time by manipulating the process so that its advertisers ‘did not understand those changes to be Google’s fault.’
This wasn’t the only time Google obscured relevant metrics or quietly switched up terms to advertisers’ detriment. Google removed the ability for its ad vendors to opt out of certain ad auctions based on targeted keywords, ‘despite recognizing that this move would ‘remove control from advertisers,’ ‘ including those that had vocally expressed their desire to be excluded from those keyword-based auctions.
What does all this mean for those of us who use Google products every day, usually by default? Well, it depends on next month’s proceedings, but there are some factors indicating which way this could head.
For one, if this ruling survives a Google appeal, it would strike down a lot of Google’s default agreements with various Big Tech platforms—meaning that browsers, smartphones, and operating systems would come without Google-made features embedded as the default. Instead, consumers would likely be given more upfront options to customize their search engines, non-Chrome browsers, and app marketplaces, on both desktop and mobile.
The ruling could also open up the startup space to more aspiring search competitors, like the now-dead Neeva, which may garner more interest from VCs and gain the ability to be included as options for consumers to try out when they get a new computer, phone, or software update.
In a time when users are increasingly sick of everything Google—from the degraded search quality to the coercive app-market dominance of its Play Store to the default data-scraping options that go toward training its A.I.—this could pave the way for a whole new internet.
Ref: slate
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