Google investors were overjoyed on Wednesday in response to a long-awaited decision in a high-profile federal antitrust case against Google. [1]
On Tuesday, federal judge Amit P. Mehta of the U.S. District Court for the District of Columbia ruled that Google could get to keep its Chrome browser, despite a previous ruling also by Mehta declaring that the tech giant’s search business was a monopoly.
In response, Google stock had its largest upside non-earnings-related overnight gap up since it was added to the S&P 500 in 2008, according to Bespoke Investment Group.[2]
Instead of divesting, the court is asking Google to share search index and user data with its competitors and refrain from exclusive contracts (though with carve outs that allow some exclusive contracts.
How is this a win for Google?
The major reason behind this decision that’s being largely considered a win for Google was supposedly the advent of AI.
“The emergence of GenAI changed the course of this case,” Judge Mehta said in the ruling. [3]
“For the first time in over a decade, there is a genuine prospect that a product could emerge that will present a meaningful challenge to Google’s market dominance,” the court ruled.
The court said that “unlike the typical case where the court’s job is to resolve a dispute based on historic facts, here the court is asked to gaze into a crystal ball and look to the future.”
Based on the many witnesses that painted generative AI as a budding competitive threat to Google search business, the court decided that “market forces” would decide the future of Google’s search engine market dominance.
How that is supposed to play out we will see in the coming years, but the testimony given by top executives from Google and Apple at the trial could show a roadmap of how the tech industry is thinking about it.
Google’s search monopoly
Last year, Judge Mehta declared that Google holds a monopoly[4] in online search and search-tied advertising. On Tuesday afternoon, the judge decided on remedies to this ruling that would open the search engine space up for competition.
Some expected that the judge would rule Google to divest from Chrome, a decision that would have been the most obvious way to combat a monopoly. But instead the judge went with more subdued actions that mostly aimed at limiting Google’s exclusive contracts, which was along the lines of what the tech giant had asked for at court.
Google requested that the remedies be limited to barring the company from entering into exclusive distribution agreements, and nothing more, because “the GenAI technology space is highly competitive and any further restrictions would unfairly hobble it in that fight,” court documents show.
Although Google’s Gemini trails competitor product OpenAI’s ChatGPT, the tech giant’s generative AI offerings are still doing considerably well as Google aims to further increase its investment in scaling out the technology.[5]
Rivals aren’t happy
The decision was undoubtedly a win for Google, and parent company Alphabet’s stock.
“This is a monster win for Cupertino and for Google,” Dan Ives, Wedbush Securities analyst and global head of technology research, wrote in an analyst note on Tuesday.
Cupertino-based Apple is also considered a winner, even though the company was not a party in the trial, as the court decided to spare its billions of dollars worth deal to have Google the default search engine on the Safari browser.[6]
Competitors were dismayed.
“We do not believe the remedies ordered by the court will force the changes necessary to adequately address Google’s illegal behavior,” a spokesperson for search engine DuckDuckGo told Gizmodo on Tuesday.[7]
How AI is disrupting search
Generative AI and general search engines (referred to in the lawsuit as GSEs) have a complicated relationship.
Generative AI technologies, and specifically chatbots like ChatGPT and Anthropic’s Claude, are used by millions to answer questions that a few years ago would have been a Google search query.
The chatbots also often include links to websites as citations in the answers they provide, much like a search engine would guide the user, albeit to more options. Search engines have taken over this role so much that many websites and media organizations who rely on these clicks to keep their business going are understandably worried.[8]
“Chatbots perform an information-retrieval function like that performed by GSEs,” the ruling said, adding that although the chatbots “are not yet close to replacing” search engines, “the industry expects that developers will continue to add features to GenAI products to perform more like GSEs.”
In his testimony, Apple’s Eddy Cue, senior VP of services, said that generative AI products “may be having some impact” on search engine usage.
“The volume of Google search queries in Apple’s Safari web browser declined for the first time in 22 years, perhaps due to the emergence of GenAI chatbots,” Cue said.
When asked what it would take for Apple to choose any other competitor over Google as the default search engine for its browser, Cue said that no existing search engine could dethrone Google, but a generative AI product might if it evolved the right way.
That is, the LLM technology itself is already doing fine, but what would provide the competitive edge would be if generative AI products grow their search index, aka the data available for retrieval.
“What that will do is create a product that gives better results, new capabilities. You know, those are things that people are interested in today,” Cue said.
How much of a competitive edge do they have?
But despite the obvious competitive risk posed to search engines by AI, generative AI has also been integrated[9] into search engines to increase their competitive edge.
Google’s search head Liz Reid said during the trial that Google Search queries have increased by “more than hundreds of millions of queries a month in the U.S. alone” since introducing AI Overviews in search.
At the company’s earnings call in July, CEO Sundar Pichai said that Google’s new AI features were now driving “over 10% more queries globally.”[10]
The executives also said that Google is looking into ways that its GenAI product Gemini can be a search engine access point by kicking commercial queries back to Search, court documents show.
As Google wins this lawsuit on the basis that AI will prove to compete with its most precious product, the focus now shifts to how the tech industry will contend with this complicated dynamic between its most prized emerging technology that is AI and search engines that provide the foundation of the current internet.
References
- ^ decision (gizmodo.com)
- ^ Bespoke Investment Group (www.bespokepremium.com)
- ^ ruling (storage.courtlistener.com)
- ^ Google holds a monopoly (google.com)
- ^ increase its investment (gizmodo.com)
- ^ Apple (www.cnbc.com)
- ^ told Gizmodo (gizmodo.com)
- ^ worried (www.theverge.com)
- ^ integrated (gizmodo.com)
- ^ 10% more queries globally (gizmodo.com)