Google Loses Its Antitrust Case: Why That Matters For Your Business (Thinks Out Loud Episode 429) Thinks Out Loud: E-commerce And Digital Strategy podcast

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Google Loses its Antitrust Case: Why That Matters for Your Business (Thinks Out Loud Episode 429)

11d ago 26:28

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The big news story this week is that Google lost (the first round of) its antitrust case in Federal court. While it’s way too soon to know for sure how this will affect your business in the near term, it’s nowhere near too soon to think about why it matters in the long run. Because, if you’re like most businesses, Google represents a significant chunk of your traffic and revenues. Anything that causes them to lose focus, lose their mojo, or, most importantly, lose trust among consumers ultimately will impact you, too.

What happened in the trial? What did the judge say about Google — and about its competition? How might this affect Google both in the near term and down the road? What did we learn about how Google operates? And, finally, why does this trial matter for your business?

That’s what this week’s episode of Thinks Out Loud is all about. Want to learn more? Here are the show notes for you.

Google Loses its Antitrust Case: Why That Matters for Your Business (Thinks Out Loud Episode 429) — Headlines and Show Notes

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You might also enjoy this webinar I recently participated in with Miles Partnership that looked at "The Power of Generative AI and ChatGPT: What It Means for Tourism & Hospitality" here:

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Running time: 26m 28s

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Transcript: Google Loses its Antitrust Case: Why That Matters for Your Business

Well hello again everybody and welcome back to Thinks Out Loud. Your source for all the digital expertise your business needs. My name is Tim Peter. This is episode 429 of The Big Show. And I think we’ve got a really cool episode for you today. I will admit it’s not the episode I thought it was going to be.

My podcast schedule just got seriously shaken up. My original plan for this week was to dive into Big Tech’s quarterly earnings, as you know we do every quarter. And don’t worry, we’ll do that in about a week. But news broke Monday afternoon, that’s about an hour or so ago, relative to when I’m recording this.

That shot that schedule all to hell. It’s one of the key points from earnings that I will return to. During this episode is that Google made about 85 billion in revenue last quarter. With 48. 5 billion of that, or roughly 57%, coming from search. So what does that have to do with what blew up my podcast recording schedule?

Well I don’t know if you saw the news, but Google just lost a major Major, huge, antitrust case. The judge in the case noted that, and I quote, Google is a monopolist and it has acted as one to maintain its monopoly. Going on to say that Google, quote, violated section 2 of the Sherman Act. That’s the Sherman Antitrust Act.

For those of you playing along at home. And whether you know it or not, this case matters to your business. I will explain why later in the episode. I’ve been talking about Google’s potential antitrust problems for at least five years. In a article I wrote called, Say Goodbye to Google, Hoteliers, and Gatekeeper’s Gonna Gate, Apple, Google, and Antitrust from way back in 2019, and as recently as 2023 with an episode entitled, The End of Google, because this matters a ton.

Now, I’m going to break down What’s going on, then I’m going to talk about why you care, and then I’m going to talk about what you do about it. The first thing I want to remind everybody, of course, is that I’m not a lawyer, so this isn’t intended to be a detailed legal analysis. I will share what I know to be true, right?

First, being in a monopoly is not illegal. It is illegal if you use your monopoly to maintain your market power. Though Google argued that they’ve achieved Their monopoly status because they had the best product. Generally speaking, the court actually agreed with them on that part. And I’d agree with them on that point.

Google wanted the marketplace because it has long been the best search engine. No offense to Microsoft and Bing, but they’ve been 20 years. As I’ve said before, though, if Bing was going to beat Google at Search, well, they’d have beaten Google at Search. The court also, at least in my first fast reading of the ruling, Seems to understand the power of scale for making Google’s product better, and that its scale is tough for others to compete with.

One thing to keep in mind throughout this is that the court refers to Google and its competitors throughout the ruling as General Search Engines, or GSEs. Keep that in mind for any quotes I share with you where that comes up. They also refer to Special Vertical Providers, or SVPs, for folks like Amazon or Expedia or Indeed.

