Microsoft’s Bing search engine has long been perceived as inferior to Google. Even Microsoft CEO Satya Nadella acknowledges this fact. However, during the US v. Google antitrust trial, Nadella shed light on the reason behind Bing’s inferiority.
Nadella took the stand in a dark blue suit and explained his motivation to compete with Google. He stated that he saw search as the largest software category and a highly profitable business. Bing already turns a profit for Microsoft, and Nadella believed that even capturing a portion of the market would result in significant financial gains.
The discussion then shifted to Google’s exclusive search provider deal with Apple, which Nadella views as a game-changer. He explained that Microsoft was willing to offer Apple all the economic benefits of the deal and was prepared to lose up to $15 billion per year to secure it. Nadella even mentioned hiding the Bing brand in Apple users’ search engines and respecting their privacy preferences. He emphasized that defaults are crucial in changing user behavior and that switching search engines is not as easy as it may seem.
Nadella identified distribution as a key factor for Bing’s success. He believed that by becoming Apple’s default search engine, Bing would experience an increase in query flow, allowing its team to gather more data and improve the search engine’s quality. This enhanced search engine would attract more advertisers and users, creating a virtuous cycle for Bing. However, for Bing, being the losing party without the queries, data, advertisers, or users creates a vicious cycle.
When questioned about the impact of artificial intelligence (AI) on the search market, Nadella acknowledged its potential to shake things up. However, he also expressed concerns that AI could further solidify Google’s dominance. As large language model-powered systems evolve, publishers and platforms are becoming cautious about how their data is used to train AI systems. Publishers may choose to sign exclusive data deals with only Google, making it difficult for other search engines to compete.
Nadella’s story aligned with other upstart search engines, which claim that Google’s default search engine status stifles competition. By making itself the default search engine everywhere, Google prevents other companies from reaching users and acquiring the necessary data to build competitive products.
During Google’s cross-examination of Nadella, their lead counsel argued that Bing’s inferiority was not due to Google’s actions but rather Microsoft’s mismanagement of search and mobile products throughout the years. Google maintained that building the best search engine is not illegal, asserting that their success was a result of out-investing and out-executing Microsoft.
One area of focus during the trial was the bundling of Bing and Edge into Windows. Despite this bundling, Google Search and Chrome remain more popular among Windows users. Nadella and the Department of Justice (DOJ) argued that Bing’s market share on Windows, even though in the teens, is evidence that defaults matter. The increased usage of Bing has allowed it to improve and gain traction, resulting in fewer users switching back to Google.
Nadella firmly believed that defaults play a significant role, regardless of the Windows market share statistics. He dismissed the idea that users can easily switch search engines, citing Apple Maps as an example. Despite initially being inferior to its competitors, Apple Maps gained market share because it was preinstalled on every iPhone.
The power of defaults is a central issue in the US v. Google case, and it will continue to be analyzed. Nadella’s perspective carries weight, as he has experienced both being the default and contending with Google’s default status. He firmly asserts that defaults are the primary driver of user behavior.
