One of the highlights of Donald Trump’s presidency was the hunt for major tech companies such as Apple, Amazon, Facebook, Google and Microsoft. Each corporation has its skeletons in the closet, many in fact use practices that can hardly be called competitive, and all in order to increase their sales. Hearings in the US Congress this year showed that the attack on IT giants will be serious, so Apple made claims in the pricing of applications and the company’s commission, the lack of alternatives for installing applications on iOS. Amazon was interested in the sale of counterfeit goods on the site, as well as competition with sellers, their displacement and replacement with their own goods. With Facebook, the old history of claims related to the collection of user data, trade in them and attempts to interfere in elections, to influence them, continued. For Google, it was about the dominance of the contextual advertising market, the company was interrogated about how it turned out that its search is a priority, and to maintain this status quo, it pays billions of dollars annually to device manufacturers. The hearings were overwhelming, and the top officials of the companies had a pale look on them, like schoolchildren being reprimanded by the director.
In my opinion, the show that was put on in Congress was simply unforgettable. I highly recommend reading the text about what was discussed at the hearings, since the topics raised will repeatedly surface in the coming years.
On Tuesday, October 20, 2020, the US Department of Justice took an antitrust lawsuit against Alphabet (Google’s parent company). Attorney General William Barr made a powerful statement that anyone can understand:
Millions of Americans today rely on the Internet and online platforms for their daily lives. Competition in this industry is vital, so today’s challenge to Google, the gatekeeper of the Internet, for antitrust violations is a grandiose case for both the Justice Department and the American people. Over the past 16 months, the Antitrust Authority has amassed strong evidence that Google is no longer substantively competing, but is instead using its monopoly power and billions of monopoly profits to block key search paths on mobile phones, browsers and next-generation devices, depriving competitors the ability to compete on the same scale. The end result is that no one can challenge Google’s dominance of search and search advertising..
The pathos of the speech can be excused, yet not every day or even every decade there is a case of this magnitude against one of the tech giants. Prosecutors from 11 states have joined the lawsuit against Google, the full text of the document can be found here.
Reading this document is more fun than a detective. In it, Google is accused of violating a number of laws, in particular, it claims that the company limited competition and entered into an agreement with both device manufacturers (Apple, Samsung, LG, Motorola) and browser makers (Opera, UCWeb, Mozilla). to make Google search the default search. Despite the fact that users could change the search engine in some cases, they almost never did it. Control over Android and the Chrome browser also allowed the company to control the search market. In the US, third-party agreements have allowed Google to control 60% of all searches, up from 90% with its own products. On mobile, Google controls 95% of all searches. It looks like a dominant market position.
In the United States, the company receives about $ 40 billion annually for placing ads, payments to platforms make it impossible to enter the market of competitors, since no one can refuse to work with Google – neither advertisers, nor the sites on which this advertisement is placed. Competitors’ attempts to create other types of search engines run up against the impossibility of being effective without the scale factor, which Google also recognizes. Search is effective when it serves billions of queries every month. Here we can recall the example of search from Microsoft, in Bing the main problem was not the search algorithms, but the lack of a sufficient scale to train the search to search for information qualitatively. And therefore, alternative search engines do not have the slightest chance of popularity, users do not even see them. For example, in the United States, a search with the protection of personal data of the user appeared, a subscription model was applied in it, almost no one knows anything about it. DuckDuckGo Search tries to protect its users’ data, so that this data is not a product that is being sold to someone.
A serious accusation is being brought against Google, which is based on the “USA against Microsoft” case twenty years ago, then Microsoft was accused of preinstalling the browser as part of the operating system, the impossibility of removing Internet Explorer. That court was lost at Microsoft, and this is a precedent that will be constantly cited in the case against Google. In this case, the Sherman Act (section 2) is involved, it describes the elimination of damage to the market. The consequence can be both fines against Google and the division of the company (for example, the same Chrome can be separated into a separate business, this is just an example), as well as the elimination of existing business practices. In any case, this does not mean anything good for Google.
It’s curious how Google is partnering with Apple to pre-install native search on iOS by default. On all Apple devices there is a search from Google, for which the company pays from 8 to 12 billion dollars annually (estimates are given in the lawsuit). The lawsuit states that roughly 15-20% of Apple’s annual revenue comes from Google (default search setting, split ad revenue). The number shows well how important it is for Apple the number of devices on hand, since the company’s revenues directly depend on it. To characterize the splicing between the companies, I will quote what one of Apple’s top managers said in a letter following the meeting of financiers of the two companies in 2018, when they discussed steps to increase revenue from advertising in search: “Our vision is that we work as if we are one company. ” It is not for nothing that Google employees were asked to be careful in their words, this one sentence reveals the cooperation of the two giants in more than hundreds of articles.
Look at the share of Google products in US search.
A lot of time in the lawsuit is devoted to how the search distribution is built on Android devices, in particular, those that contain Google Mobile Services. I read the lawsuit several times and realized that it contained a trick (it would be difficult to accuse the prosecutor’s office of misunderstanding), for example, Android is called an open-source system. Of course it is not. There are two versions of the system, one is AOSP (Android Open Source Project), it does not have any services from Google, and any company can use this system. In particular, Huawei, based on this version, creates its smartphones today, since the GMS version is not available for them due to sanctions.
