Google Could Change Forever

this episode is brought to you by ground news hi welcome to another episode of Cold Fusion Google is everywhere the company is just a part of daily life when you want a quick answer to something you just use Google without a second thought but what if there was a world where it wasn't just Google in that position but a whole host of other players that vision is what the Department of Justice in the US wants to see now Google has suffered a major legal blow after a US judge ruled it had acted illegally to Main

contain a monopoly and stifle competition while generating huge profits the US attorney general described the ruling as quote an historic win for the American people in August of 2024 in an event called the biggest antitrust ruling of the century the doj has called Google a monopoly in the online search Market but since that ruling things have progressed now the doj are looking out ways to break up Google on September 6th 2024 a hearing was held to determine the plan for forward but in yet further escalation the doj is launching another antitrust case against Google in

the coming days but in all of this there are still some questions here is this the beginning of the end for Google's era of online dominance do the government's actions actually help the average internet user or is there a bit more to the story might the Department of Justice be a bit heavy-handed on Google we'll have a fair look at both sides also stay tuned for the story of the Monopoly man all of that and more coming right up you are watching to Fusion TV so it's well known that Google dominates online search they make

up about 90% of the search Market which has served them well Google makes over $75 billion yearly from search that's more than the GDP of countries like Kuwait Morocco Slovakia and Oman but recently this dominance has come into question in the landmark 286 page ruling of Google versus the United States the doj thinks that Google has gotten to this position due to unfair practices in other words the violation of antitrust laws so it's probably good to have some definitions before we go further according to the doj antitrust behavior is quote anti-competitive conduct that deprives American

consumers taxpayers and workers of the benefits of competition end quote and part of this is a Monopoly Monopoly status isn't legally defined and it depends where you look but at 50 to 60% market share you're teetering on the edge and such a company may endure scrutiny at 70 to 75% you're most definitely a monopoly but the thing is the triggering of antitrust action also depends on the company's Behavior but 90% market share is definitely going to attract Regulators in any functioning government [Music] I read through some of the case document and there's a lot but

there's two main things I want to cover Google charging higher prices because there's no competition and paying to keep the competition away and remember that these are not my opinions just the facts from the case an interesting note in the paper was that apparently in 2020 Google conducted a study to see what would happen to their bottom line if it quote were to significantly reduce the quality of its search product end quot the conclusion was that even if the company made search bad the revenue from search would still be fine on this the judge wrote

quote the fact that Google can make product changes without concern that its users might go elsewhere is something only a firm with Monopoly power could do okay so let's dig deeper the case CES that since there's no other game in town for search advertising advertisers had no choice but Google in order to reach more people Google could then increase prices the other problem according to the ruling was that prices were raised incrementally to blend in with normal Market fluctuations and this was to reduce the likelihood of advertisers noticing incremental price changes led to consistent Revenue

growth without significant complaints from advertisers Google went as far as to do internal studies to show that advertisers did indeed not notice and just thought that the price hikes were just part of the overall Market the doj also cites that Google tuned their mechanism for determining ad costs quote Google adjust the parameters of the auction function how advertisers bid for adspace in order to improve long-term Revenue this work has resulted in products which add several billion dollars in incremental Revenue annually end quote and this next point is pretty interesting the ruling goes on to say

that when Google grew concerned about meeting its Revenue targets a code yellow was called basically it was an instruction to get all hands on deck to subtly raise Advertiser pricing without too many noticing the company knew they could do this yet again from more internal studies showing that advertisers would pay more than they currently were without leaving the judge stated quote the trial evidence firmly establishes Google's Monopoly power and has enabled Google to increase text ad prices without any meaningful competitive constraint I know what some of you would be saying well who cares about advertisers

getting fleeced all advertisers do is track you and follow you around on the off chance that you'll buy something that you've previously been Googling and there is an argument to be made there but there's a second order consequence if advertisers have to pay higher cost to Google they can then turn around and pass some of that cost onto you the consumer Google has been paying Apple and Samsung billions of dollars annually to install Google as the default search engine on their smartphones and web browsers quote in return for exclusive and non-exclusive default placements Google pays