Or Yelp, where you’re searching a very narrow channel, a very narrow vertical search that only focuses on products or travel or jobs, for instance. Anyway, the court stated, as the most widely used GSE in the United States, Google receives nine times more queries each day than all of its rivals combined across all devices.

This disparity is even more pronounced on mobile. There, Google receives 19 times more queries than all of its other rivals put together. And the court notes that the data comes, that comes from those queries gives Google a powerful tool for making search better. Bing struggles to get better, DuckDuckGo struggles to get better because they just don’t have as much data as Google does.

One of the expert witnesses during the trial testified they analyzed, quote, 3. 7 million unique query phases on Google and Bing Showing that 93 percent of unique phrases were only seen by Google versus 4. 8 percent seen only by Bing. And that that disparity was even greater on mobile. It’s awful tough for Bing to make a product that’s much better than Google.

When they just don’t get near as much distinct data. The court noted that, quote, Google has used its scale advantage to improve the quality of its search product. At every stage of the search process, user data is a critical input that directly improves quality. One of my favorite quotes about data in this ruling states that, quote, 13 months of user data acquired by Google is equivalent to over 17 years of data on Big.

I mean, holy crap, that is a wild way of pointing out Google’s advantages. All of that, by the way, is before they started using AI. And none of what I’ve just described is illegal. They’re just building a better product that improves the more that people use it. That’s smart business. The ruling says that breaking the law, quote, the offense of monopolization requires proof of two elements.

One, the possession of monopoly power in the relevant market, and two, the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. Okay, simplifying that, they’re saying it’s okay to gain and maintain monopoly power by building a better product, or by having better execution, or by just plain luck.

But if you then maintain that power in any other way than those three things, then you probably broke the law. And as a quick note about markets, To be a monopoly, there has to be a defined market. The court found that, quote, general search services is a distinct market. That’s using Google and Bing for search versus, say, what the court calls special vertical providers, or what I’ve always called vertical search engines, Yelp, or things like that.

Or social networks like Facebook and Pinterest for search. Obviously, all of those examples of SVPs and social networks allow searching, but they’re not, in the court’s view, general search services. And I think this is interesting and worth talking about for a moment. The court gave multiple reasons. I’m only going to focus on three.

Most of the SVPs and social networks, they, the court noted, only search their own content. They don’t typically search the whole web. That feels like a reasonable distinction to me, and something we want to keep in mind when we think about our own businesses, which I will come to later. The second factor, Google’s expert witness testified, quote, that there is relatively limited user overlap between the general search engines.

So, users see Google and other GSEs as substitutes, such that using Google obviates a need to use another GSE. In other words, most users use Google for general search and Amazon, Expedia, Indeed, and Pinterest, let’s say, only when they’re searching for products, travel, jobs, and images. They’re not using those tools to replace Google itself.

So, you might use Google or Bing. Along with Expedia, Indeed, Amazon, and Pinterest, but you’re not using Expedia, you’re not using Google and Bing along with those. And then the last reason that the court found is kind of funny from a, from a darkly funny perspective, especially if you’re Google. Google also only looked at general search engines internally when it compared itself to its own competition.

This is a quote from the ruling. When Google has evaluated its quality against other platforms, it has done so primarily against other GSEs. In the next sentence, the court writes In addition, internal Google documents show that Google, as early as 2009, tracked its, quote, market share, unquote, relative only to other GSEs.

Whoops, the court didn’t define the market, Google did. They said this is who our competitors are and these are the only ones we care about. That’s not great if you’re Google, right? You basically told the court these are the folks who we see as the market. So, you know, that’s kind of a pretty telling detail.

The court also ruled that Google has monopoly power in the general search text ads market. And without getting too deep into the specifics, again, not a lawyer, Google’s own actions, again, apparently played a role. The judge noted that Google does not consider competitors pricing when it sets text ad prices.

They said that’s something a firm without a monopoly would have been unable to do. Make sense, right? If you’re gonna set prices, you’re kind of gonna pay attention to what your competitors price things at. Google didn’t do that. So, they’re kind of saying they’ve got power over pricing that very other few, that very few other people would have.

I also think it’s notable that the court Google, quote, recognized a separate market for search ads, it found that Google did not have monopoly power in that market, it also rejected a separate general search ads market, unquote. So, we’re only talking about Google as a monopoly in the general search services market and the general search ads market.