Google truly dominates the smartphone market, with a share of more than 85% of all devices in the world. Of this number, almost 70% of devices contain GMS. But here you need to understand that the company has created conditions under which it pays producers, shares advertising revenues. That is, Android itself is free, you get it for free, and you can also earn ad revenue (for small manufacturers, this revenue sharing may not apply).
Of course, Google’s goal was to maximize the penetration of its own search, as well as contextual advertising on devices, all of which were started to make a profit. And the current lawsuit casts doubt on the very possibility of continuing this practice. It is impossible to isolate GMS from Android or force to abandon the same Chrome, its market share is too large. Google’s defense strategy can be very simple: charge for Android usage, but remove all or most of the GMS apps from there. And then pay the device manufacturer to install these applications. Formally, this will not complicate the situation much, and offsetting the money will lead to the fact that Android with GMS will still not cost the manufacturer absolutely nothing.
It is almost impossible to break Google’s monopoly on Android, for this you need to separate search, contextual advertising and Android itself, and divide these businesses into different companies. Whether officials in the United States will be able to achieve this is unclear, since their goal is to break the monopoly and give way to other companies in search and advertising. The problem here is that there are no people willing to compete with Google in this field. The reason is trivial: strengths and opportunities are incommensurable, there is no reason to invest in a fight that is known to be lost.
Formally, for the US market, a law may be passed that will oblige to show the search engine selection window when the browser is first launched (including on iOS / Android), as it is implemented in Russia.
Such a choice already exists in Russia, as well as in Europe, adding a selection window for American users will not change their preferences much. The same Yandex, which lobbied for such a window of choice in Russia, did not benefit from this in the long term. See how the search shares of both companies look today, you can do it here.
We had several materials about the situation in Russia and about how Yandex used the FAS to fight its competitor, I advise you to dwell on this article.
But it is impossible to assume that the situation in the USA will develop exactly according to the same scenario. The pressure on Google will be unprecedented and the consequences are difficult to predict today. At the very least, a compromise will be reached that the company will revise many practices, stop paying for a superior position in search on devices. Which means a loss of income for many companies, primarily Apple. The US prosecutor’s office acts for the good of the market, but at the same time it hits the largest companies, their losses will be noticeable, we can talk about billions of dollars. And if Google is forced to pay fines for its practices, then it will also be in the billions of dollars. Interestingly, this litigation is limited to the US market only, but similar stories will begin to emerge in other parts of the world. After all, pinching tech giants is sacred, especially if you don’t have similar companies. The European market has already mastered this technique in full.
And the lawsuit also contains very interesting passages that shed light on Google’s corporate culture and how the company tried to plant a straw for itself just in case. For example, Google’s chief economist wrote that “we need to be careful about what we say, both internally and externally. We must avoid phrases such as “cut off the oxygen”. ” At Google, employees were taught that certain words cannot be used because they play a role, especially in antitrust investigations. Employees should not have mentioned “market power” or words such as “block”, “crush”, “kill”, “block”, “bundle” and so on. Caution inside Google can be interpreted in two ways, but it is impossible to deny that it gave birth to many euphemisms.
The people of America are opposed to tech giants, which means that we will be able to look behind the scenes of big business. The documents contain many references to the inner workings of companies, which give an idea of their actions, how they relate to competitors and their users.
This text would be incomplete without the point of view of Google, it was stated in the corporate blog. The company denies that they did anything unworthy or somehow limited competition. On Android, there are many examples of preinstalling competing browsers, app stores, and more.
The key point is that it is 2020, not the 90s, when you were limited in choosing an application only by what the manufacturer supplied. The ease with which you can change the search engine is maximal, it is the user’s choice. And the fact that the creators of alternative browsers choose search from Google speaks about its quality, and not about the promotion by the company. Google’s success in this area is not due to bad business practices, but rather to the use of common tools that are widespread in the market. You can find this text here.
Usually, such litigation lasts more than one year. There is no doubt that the current attacks on tech giants are driven by politics. But despite the political differences between Republicans and Democrats, they have the same view of the dominance of IT companies, they want to limit their opportunities. It is interesting that the described claim was supported exclusively by the Republicans, this is their story.
And a few words from me in the end. As a Google search user, I can’t say that the company’s product turned out to be bad, the quality of information search, as well as voice search, is decent. The fact that they show me advertisements and sometimes a lot of them does not cause much irritation, these are clear and transparent rules of the game – maintaining such a product requires a lot of money. And I do not envy the fact that Google makes money, since search works and helps me every day in many tasks. Of course, I would like competitors to appear for this search, but here I am not expecting a repetition of search technologies like Google (for example, as it was in Bing), but something fundamentally different, which will give a new quality of comprehension of information, facilitate navigation in her. And for such search algorithms, the presence of Google in this market does not play any role, because it will be a completely different story.
I have no favorites in this business. Neither Google nor the Department of Justice is supported, each with their own truth and their own reasons. Perhaps it is different for you, then tell us whom you support in this story.
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