The Six Five team discusses Google deemed a monopoly in DOJ ruling.
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Transcript:
Daniel Newman: Google just faced defeat in a decision by the DOJ. What happened there? Are they a monopoly, Pat? Is Google a monopoly?
Patrick Moorhead: Well, we’re going to have a lot of those questions, but let me get the news under … U.S. federal judge basically says it’s a monopoly using its search engine in any competitive practices. And the big spotlight here was on deals that Google did to get default search. And by the way, selling defaults on devices literally goes back to when I was in the PC market. I had buttons on my keyboard that I would sell, and inside of the search engine we would get money for the default search. And that’s turned into just a gigantic business. So, numbers here, Google has about a $200 billion ad business. Google pays Apple around $20 billion a year to be the default search engine. And that’s 25% roughly of Apple’s entire services industry. And one thought I have is, who could this potentially benefit? What could be the downstream effects here?
I mean, we haven’t seen the details of exactly where this could go. And by the way, Google is appealing here, but I’ve seen people speculate that the company could get broken up. You could outlaw doing default search given how massive the company is. Microsoft had a very similar experience when it had Internet Explorer and that was implicated in anti-competitive issues with Microsoft. Microsoft almost got broken up, by the way. In fact, a judge actually said it had to be broken up and there was some negotiation that kept that back on there. But this has to be some sort of a benefit to Microsoft with Bing and maybe even perplexity and an OpenAI here. I can’t imagine if they’re not found guilty that this might impact them. And what does that do to Apple? By the way, the services revenue 25%. I mean, imagine that basically going away. Because it’s been the bright spot with Apple.
Daniel Newman: But does it go away, or is this just open up competitive bidding?
Patrick Moorhead: It opens up competitive bidding. But I got to tell you, Apple’s lead guy, I can’t believe I forget his name. Oh, Eddy Cue said you couldn’t pay him to use Microsoft.
Daniel Newman: I saw that. I saw that.
Patrick Moorhead: You couldn’t pay him to use Microsoft Bing. Well, he might have to think about spreading the love here. One thing that the DOJ did with Microsoft, and again looking at the history, this is fun being history is in the boot up of the new PC it had to give you a choice of which browser to use. And you had to embed in there a way to change your default search. And Daniel, maybe you can dive into this part, I’ve already talked too long, but is this onerous regulation or true anti-competitive nature? And we’ve got big companies paying another trillion Mag seven company all this money, which just factually, of course it limits the level of competition, but is this just because Google is better than Bing, or something like that?
Daniel Newman: Yeah, this is funny. I actually want to even take a slightly different direction here, Pat, but-
Patrick Moorhead: I’d like you to answer my question. Just kidding. No, go ahead. I’m just kidding.
Daniel Newman: Eventually I will, but I’m media trained. I don’t answer your question, I talk about what I want, that’s the deal. It’s a stupid time to actually regulate this. Search is just about to hit the absolute pivot shift inflection point of which it’s relevance. Apple’s got its new Intelligence product. Pat, you and I are, Pat, what do you search on now when you do your searching?
Patrick Moorhead: Perplexity is nine out of 10 searches that I do.
Daniel Newman: And then after that it’s some derivative of everything else that you tend to bounce between. Now again, you’re the cutting edge, you’re a leading innovator, but you are at the front edge and you are setting the trends and people are following these trend lines. And what I’m saying is we have a horde of trend lines that are about to change. We’re about to see new PCs, new smartphone devices, new search engines that are going to be developed. I mean, look, the other day I shared one that an open source, fully open source stack that used Llama, that used Grok and a bunch of other open source tools to create a search that I would say on five tries was 95% as good as I was getting out of ChatGPT. And now you see ChatGPT creating SearchGPT.
Google’s got its own challenges right now. And I mean look, the being with GPT thing did not really move the needle, it didn’t. But that’s because we haven’t really seen the inflection to which search has shifted from being something that, but as everybody starts to pick this up, Pat, as everybody starts to use these generative tools for search, these abstracts, these summaries, the regular searches we know isn’t going to be a thing. If I’m Apple, I’m looking at the whole situation and I’m basically like, “Look, I don’t really care. I want as much money as possible. We’ll sell this thing off. We’ll continue to use our giant customer platform and we’re going to make as much as we can.”
And by the way, to your point about what Apple said, they do want to deliver a good experience. That is still Apple’s thing. And I don’t know about you. I played with Bing search, I played with DuckDuckGo. I played, Google still does the best search. Now, to the point, I’m also like you, I’ve moved to Perplexity for almost everything, because I just find the outputs better for me in most cases. How long before that tail wags the dog? Meaning, we are the early, but how long before that starts to come up and then now you’ve got a whole new ecosystem? Apple’s busy building and training models and developing Apple Intelligence. And so, in the long run, I just wonder how long this is viable, period. Now, back to your question, they have to offer the best product. They have to have the best service. And to my point is, what does it really accomplished by opening the door and bringing in Microsoft? This isn’t a knock by the way. Let’s even say it’s all even. Does that suddenly make this less anti-competitive to bring the $3 trillion company in to displace the $2 trillion company? Who else has a default search engine that would provide customers at a level of experience that they’re going to expect when they’re using their iPhone? Or what is Lina Khan doing? Why is this the most important thing to spend time regulating?
Patrick Moorhead: Yeah, it’s almost like, let’s think of Qualcomm who has literally 95% share of the Android premium chip market. Does that mean that Lina Khan can come in and say to the phone makers, to Samsung, “You’re no longer allowed, Qualcomm, you’re no longer allowed to sell that many premium chips to Samsung.” And where does this thing end?
Daniel Newman: Yeah, you know what? I can’t tell you, Pat, but I just mean, this to me feels like litigating, we’re litigating history, not the future. Spend the effort and the time figuring out how to manage the generative AI tools are accurate, grounded, capable, distributed. Because search is literally going to go … Search as we know it over the next decade is going to go the way of the dodo bird. It just isn’t going to be the same. And so, if I’m Google, I’m doubling down on Gemini, trying to build a better mousetrap there, trying to make sure highest fidelity, accurate, lowest hallucination. I’m looking at the Google search business the way Hock Tan looks at any business he buys. I want to massively win the business until it’s no longer a business. But you got to believe me, search as we know it is not going to be the same in 10 years, not even in five. I mean, look how fast generative has changed your behavior. But we’re sort of technological nerds. We’re geeks, but our kids, and by the way, last thought are kids, what are they using to search right now? I mean, but-
Patrick Moorhead: TikTok.
Daniel Newman: Yeah, let’s assume they’re doing any real level of research. Don’t you think a lot of them have picked up ChatGPT though and the generative tools they’re using?
Patrick Moorhead: Yeah, I know my son has. I don’t know, I don’t think my daughters have.
Daniel Newman: Okay. Well, I know my kids in college are. My college-aged kids are definitely using those tools heavily. I mean, tools are rethinking how they teach and how to manage that, because they can’t expect kids to not use these tools to influence their outcomes. Just like when search first hit, we are at an inflection that I think people are ignoring. But like I said, Lina Khan and the whole, the DOJ, FTC, they want to win something. Just to me, this just feels like another, probably another fine, another speed bump, another case, but it’s not really feature forward as far as I’m concerned.
Patrick Moorhead: It’s interesting with these lawsuits here in the U.S., it’s almost like we have a proxy gatekeeper rule like we had what’s going on with the EU.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