Apple $20 billion in 2022 end quote this is apparently quote almost double the payment Google made in 2020 which at the time was 17.5% of Apple's operating profit so why would Google do this well consumers tend to buy more things on their phone and for iPhones quote Google receives almost 95% of General search queries end quote and with billions of iPhones out there that's a lot of ads which means a lot of Revenue the doj didn't like that quote Google's distribution agreements foreclose a substantial portion of the general search Services market and impairs Rivals opportunities

to compete end quote the doj thinks that it's actually the Monopoly on the phone browsing Market that enabled Google to consistently raise the prices of online advertising without consequences as we discussed earlier it turns out that back in the days of Steve Jobs and for a little bit after that Apple was looking to make their own search engine but they had a search Project in the works when Steve Jobs was in charge over there they were looking at search because he had such an ax to grind with Eric Schmidt because they launched Android and he

kicked Eric Schmidt off the board and there was a lot of hand ringing there I think apple is and i' I've heard this from folks around Apple I believe Apple's going to launch their own search engine and compete heads up with Google but now Google has Apple in golden handcuffs with a$ 20 billion yearly deal in the contract apple is basically not allowed to innovate on any of their own search engines the judge also scolds Google for destroying and hiding evidence they allege that Google trained employees to not leave a paper trail or quote bad

evidence behind quote any company that puts the owners on its employees to identify and preserve relevant evidence does so at its own Peril Google avoided sanctions in this case it may not be so lucky in the next one entrepreneur and angel investor David Friedberg gives an interesting Viewpoint in his View the ruling is more anti- suuccess than it is anti-consumer I'll also say it just feels like the tenor of all of this is anti- success and not anti-competition and anything that's kind of successful or big is automatically deemed to be a monopoly and I think

we really have to kind of understand how are consumers and the market for competition being affected by having all these things together and that's what should really be focused on and studied not just the fact that something is big and successful Jason kakanis another angel investor states that Google does not in fact have a monopoly on the ads business meta Amazon and Tik Tok are also huge players they do have a massive Monopoly in search that's absolutely true and the justice department I think is um well within their rights to to take a deep dive

on that they don't have it in ads if you look at the competition for Google in advertising you got meta Tik Tok and Amazon which have very very significant advertising businesses and then like a bunch of new players um which are referred to basically as the shopping cart networks that's Uber instacart door Dash Etc and so when you look at this it really does rhyme with what happened with Microsoft they're two decades late on this the the search Monopoly has been squeezed for every dollar and to build every subcomponent of Google's Monopoly at the time

of the antitrust ruling Google argued that its distribution deals are common in the business World they equated paying for search engine default privileges on phones to be the same as if a food manufacturer pays to promote products at ey level in a grocery store aisle the way Google sees it if you don't like Google you can switch the default engine on your device but people don't switch says Google because they prefer Google Google has also stated that they're going to appeal the decision of them being a monopoly on the flip side when it comes to

the default status of Google and iPhones Apple themselves aren't a fan of Bing Eddie Q Apple's senior vice president said quote I don't believe there's a price in the world that Microsoft could offer us to set Bing as the default in Safari over Google they offered to give us Bing for free they could give us the whole company end quote but also take that with a grain of salt because it might be in Apple's best interest to defend Google it's actually written in that 20 billion contract with Google part of the contract obligates both Google

and apple to defend this agreement quote in response to regulatory actions I.E doj antitrust lawsuits just like this one okay okay so that's the ruling but it doesn't leave you satisfied what does this all mean and what happens next and what about the calls to break up Google Justice Department officials are discussing their options including breaking up Google so that their Chrome browser could be sold as a separate company same with Google's Android smartphone operating system other options may include even separating YouTube from Google Department of Justice is considering breaking up Google after winning an

