Microsoft's CEO admits Bing is inferior to Google, but a deal with Apple could change it
Microsoft's CEO, Satya Nadella, has admitted to a court that Bing is inferior to Google. Well, everybody knows that, but the U.S. v. Google antitrust trial is unearthing quite a bit of interesting details.
For those unaware, Google is the default search engine in Apple Safari on iOS, macOS and iPadOS. It is also used by Siri. This is important because Apple sells billions of iPhones, iPads and Macs, and all of these users will be directed to use Google for search. Neither company is doing this out of the goodness of their hearts, Apple earns several billion dollars (reportedly $8 billion / year), to allow Google as the default search provider across its apps and devices. This is one of the main reasons why the U.S. Department of Justice dragged Google to the court, for anticompetitive practices, that are harmful to other search engines like Microsoft Bing, DuckDuckGo, etc.
An article published by The Verge covers Nadella's testimony in extensive detail, I'm going to discuss the most important points from it.
What if Microsoft Bing had been Apple's default search provider?
When questioned by Adam Severt, a lawyer at the Department of Justice, about why Microsoft Bing wanted to compete with Google, Nadella said that it was all about money. He mentioned that search is the biggest software category, and that while Bing has not won the market, it is a profitable business for the company.
Nadella believes that the company's partnership with OpenAI (ChatGPT) will change the search market, even though Bing has a measly 3% share. When asked whether Microsoft had made any efforts to become Apple's default search engine, he said yes, but also mentioned that it did not go well. He was likely referring to the talks between the two Silicon Valley Giants which took place in 2016, when Nadella met Apple CEO, Tim Cook.
Severt had asked Nadella what it would mean to Microsoft if Bing were Apple's default search provider. Nadella replied that it would be a game changer, and that Microsoft would be willing to pay Apple up to $15 billion / year (which is reportedly twice as what Google pays). He went on to say that Microsoft would have no problem in respecting Apple's privacy wishes. He even said that the company would be willing to hide the Bing brand in Apple's search engines. The only thing that Microsoft wants is data. This really highlights how desperately Microsoft wants Bing to succeed, and also shows beneficial Google's agreement with Apple could be for the former.
Microsoft admits that defaults are difficult to overcome
Nadella said that "Defaults are the only thing that matter in terms of changing user behavior." He backed this by saying an option to switch to another service is "bogus".
Whoa, whoa. Hold it right there. I think Nadella has said too much, you don't even have to read between the lines to understand the importance of defaults, or in this example, "default app". So Microsoft thinks it is unfair for others when an operating system uses something as a default option? Guess who does the exact same thing? Remember when Mozilla and Vivaldi cried foul when Microsoft Edge was set as the default browser on Windows, and that it was not easy for users to change the setting? Or the numerous instances where Microsoft promoted Edge via Bing for searches related to other browsers? Are we really going to forget that Microsoft used to redirect search queries from Start to Edge, instead of opening them via the default browser? Anyway, I digress. Let's get back to the case in hand.
Google argues that Microsoft Bing failed because of its incompetence
Google's lawyer, John Schmidtlein cross-examined Nadella, pointing out the reasons why Microsoft's Bing was inferior was due to the Redmond company's mismanagement which dates back to over two decades. The attorney referenced to Internet Explorer, Windows Phone, the renaming of Microsoft's search services, poorly done deals with BlackBerry and Nokia, etc. Imagine someone pointing your failures for 2 hours, that must have been rough. Google's attorney claimed that Microsoft's failure to establish itself in the search engine market cannot be blamed on Google Search. He argued that it was not illegal to build the best search engine, and that Google had achieved its status by making smart investments and executions. Google's arguments come across as smug and somewhat arrogant, but those are valid points.
Schmidtlein mentioned the fact that Chrome and Google Search were more popular among Windows users, even though Microsoft bundles Edge and Bing in its own operating systems. His argument was that defaults don't matter much. But neither the DOJ nor Nadella were convinced by this point.
Nadella claimed that users don't change defaults, even if they had an option to switch easily. He pointed out Apple Maps as an example, which has grown in popularity despite a rather poor start. How did it succeed? That's quite simple, it is because Apple Maps comes pre-installed on all iPhones. Since it is the default, people use the app, even though they could just download Google Maps from the App Store.
Microsoft's CEO also said that Bing had a very low market share on Windows, and few users would ditch Google. But, by making Bing as the default, Microsoft had managed to create an impact, even if it was only a slight dent. Reuters quotes Nadella as saying that Bing has a 20% market share among Windows laptop users.
Neeva CEO Sridhar Ramaswamy, who was called as a witness also testified that Google's dominance was very difficult to overcome given its default status. DuckDuckGo's CEO, Gabriel Weinberg, had stated something similar as well.
Maybe OEMs like Apple should just offer an option to users to let them select what search engine they would like to use, when they set up their device. Sadly, Apple doesn't care about it, it defended Google in the antitrust case, calling it the best option available for users. The Cupertino company is not interested in making an alternative search engine, even though it has the means to create one. Why would it when Google is paying it billions? Nadella believes that Apple is afraid that if it severs ties with Google, it could spell doom for Safari. Google could potentially use Gmail, YouTube to promote Chrome, and educate people how to ditch Safari.
Microsoft had tried to sell Bing to Apple in 2020, but the deal fell through because the Californian company had deemed the search engine inferior to Google. Microsoft believes that Google's partnership with Apple pretty much ensures Bing doesn't survive. I don't like Microsoft's shenanigans with Windows, Bing and Edge, but Nadella and the others are right. Google's dominance is a much bigger problem, and it needs must be controlled.