Text ads market, and that again, being a monopoly in those markets itself is not illegal. This is the thing I said I would come back to later about, you know, Google has a great product. The court said, this is a quote from the document, Google has long been the best search engine, particularly on mobile devices.

Nor has Google sat still. It has continued to innovate in search. The judge flat out goes on to say that Microsoft and DuckDuckGo have tried to beat Google, but quote, These firms have not succeeded in part due to their inferior quality. I mean, jeez. That’s harsh, man. That is rough. You know, Google’s being found to be breaking the law and you’re getting dragged at the same time.

That’s crazy. In another kind of brutal takedown of Microsoft, the judge wrote that, again, a quote, Microsoft acknowledges that it was slow to recognize the importance of developing a search product for mobile and it has been trying to catch up unsuccessfully. Ever since, oof, I mean, geez, that’s some rough stuff.

Where Google went wrong here, where it broke the law, according to the court, is that it used its dominance when it paid Apple, Netscape, and Android phone manufacturers To make sure they wouldn’t switch to another product, or wouldn’t invest in developing their own. They paid Apple around 20 billion in 2022 to prevent Apple looking at alternatives, and apparently based that price in part on what they felt it would cost Apple if they were going to invest in making their own search engine.

That’s not a good thing. When the court asked why Google pays billions in revenue share when it already has the best search engine, former Google Senior Vice President of Ads and Commerce, Dr. Ramaswamy, said that the payments provide an incredibly strong incentive for the ecosystem to not do anything.

They effectively make the ecosystem exceptionally resistant to change. And their net effect is to basically freeze the ecosystem in place. The judge followed up by saying, No one would ever describe a competitive marketplace in those terms. This is me now, not the judge. Freezing the ecosystem in place?

That’s the illegal bit. You’ve heard me say plenty of times that gatekeepers gonna gate. We’re seeing that right here in this case. Gatekeepers gonna gate even if it’s illegal. Now, I’ve talked about this before. I mentioned at the top of this episode that I’ve talked about this for at least five years.

Because it matters to your business. And the reason it matters to your business is that you get a lot of traffic and a healthy share of revenue from Google. Most businesses receive a plurality, if not an outright majority, of their traffic and revenue from Google. In the ruling, they had a fact that the special vertical providers that I mentioned before, so folks like Amazon, Expedia, Indeed, Yelp, and so on, Received between 33 percent and 88 percent of their traffic from Google search.

I strongly suspect, and the data that we see with clients, shows that you’re likely getting numbers very much within that same range, that same very rough range. The court also found that, quote, not surprisingly then, SVPs are Google’s top advertisers. That’s a big deal. Right? You are probably also paying Google for some of the traffic that they drive to you.

If Google is forced to change its behaviors, then your business can suffer. Anything that hurts Google can hurt you. That’s why you care. That’s why this matters. This isn’t about Google. This is about your business. It’s also true that the search ecosystem is not as frozen as it was. We’ve probably seen more innovation in the last 10 months than we’ve seen in the last 10 years.

Google faces more threats, whether they’re new entrants, More AI competitors, this anti trust ruling, similar cases working their way through other state courts, movement in the European Union regulation, than at any other time I can recall. And that’s even going back to when I first started talking about this five years ago.

There are lots of ways that Google can stumble, and lots of ways that any of those stumbles can hurt you. That’s what you need to prevent. Now, I want to be very clear, there’s a ton of good news here, too. The court rulings actually contain a ton of insights into why other channels are good for Google, and again, by extension, good for you and your business.

Google had an analysis in 2019 that they called Project Charlotte that showed users who engaged with SVPs, Special Vertical Providers, so people like Amazon, people like Expedia, people like Yelp, were more likely to search on Google. And that was also true on mobile apps. If people used a mobile app, they were more likely to actually search on Google.

That’s hugely important and shows the values of diversifying your mix into other channels. They also had some more dated evidence that Facebook use correlated to more searching on Google. So again, It sometimes drives people to Google, but it helps people find you lots of ways. The question you should be asking is where your traffic and revenue come from if Google loses in court or loses its way more generally.

