AI will make Google more dominant

“Bogus.” That’s what Microsoft CEO Satya Nadella thinks about Google’s argument that there is actual choice in the search engine market. And artificial intelligence will provide zero advantage or hope for any companies that hope to enter web search – the “biggest no-fly zone of all,” Nadella said.

Why we care. The ongoing U.S. vs. Google antitrust trial has already unearthed troubling behavior from Google, including raising ad prices to meet revenue targets. If Google is found to have abused its monopoly position in search, it could potentially reshape the company and the search landscape.

Exclusive rights. To further enhance its dominance in AI Search, Google plans to pay publishers for “exclusive” content rights, Nadella testified. If only Google could access this data, it would essentially make every other search engine irrelevant, Nadella said.

  • “When I am meeting with publishers now, they say Google’s going to write this check and it’s exclusive and you have to match it,” Nadella said.
  • “What is publicly available today, will it be publicly available tomorrow? That’s the issue.”
  • “Is this going to be even more of a nightmare to make progress in search?” Nadella added.

Search engines have been “the organizing layer of the internet” Nadella said. But publishers are concerned over the rise of large language models (LLMs) – many popular websites have blocked GPTBot – and using their content/data for training and profit, without compensation.

Google has not commented on this accusation about exclusive deals.

Google’s Search Ads 360 dispute. One of the key issues of interest to paid search marketers is Google Search Ads 360. The platform has not kept up with new Microsoft ad features and types and Nadella said Microsoft wanted to make it easy for advertisers to transfer ad campaigns from Google to Microsoft with the click of a button. That didn’t happen.

  • “We keep asking for them to add some features we want. They’ve asked us to go pound sand,” Nadella said.

A vicious cycle. With nearly 90% market share, Google is able to improve its search results and bottom line, Nadella said, and has nothing to do with product quality.

  • “The distribution advantage Google has today doesn’t go away. In fact, if anything, I worry a lot that – even in spite of my enthusiasm that there is a new angle with AI – this vicious cycle that I’m trapped in could become even more vicious because the defaults get reinforced.”

All hope is gone? The launch of the new Bing and Bing Chat, powered by OpenAI’s technology that powers ChatGPT, came with a lot of hype and excitement, especially from Nadella, who said he may have been over-enthusiastic.

  • “Yeah, I mean, look, that’s called exuberance of someone who has like 3% share, that maybe I’ll have 3.5% share,” Nadella said.

So far, Bing Chat has failed to take market share away from Google. Yusuf Mehdi, Microsoft’s corporate VP and consumer CMO, claimed the opposite, but to date has not shared any of the company’s data showing this. In fact, Microsoft Bing’s market share is lower than it was a year ago, as we reported in August.

No breaking the Google habit. Default search agreements, such as the one Google has with Apple, have cemented Google’s dominance, Nadella said.

  • “You get up in the morning, you brush your teeth, and you search on Google. With that level of habit forming, the only way to change is by changing defaults,” Nadella said.
  • “Defaults are the only thing that matter in terms of changing user behavior.”
  • “It would be a game changer (for Bing) to be a default on Safari,” Nadella added.

But. On laptop devices where Microsoft’s operating systems are used, and Bing is the default search engine, Bing’s market share is still below 20%, Nadella admitted. That means a lot of people have figured out how to switch their default search engine.

$100 billion. That’s how much Microsoft has invested in Bing, according to Nadella. Why?

  • “I see search or internet search as the largest software category out there. We are a very, very low share player. But we continue to persist in it because we think of it as a software category we can contribute to.”

Leading with pessimism. It surprised me to see such bleak quotes today from Nadella, who has typically been an optimistic leader with all things Bing. He never argued that Microsoft Bing Search is better than Google Search. It seemed more like a concession that Microsoft Bing Search could never be better because of Google’s monopoly position.

Is this Nadella simply telling it as he sees it? That he knows Microsoft Bing will never be a true contender (which is true).

It’s likely he views this antitrust trial as a last-ditch moment to stop Google – a monopolistic rival that could do real damage to consumers, competitors and the entire ecosystem that relies on Google advertising and traffic. The $244 billion question is whether Google will be forced to change how it operates.

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