Microsoft vs Google: The battle of the giants has begun! Here are the details

Microsoft CEO Satya Nadella warned on Monday that if Google’s dominance in online searches is allowed to continue, a “nightmare” scenario will emerge for the internet. While it is very important to know that this warning is not empty, it is also important to know that Google is at the center of a major federal antitrust case in the USA. The statements made by the Microsoft CEO as part of this lawsuit may be a declaration of the obvious for some of you, but perhaps it marks the beginning of the war of the giants.

“Googleverse”

Nadella told the court that Google’s dominant market share in online search means publishers and advertisers tailor their content to Google’s needs, making it difficult for rivals such as Microsoft’s Bing to gain a foothold. Nadella delivered the following striking words from the courtroom: “Everyone talks about the open web, but in fact there is only Google Web.”

The US, on the other hand, argues that Google has locked down distribution channels for public search engines through special agreements with browser and phone manufacturers to be the default option on various devices. Perhaps the most famous of these deals is the multibillion-dollar deal between Google and Apple that made Google search the default on Apple products. The USA claims that Google has gained more dominance in this way, reached more users, attracted more advertisers and ultimately earned more money.

Meanwhile, the government argues that it is becoming more difficult for competitors to reach consumers and, as a result, they are missing the opportunity for greater benefits or innovations in search. Nadella confirmed this argument in his testimony, describing the obstacles that a general search competitor like Bing faced in gaining more market share than Google.

Microsoft, Apple and Bing

Nadella also said Microsoft is willing to take billions of dollars in short-term losses for Bing in order to pay Apple enough to make the search engine default. This payment is approximately 15 billion dollars annually. In our news about Apple’s search engine that we shared the other day, we mentioned that the company is taking steps in this field. Nadella’s confessions do not end here. The CEO said that every year he has been in office he has focused on whether Apple would be open to accepting a hypothetical offer from Microsoft, and a number of conversations have taken place on this subject.

Nadella said that if Apple strikes a deal with Microsoft, it may choose to use Bing’s technology and brand it as its own Apple search engine. This discourse is very important and critical. Because it was revealed a while ago that Microsoft was trying to sell Bing to Apple in 2020.

Why Microsoft’s passion for Search?

Throughout his testimony, Nadella talked about why Microsoft chose to stay in the search space despite the challenges, and how the company remained persistent and continued to wait for the right opportunity to shake up the market. Nadella said Microsoft wants to “make search more competitive” by operating it like a “public service.”

The idea that users have full choice in changing their default settings is “completely fake,” Nadella said, adding that it is difficult to change default settings on mobile platforms because “they are all locked.” By the way, it should be known that Microsoft does not have a good track record when it comes to changing the default.

However, becoming the default isn’t just about attracting an influx of new users. It also includes getting more signals from users about what they are searching for and what they are clicking on. Such information can help improve the search engine to make results more useful and tailored to users’ needs.

Nadella said that although Microsoft remains a “very, very low-share player” in the overall search market, the company still believes there is opportunity to innovate in what he sees as the “largest software category.” He said that when he became CEO in 2014, he focused on making Bing profitable to continue investing, and it remains so now.

Nadella said he expects a “paradigm shift” that could create a window of opportunity for Bing, just as the compromises resulting from Microsoft’s antitrust fight with the government at the turn of the century created for Google. We talked about history repeating itself in our article “An article about Google on its 25th anniversary”, where we touched upon the past and future of Google. It seems that Nadella is also waiting for an opportunity for such a change.

100 billion dollars investment

Meanwhile, Nadella says Microsoft has invested nearly $100 billion in Bing over the past 20 years. The fact that Bing’s market share remains in single digits despite this huge three-digit investment shows the strength of its rival. “It is difficult to make any breakthrough, but no one can accuse us of not being persistent,” Nadella said.

Building a new competitor from scratch is very difficult because it involves both fixed costs and costs that increase as you gain market share, Nadella said. Nadella added that the search area is considered one of the largest “no-fly zones” in Silicon Valley.

To put it bluntly, the only area where Bing excels is in desktop search. Edge, which comes by default thanks to Windows and Edge, manages to retain some of the users. Still, Nadella acknowledged that “Google” is still the most frequently queried word on Bing. Possibly the second word could be “Chrome”.

“Nightmare”

Nadella said Microsoft was trying to make sure advertisers could move their campaigns seamlessly between Google and Bing’s search advertising tools, but Google wasn’t willing to do so.

Nadella said he worries that as artificial intelligence becomes increasingly prevalent in search, Google will leverage its position to block more avenues for rivals. Microsoft has begun integrating ChatGPT into Bing search results, thanks to its partnership with OpenAI. Frankly speaking, Bing with artificial intelligence is already ahead of Google in this field. However, Google is trying to close this gap with SGE. For now, this new Google is used by a limited number of users.

Although Microsoft acted much earlier than Google, Nadella said he was concerned about missing out on important data sets that could be used to train the technology. “Despite my enthusiasm, I am very worried about a new perspective on artificial intelligence,” Nadella said. “I am very worried that this vicious circle I am stuck in may become even more vicious.”

Because Google may try to ensure that content from its search engine and video platform YouTube is used only to train its AI large language models (LLMs). Nadella said competing with Google’s core economic advantage “will become even harder in the age of AI,” and he wonders whether AI “will make making headway in search an even worse nightmare.”

“Let’s say Bing exited the market,” said Nadella, who acknowledged that Google would not have been dominant if it weren’t for Microsoft’s antitrust battles with the U.S. government in the 1990s. “Do you think Google will continue to pay Apple?” he said.