antitrust case against the search giant just last week a hearing is said for early September you know maybe um forcing Google to divest the Android operating system and the Chrome browser those are two of the suggestions that we had heard from people with knowledge of this case even if you don't actually get a breakup it can divert resources Talent money uh Capital towards fighting these antitrust battles and make a company miss out on Innovation that led to what a l decade at Microsoft so that is the worry here for Google as well but the idea

of a breakup has been raised that the doj is going to ask the judge to consider but there's a possibility that Google could even break itself up the last time something similar happened was back in 1982 When AT&T broke itself up and this was to dispel the antitrust pressure from the government Google has the opportunity to do something really interesting here which is get ahead of the curve and break itself up before the political system forces that onto it the big categories would be search advertising and YouTube and I think that would have two big

economic benefits for shareholders one is you unlock value by deong glomera second once you break up the company into these pieces there's less places for employees who aren't doing anything to hide you know for all this bureaucracy to hide I mean look Google is famous for employees who don't do anything right the guys sitting on the roof suting themselves all day if you break up the company into three or four smaller companies right there's just way less room for people to the doj could also Force Google to make its advertising knowledge available to its Rivals

but the most likely scenario is mandating that Google abandoned the deals with apple that made its search engine the default option and the same goes for the deal with Android manufacturers too law professor Spencer Weber Waller agrees quote there are no fines or monetary penalties in these types of cases but the court will have to decide whether Google should be broken up in some way more likely it will order Google to eliminate the exclusive contracts exclusive contracts and Licensing restrictions that have reinforced its Monopoly position for years end quote now to the latest updates on

September 6th 2024 in Washington a hearing was held by the doj the result of the hearing was that Google was going to be given an outline in December as to what they should do to restore competition in the market the prosecution hasn't finalized the details of the recommendation but justice department attorney David delist said that it should be sweeping the recommendations may include what we just covered but interestingly the doj is specifically looking at the intersection of artificial intelligence and Google's plans during the hearing there was lots of talk about Google's Gemini and what else

Google had up their sleeve meanwhile Google said that they were concerned that the doj will hamstring their efforts in the next generation of search technology Google's Attorney John smed line said at the hearing that the company requires an in-depth proposal from the US government prosecutors he said that they need to know the details as soon as possible could also turn out that Google could reach out to Microsoft and open AI to come to their aid in regards to convincing the government that AI search isn't going to be dominated by Google after this around next August

there'll be another hearing where the judge will give his opinion in the meantime the Department of Justice and Google will begin the discovery process to argue the respective cases and if all of that isn't enough Google has even more to worry about the company is under fire at the moment a second case by the doj will be shining a critical light on Google's online advertising business specifically in the second trial the court will want to know does Google have a monopoly in the online ad industry did they achieve this Monopoly through anti-competitive Behavior Google is

heading back to the courtroom next week the tech giant clashing with the Department of Justice again back in court again openings start on Monday and this is just on the heels a month after Google suffered this defeat in another federal court but here's what this case is about it's really different from from the search case what the Department of Justice in 17 states are saying is that there are three advertising technology markets where Google is also an illegal monopolist and mind you these markets are defined by the doj and this is something that the doj

and the states have to prove up they say these markets are the networks that Google owns where advertisers buy space they say that Google controls 80% of that market also the servers that Publishers use to sell space for ad advertisements doj says 91% ownership by Google there and also the exchange where the parties meet to make these deals Google may have to fight tooth and nail to keep the status quo you all know Firefox right the web browser well that's made by a company called Mozilla the weird thing is that over 83% of mozilla's Revenue

is made up from Google payments the total number of Firefox users continues to plummet and yet Google keeps paying them that sounds a bit weird you might be asking why would Google pay to keep their competitor alive the payment started back in 2005 when Google liked what the guys at Mozilla were doing with Firefox but now critics state that Mozilla keeps Firefox on life support just so that Google can say that the Chrome browser doesn't have a monopoly in the world of web browsers if the doj orders Google to stop their deals with other parties

