Google’s unlawful grip on search could shatter its market dominance
The best case scenario for Google is that it wins its appeal; the unlikely worst case scenario is that competitors launch their own search engines.
The court ruling that Google is a “monopolist” could have ripple effects across the entire tech industry.
A recent analyst note from WedBush Securities lays out some of the possible scenarios. Some are more likely than others, and not all are favorable for Google—though some could be. The options on the table include a ban on the billions’ worth of exclusivity agreements Google struck with other companies, a massive fine, or the longshot possibility that Apple seizes the opportunity to parachute into the search engine business itself, potentially with a formidable player like OpenAI, according to Wedbush.
For consumers, the end of “Let me Google that for you,” a term that officially became a verb in 2006, could mean that it will ultimately be easier for them to access other search engines. But just because access is easier doesn’t mean Google’s business will evaporate. Consumers could simply choose it over competitors. However, if Google’s position were to slip, it could open the door to other search engines now that they could more fairly compete.
On Monday, Judge Amit Mehta of the United States District Court for the District of Columbia ruled that Google acted as a monopoly by using its position as the market leading search engine to unfairly harm its smaller competitors. In the ruling, Mehta said Google had used its size and influence to secure exclusivity deals that made its search engine the default setting. In 2021, Google spent a total of $26 billion securing these agreements through revenue-sharing deals with smartphone makers like Apple, various wireless carriers, and web browser developers, according to Mehta’s ruling.
In his 286-page brief, Mehta acknowledged Google’s superior product, calling it “the industry’s highest quality search engine.”
Google pointed to this fact in its reaction to the ruling, which it plans to appeal. “This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available,” Google president for global affairs Kent Walker said.
The agreements Google signed with other companies paid off handsomely—in 2023 Google Search raked in $175 billion in revenue—keeping competitors off consumers’ devices. In 2020, Google had a 95% market share on smartphones and a 90% share of online search in general, according to Mehta’s ruling. Microsoft-owned Bing, the runner up, had just 6% of all searches, the court filings stated.
With an appeal pending and the fact Mehta hasn’t yet decided what penalties he will impose on Google, there are a few possible outcomes in the running. They range from maintaining the status quo to upending the search industry all together, according to Wedbush’s analysts.
What could happen to Google?
The most straightforward outcome is if Google wins its appeal. In that case, the current ruling would be overturned and things would stay as they are. Google has about a 30% to 40% chance of winning its appeal, according to Wedbush analyst Dan Ives’ estimate. The appeal will likely take months if not years to play out and until then things could be in a holding pattern.
If Google loses the appeal, Mehta would impose a penalty that either forces the company to pay a fine, change the way it does business, or both. Google could be hit with a fine, which would likely have little effect on Google’s business, especially if the agreements allowing it to remain the default search engine stayed in place, said Wedbush’s analysts. It’s also old hat for the $2 trillion tech giant and others like it. In the EU, Google was hit with a $2.7 billion fine in June 2017 for violating newly implemented tech regulations by the EU’s antitrust watchdog. In the U.S., other tech companies have been hit with similar multi-billion fines by other antitrust regulators. In 2019, the FTC slapped Meta with a $5 billion fine for violating privacy regulations.
What would be a hit to Google’s business is if the government forced smartphone companies to proactively offer consumers the option to change their default search engine. Wedbush called this a “net negative outcome” even though it expected most users would continue to stick with Google.
In this case, Google’s appeal would end in a sort of middleground, where it kept its agreements but under certain conditions, according to Dan Ives. He likened it to Microsoft’s famous antitrust case from 2001 where after an appeal the company was allowed to stay together but had to offer competitors access to its APIs, something it had previously resisted.
“If they lose, they likely come to some structured agreement with Apple that would tightrope everything,” Ives said. And “give [consumers] some other options from a search perspective on the iOS iPhone ecosystem, but still keep Google as the primary search partner.”
Other analysts also consider this to be a possibility.
Evercore analyst Amit Daryanani said one of the most likely outcomes is a ruling that would require that “companies like Apple must proactively prompt users to select their search engine rather than setting a default and allowing consumers to make changes in settings if they wish.”
Google’s agreements with companies like Apple ensures that devices don’t come preloaded with other search engines. There’s a strong possibility that could change and that upon buying a new device, users will be prompted with the option to select a default search engine from a list of choices.
There are also two less likely scenarios. In one, companies like Apple, now unencumbered by lucrative but restrictive default agreements, simply replace Google with a different search engine. Wedbush doesn’t see that happening because Google is widely considered to be the best search engine on the market.
The second unlikely scenario is that Apple uses this as an opportunity to start developing its own competitor to Google.
If done properly, Apple could seamlessly integrate an AI search tool across its countless devices across the world, says Jim Kaskade, CEO of Conversica, a cloud company developing conversation AI. “This is a potentially big win and will help unseat Google’s dominance,” he said.
One of the reasons for Google’s big money deal with Apple was to keep it from developing its own search tools, according to New York Times reporting from 2023. Apple and Google already compete in the smartphone market with their iOS and Android systems.
In closing, the Wedbush note floats a partnership between two of Google’s major tech competitors. Apple and OpenAI could team up to develop a next generation, AI-powered search engine. It’s a long shot possibility, Ives concedes, but an option nonetheless. “There’s probably a better chance of me running the 200 meter in Paris than that happening, but you just got to put every option out there,” he said.
The two companies already have an agreement to integrate OpenAI’s ChatGPT tool into Apple’s existing Siri features, which it is calling Apple Intelligence. While unlikely, Wedbush concedes that if it did happen it could be a big hit to Google. “An unexpected challenge from Apple could result in more material market share loss from Google,” the research note reads.
But Apple, a famously fastidious company, is reportedly keeping OpenAI at arms length over concerns about consumer privacy and its brand image.
Kaskade says all of this is still premature. “Let’s not mix the ruling and associated challenges, with go-to-market and product technology breakthroughs of these two,” he said. “The ruling applies no matter how Google and Apple compete.”
