Where The Case Against Google Could Fall Apart
In his early days at Google, Sundar Pichai learned Google’s distribution deals were its lifeblood.
In 2004, a young Sundar Pichai joined Google as a product manager. Starting out, he took on the unsexy yet important task of growing Google Toolbar. And as we look at the Department of Justice’s new antitrust case against Google, and where it could fall apart, the story is worth revisiting.
When Pichai joined Google, it was simply a website. To use it, you typed its URL into a browser — almost always Microsoft’s Internet Explorer — leaving Google’s fate in the hands of an intermediary.
Microsoft had tremendous power over Google via the browser. People used Internet Explorer to visit websites. But, one day, they might also type keywords into the address bar, giving Microsoft an opportunity to answer these queries with a search engine of its own, one it would eventually develop.
Google Toolbar, released in December 2000, was Google’s insurance. The Toolbar put a Google search box below Internet Explorer’s address bar, giving people a way to use Google right in the browser. “The powerful feature set enables users to save time while searching for information,” said then-Google CEO Larry Page in the announcement. Toolbar, critically, would keep Google prominent in the browser no matter what Microsoft did with the address bar.
When he took over Toolbar, Pichai found a stagnant product, with nowhere near the installs Google needed to insulate itself against an inevitable Microsoft attack. So he began brokering distribution deals.
Pichai paid companies with heavily downloaded applications — like Adobe’s Flash and Acrobat Reader — to include Toolbar as an add-on option for new installs. And once it became part of these packages, Toolbar started to pick up. “He set up this distribution channel so that it overcame the biggest point of friction,” Linus Upson, a Google VP who shared an office with Pichai, told me as I worked on Always Day One.
By the time Pichai finished, Toolbar was live in more than one hundred million browsers. And when Microsoft eventually released Live Search, and then Bing, Google avoided getting crushed. “The work that Sundar did on Toolbar is one of the reasons he's CEO today,” said Upson. At one point, more than 60% of Google search came through Toolbar.
When the Department of Justice brought a lawsuit against Google this week, it took aim at distribution deals, some similar to those Pichai brokered. Google “pays billions of dollars each year to distributors,” the DOJ said, “to secure default status for its general search engine and, in many cases, to specifically prohibit Google’s counterparties from dealing with Google’s competitors.”
In a surprising revelation, the DOJ said these distribution deals accounted for three times as many searches as Google sees on its owned and operated properties. Sixty percent of all “general search” today comes to Google via its partners, the DOJ said, while 20% of search takes place on Google properties like Chrome and Google.com.
Google, therefore, is far more vulnerable than we thought. As in Pichai’s early days, its fate rests in intermediaries’ hands, as evidenced by the $8 to $12 billion it pays to Apple each year.
Google, no doubt, is more powerful and omnipresent today than it was in 2004. And its deals make it difficult for competing search engines to break in. But it’s interesting that, in this situation, the DOJ focused on the rent payer vs. rent-seekers like Apple. With some credibly, Google could argue that it has no choice but to pay. Just look at the history.
Supporters of the DOJ’s lawsuit, like Stratechery’s Ben Thompson, say the DOJ can create an opening for smaller search engines to gain market share. With distribution deals wiped out, smaller search engines could get more exposure, and hence more data, helping them provide better search results and give Google a run for its money. If people switch away from Google to something like Bing, this could be true. But the main anti-competitive issue here isn’t that Google crowds out other search engines.
With Google, and its fellow tech giants, the anti-competitive problem is the way they privilege their own services in their marketplaces, and use their marketplaces to gather data on competitors. Think, for instance, of Amazon selling its own “private label” products against third party sellers, and using those sellers’ data to shape its offerings. Or think of Google starting out as a window into the internet, but becoming the internet itself with services like Google Maps, Google Shopping, Google Flights, and Google News. The tech giants seem like neutral portals, but they rig the game so their services win.
The Department of Justice didn’t touch these pressing issues because a dysfunctional Congress won’t write laws to stop rigged marketplaces. Though the House Judiciary Antitrust Subcommittee recently pointed to the marketplace problem, Democrats and Republicans would not even sign the same report. So the DOJ is stuck bringing a lawsuit under the Sherman Antitrust Act, a law signed by President Benjamin Harrison in July 1890.
Perhaps in the future, we’ll see good laws that effectively check the tech giants’ power. But until then, Google is likely to breeze through the DOJ’s case, setting more bad precedent. And it wouldn’t be surprising to see Sundar Pichai’s personal story front and center in Google’s defense.
This week on the Big Technology Podcast: Two Shows
Ex-Googler Meredith Whittaker on Political Power in Tech, the Flaws of ‘The Social Dilemma,’ and More
When I interviewed Tristan Harris about The Social Dilemma earlier this month, my mentions filled with people saying, “You should speak to the people who were critical of the social web long before the film.” One name stood out: MeredithWhittaker. An A.I. researcher and former Big Tech employee, Whittaker helped lead Google’s walkout in 2018 amid a season of activism inside the company. In this edition of the Big Technology Podcast, we spoke about her views on the film and the future of workplace activism inside tech companies in a moment where some are questioning if it belongs at all.
Emergency Podcast: Yelp’s Luther Lowe on the ‘Seismic’ Antitrust Case Against Google
To talk about what the DOJ’s suit against Google might mean, Yelp’s senior vice president of public policy Luther Lowe joined the Big Technology Podcast on extremely short notice. Lowe has been pushing the case against Google forward for years, and his on-the-ground perspective can help shed light on what’s at stake and what comes next.
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