Oct 3, 2023 - Technology

Microsoft CEO decries "vicious cycle" of Google search dominance

Microsoft CEO Satya Nadella outside a federal courtroom in Washington DC

Satya Nadella, CEO of Microsoft, arrives at federal court in Washington, DC, US, on Monday . Photo: Nathan Howard/Bloomberg via Getty Images

Microsoft CEO Satya Nadella testified in federal court Monday that Google has unfairly hobbled his company's effort to compete in search — and that advancements in artificial intelligence likely won't change the landscape enough for Microsoft to catch up.

What's happening: Arguments are underway in the third week of the trial of the Justice Department's lawsuit against Google for alleged monopolistic behavior in maintaining its dominance of the internet search market.

  • Nadella's testimony is one of a handful of high-profile appearances from technology CEOs expected during the trial, which is likely to last about ten weeks.
  • The DOJ, along with state attorneys general, argues that Google's deals with Apple and Android establishing its service as the default search engine on smartphones hobbles search rivals and makes real competition impossible.

The big picture: Microsoft and Google have been bitter rivals, with occasional truces, for two decades.

  • Microsoft's close alliance with ChatGPT maker OpenAI and early integration of conversational AI into Bing raised Bing's profile earlier this year.

Between the lines: Microsoft has argued before that Google and Apple's default search deal slowed Bing's growth. But Nadella's statement that AI might not help Bing gain ground against Google bolsters the DOJ's case.

What they're saying: "The distribution advantage Google has today doesn't go away," Nadella said while being questioned by DOJ lawyers. "In spite of my enthusiasm that there is a new angle with AI, I worry a lot that, in fact, this vicious cycle that I'm trapped in can even become even more vicious because the defaults get reinforced."

  • "Yeah, I mean, look, let's call it the exuberance of someone who has like 3% share, that maybe I'll have 3.5% share," Nadella said of earlier comments he'd made about ChatGPT's potential to upend the search market.
  • Nadella said he's worried AI will make it "even worse of a nightmare to make progress in search because there's a new avenue to lock up essentially what's the thing that feeds the power of these [large language models], which is content."
  • "Everybody talks about the open web — but there is really the Google web," Nadella said. He also said he "focused every year of my tenure as CEO to see if Apple would be open" to a default agreement with Microsoft.

The other side: Google argues that its search engine is simply the best, that consumers love it and can easily switch to another if desired, and that's how it maintains its exclusivity deals.

  • Google's lawyers have also been arguing that when search engine defaults have been switched away from Google in the past to Bing or Yahoo, customers have chosen to switch back because they prefer Google.

Flashback: The Justice Department and 11 state attorneys general first filed a complaint against Google in 2020, accusing the tech giant of violating Section 2 of the Sherman Antitrust Act.

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