How are you diversifying your web traffic? How are you connecting with consumers and customers more broadly beyond Google and the rest of big tech? How are you building a brand that customers return to again and again? This episode is already getting on the long side, so I’m not going to go into huge detail about this.

But there’s a ton of episodes we’ve done here about these very questions. Last week’s episode alone, how to put big tech and AI, the biggest threat and biggest enablers of your business, to work. We had an episode shortly before that called, Google is Changing Search, How to Build Traffic and Revenue Beyond Google.

Another called, The Core Methodology, How to Build Traffic and Revenue Beyond Google, Part 2. We’ve asked you still need a website and how to escape big tech’s web, and can podcasting help your business bypass big tech gatekeepers? We’ve talked about how you can rethink search marketing in the age of AI, and what Taylor Swift can teach you about bypassing gatekeepers.

We’ve asked, will AI and ChatGPT kill your search traffic? We’ve said, does marketing have a future? And explained why the word of the year is integration. All of these will be linked to in the show notes. Those episodes offer a playbook for what you should be thinking about. And more importantly, doing. To prevent Google’s troubles from becoming your troubles.

I also want to acknowledge one other point. This ruling does not mean this case is final or is over. Google will appeal. They have to win this in the long run. It is existential to your business. Remember at the top of the episode when I talked about the 57 percent of revenue that comes from search? How would you like it if someone ruled that you had to change the product that drives 57 percent of your business’s revenue?

I bet you wouldn’t like it very much. I bet you would do a lot to ensure that you could keep moving your business forward the way you wanted to. Google is no different here. I suspect they’re either going to win. Or at least reach a favorable settlement in the long run. And I think this is going to take a little time to play out still.

I’m not, again, a legal analyst, so I can’t actually make strong predictions as to for how long this will take. But from a business perspective, they’ve got to find a way to come to an agreeable settlement here. They’ve got too much riding on it otherwise. I also want to point out that none of this is meant as, you know, the death of SEO or the death of search.

None of this means abandoning Google. Think about everything we’ve talked about here and the things that I mentioned a moment ago as Google and other channels, not Google or other channels. You can use the many alternatives referenced in those episodes to drive more traffic and revenue for your business no matter what happens to Google.

If they lose and their traffic declines, then you’ll have built other ways of driving traffic and revenue to your business. If they succeed, you’ll get as much search traffic as you ever did, plus the benefits of the alternatives you’ve built along the way. It’s a win win for you, and in either case, you’ll be fine.

The thing that you want to remember is that Google might have a monopoly on search. That doesn’t mean they should monopolize your marketing spend or your customer acquisition. I hope this ruling and this episode serves as a wake up call that you’ve got the ability to make your own decision about how to create customers for your business.

No matter what happens to Google in court or in the marketplace, it’s up to you to take the next step to make that work in practice for your business.

Show Wrap-Up and Credits

Now, looking at the clock on the wall, we are out of time for this week.

And I want to remind you again that you can find the show notes for this episode. As well as an archive of all past episodes by going to timpeter.com/podcast. Again, that’s timpeter.com/podcast. Just look for episode 428.

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Show Outro

Finally, and I know I say this a lot, I want you to know how thrilled I am that you keep listening to what we do here. It means so much to me. You are the reason we do this show. You’re the reason that Thinks Out Loud happens every single week.

So please, keep your messages coming on LinkedIn, keep hitting me up on Twitter, sending things via email, I love getting a chance to talk with you, to hear what’s going on in your world, and to learn how we can do a better job building up the types of information and insights and content and community that work for you and work for your business.

So with all that said, I hope you have a fantastic rest of your day, I hope you have a wonderful week ahead, and I will look forward to speaking with you here on Thinks Out Loud next time. Until then, please be well, be safe, and as always, take care, everybody.

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Google Loses its Antitrust Case: Why That Matters for Your Business (Thinks Out Loud Episode 429)

Thinks Out Loud: E-commerce and Digital Strategy

published 11d ago

MP3•Episode home

That’s what this week’s episode of Thinks Out Loud is all about. Want to learn more? Here are the show notes for you.