Mozilla could end up losing 83% of their revenue overnight interestingly this this ruling draws from a 25-year-old antitrust case with Microsoft as per CNBC quote a federal judge determined in 1999 that Microsoft had illegally used the market power of its Windows operating system to box out rival browsers namely Netscape Navigator a settlement in 2001 forced the software giant to stop disadvantaging competitors in its PC deals end quote after the legal trouble Microsoft would take a step back from the emerging internet industry creating room for new startups like Google to thrive so this ruling isn't the

end of Google overnight it's just the door to open a pathway for a reduction in their dominance foundationally antitrust regulation is underpinned by the idea that competition is good for everyone the market the companies themselves but especially for the average consumer the argument is if Google has no competition there's a possibility that they could just stop caring altogether there's already online murmurs that Google search is indeed getting worse from the search relevancy dropping to SEO keyword stuffing polluting results to too many ads and poor generative AI implementation there's a point to be made that all

of this legal scrutiny could at the very least keep Google on their toes to improve their user experience but regardless This legal trouble for Google is the biggest in decades nraam law school Professor Roger Alfred who served in the doj's antitrust division has the defining comment on the matter quote not since Microsoft lost in the 1990s have we seen a case of this magnitude as for the future if and when Google is forced to let go of its exclusivity contracts at first it's not going to be that exciting for Android and iPhone users if they

prefer Google on their phones they'll stick with it though it would open the door up for things to be shaken up for example Apple would now be free to create their own search engine newer players like perplexity could gain a footo who knows so I'll ask you as a viewer what are your thoughts on the US government going after Google like this opinions are really split here some say Google deserves to be broken up others say that Google is the best product out there so no wonder they dominate others still think that America should avoid

turning into the EU regulating Innovation into Oblivion others like chath think that Google is actually a great company overall because they're in a unique position to innovate a point pretty much counter to what the government is argued here the breaking up of Google is great for competition and for startups but let's not forget Google is an incredible company that has created enormous amounts of good they have done way more good than bad way more like three four five orders of magnitude more good than bad and to break a company like that I think would be

a really bad outcome I want to just underline what chov said real quick being big can be very good in the sense that it can drive an ability to invest in Innovation that is not possible without the scale and the significant cash flow that's being generated by being that [Music] big for those of you who stuck around let me show you something here's a classic troll move for some comic relief a man dressed as Mr Moneybags himself was repeatedly pictured terrorizing Google the images surfaced online during multiple Google hearings in 2017 and 2018 the Monopoly

man in question is Ian madria the aim of his stunt was to draw attention to the need for antitrust action against Google and now it seems like he finally got his wish digesting the news today is more complicated than ever to make sense of that's exactly where today's sponsor ground news comes in ground news is a website and app developed by a former NASA engineer she was determined to give readers an easy datadriven objective way to read the news using this story of yel suing Google as an example their bias distribution chart shows me the

political leanings of the news outlets and I can get a summary of how the issues are being framed the left focuses on Google rigging the results in their favor disadvantaging players like Yelp they also give more weight to yelp's CEO who states that Google has an ecosystem of control meanwhile the right underscores the broader implications and States Google's counterarguments highlighting past FTC dismissals and pending appeals scrolling down I can compare every single article on the topic with convenient tags showing me context about the source like how factual it is and who owns it I also

love their blind spot feed this shows you stories that are underreported by one side of the political Spectrum for example if you're on the left you probably miss the story of Amazon Alexis refusing to give reasons as to why users should vote for Trump but doing so when asked for reasons to vote for Kamala Harris ground news is a fantastic tool for getting International views sifting through misinformation and identifying media bias they provide all the tools you need to be a critical thinker today I'm offering 40% off the advantage subscription this comes with a feature

called my news bias so you can even check out how your news viewing habits change over time go to ground. news/ coldfusion to get started so that's what's going on with Google and these antitrust lawsuits thanks for watching if you did like it feel free to subscribe to Cold Fusion all right so my name is toogo and you've been watching cold fusion and I'll catch you again soon for the next episode cheers guys have a good one cold fusion it's new thinking [Music] [Music]