What we learned from Microsoft’s testimony in the Google case this week
Over the past week, three Microsoft executives testified for the Department of Justice (DOJ) in their case against Google Search: Microsoft’s CEO Satya Nadella, CEO of Advertising Mikhail Parakhin, and Corporate Vice President of Business Development Jonathan Tinter.
Here are the big three things we learned:
1. People choose Google because it’s helpful.
2. Microsoft’s failure to surpass Google in search and mobile is due to their lack of investment and business foresight.
3. The Department is losing sight of who should be the main beneficiaries of antitrust enforcement – consumers – as it becomes increasingly clear that if the DOJ gets their way, Microsoft’s Bing would be the primary winner.
First and foremost, Google is successful because consumers like and want Google Search.
- CNBC correspondent Eamon Javers noted that in “a little bit of an embarrassing” moment for Microsoft, CEO Satya Nadella had a hard time responding to the fact that Microsoft users frequently opt out of Bing. “Google’s attorney hit him [Satya Nadella] pretty hard with this idea that Microsoft has paid for the default setting on a number of different devices over the years for Bing, and when they do that, consumers do opt out of Bing. A little bit embarrassing for Microsoft at least in that respect.”
- CCIA President Matt Schruers, in NPR’s On Point show on the DOJ v. Google Wednesday, said that consumers are clearly indicating that they like Google and the government’s response is trying to push them to another service. “Google is a product that’s free to consumers and even their competitors, the government’s own witness is on the stand saying, we can’t keep up with Google because it continually improves its search results. That’s a government witness. That’s how competition is supposed to work.”
- “Maybe Google is popular because it’s good?” writes Thomas Hazlett of Reason. “I say that Google is the better search engine, but don’t trust me—only 3 percent of U.S. web searches take place on Microsoft Bing, while a whopping 93 percent use Google. Is it possible that that is simply because Bing is being suppressed by the all-powerful Google? Not likely. Google’s lawyers argue that not even the greater share of browsers distributed by Microsoft (which come pre-installed on the majority of computers sold globally) significantly boost Bing’s popularity. This prompts a word of caution: try not to get between a happy new owner of an HP, Dell, or Acer laptop and her keyboard, as her fingers pound with zeal in a race to replace the default Bing app with her preferred choice.”
- Companies choose Google to be their default because it’s what consumers want, as explains Trey Price of the American Consumer Institute Center for Citizen Research. “In 2017 Mozilla opted to return to having Google as its default search engine in part because the change to Yahoo proved unpopular with their user base. Even when another engine is the default many still use it to go to Google as evidenced by the fact that Google remains one of the top searches on Bing. Additionally, if users want to use a different web browser, the process of changing the default in a phone or other device is simple. At most, it takes four clicks to change the default browser in settings in Safari with Google providing a demonstration on how to do so.”
Microsoft’s failure to surpass Google in search and mobile is due to their lack of investment and business foresight.
- Microsoft admits on the stand that they demanded distribution deals promoting Bing as the default search engine before investing in Bing mobile, writes Carl Szabo of NetChoice. “This is the inverse of the Field of Dreams. For Google it was ‘if you build it they will come.’ For MSFT and Bing: ‘they must come and then a couple years from now we might actually build it.'”
- Vidushi Dyall, legal analyst at Chamber of Progress, notes: “by their [Microsoft’s] own admissions, Bing was a worse product in terms of search quality (internationally and mobile) and Microsoft was not willing to make necessary investments to improve unless it could lock in a deal.”
- Microsoft was losing distribution “solely based on user experience,” as Microsoft testimony highlighted by Dyall demonstrated. “The reason Verizon exited its Bing partnership was solely based on user experience, even though financial prospects with MSFT were better than with Google.'”
- Microsoft admitted that they underinvested in Bing and failed to fully understand how to maximize user experience, shows Chamber of Progress. Founder and CEO Adam Kovacevich noted “[The] DOJ is arguing in court that G’s deals are the chief source of its search share. But MSFT acknowledged in court today that they have a much smaller engineering team working on making Bing great – and they invest much less in search than G.”
- Dyall summarized lessons from CEO Nadella’s testimony:
- “On browsers: ‘MSFT failed to understand having a really good browser would affect user experience with search.'”
- “On mobile: ‘MSFT missed the mobile revolution.'”
- “On search: ‘MSFT knew G had a much larger team behind search but instead of catching up, it lagged further behind. In 2007, MSFT’s team was about ½ as big as G’s, with that figuring dropping to ⅕ by 2018.'”
- Microsoft’s fumbles spanned decades, as CEO Satya Nadella “nodded” in agreement as Google counsel led him “on a nearly two-hour tour of Microsoft’s failures, from MSN Search in 1998 through the ugly end of Internet Explorer, the expensive failure of Windows Phone, the endless renaming and rebooting of Microsoft’s search products, its hugely problematic deals to bundle Bing search with BlackBerry and Nokia phones, and much more.”
The DOJ is putting major companies ahead of consumers, breaking centuries of antitrust precedent.
- Townhall’s David McGarry explains how the government’s flawed case seeks to handicap success. “Google’s partners elect to establish a default engine on their devices and browsers for their users’ convenience, and they choose Google Search due to its superiority over such competitors as Microsoft’s Bing and DuckDuckGo”
- “In essence, the government’s case seems to presume that once a company reaches a certain level of success, its competitors deserve a handicap. It is as if the NFL, after Tom Brady’s fifth championship, decreed that the Patriots would be allowed to pass the football only during the first half of all subsequent Super Bowls they were to play in. Neither the real-life antitrust theory nor the NFL’s hypothetical one would increase competition.”
- “In essence, the government’s case seems to presume that once a company reaches a certain level of success, its competitors deserve a handicap. It is as if the NFL, after Tom Brady’s fifth championship, decreed that the Patriots would be allowed to pass the football only during the first half of all subsequent Super Bowls they were to play in. Neither the real-life antitrust theory nor the NFL’s hypothetical one would increase competition.”
- American Enterprise Institute’s (AEI) and Boston College Law Professor Daniel Lyons highlights that “The Justice Department continues to help companies, not consumers,” noting that the beneficiary of this probe is Microsoft, not consumers. “Of course, search engines such as Bing could simply outbid Google for the right to be a default provider, and that’s perhaps the most amusing aspect of this case. While the case is styled as a quest to protect competitors from Google’s dominance, the primary beneficiary of a government victory would be Microsoft—an even larger tech titan. Microsoft has the resources to buy preferential placement for Bing. It hasn’t done so, which suggests consumer preferences for Google are strong enough—and switching costs are low enough—that rivals would not significantly benefit from similar arrangements. If customers prefer Google defaults, then the government is literally asking the courts to put companies ahead of consumers.”
- Antitrust law is meant to protect consumers, says Jessica Melugin, Director of the Competitive Enterprise Institute’s (CEI) Center for Technology and Innovation. “The aim of U.S. antitrust law should be to protect consumer welfare, but this case instead aims to protect Google’s competitors. If the DOJ is successful, it will be to the detriment of customers. Government putting its thumb on the competition scale might benefit search competitors like Bing and DuckDuckGo, but the DOJ is supposed to be looking out for consumers, not picking winners and losers in the marketplace.”
- “‘Those voluntary [default placement] contracts surely benefit Google’s distribution of its tools and device makers by improving the quality of their product. But most importantly, these deals benefit consumers…'”
- “‘Those voluntary [default placement] contracts surely benefit Google’s distribution of its tools and device makers by improving the quality of their product. But most importantly, these deals benefit consumers…'”
Read more from Springboard about the DOJ and FTC’s attempt to stifle competition here, here, and here