On Monday, Microsoft CEO Satya Nadella appeared in Google’s antitrust trial, saying that “Google has used unfair tactics” to block opportunities for search competitors such as Bing. The Wall Street Journal reported that it upheld the Justice Department’s argument that the most important thing was the default search agreement. .

A Microsoft spokesperson provided Ars with a transcript of Nadella’s morning testimony. This does not include about an hour’s worth of testimony from the afternoon session, the transcript of which is not yet available. But it included about an hour of questioning from Justice Department attorney Adam Severt, in which Nadella argued that Google controls the default search placement of mobile providers and browsers. , said the idea that users have an actual choice when choosing a search engine is a “sham”.

But Nadella’s efforts to help the Justice Department include early statements that touted how AI-powered Bing could give Microsoft a long-sought competitive advantage over Google. It appears that the CEO had to withdraw the department.

Nadella said at trial that Internet search is the “biggest no-fly zone” in Silicon Valley, which the magazine characterized as “the most difficult market to break into.” According to the WSJ report, Nadella said that even Microsoft, which appears to be leading in artificial intelligence (which has invested billions of dollars in OpenAI), is not concerned with “the extent to which artificial intelligence can reshape the markets that exist today. “There are limits to how much money there is,” so it likely won’t be enough to change the situation, WSJ reported.

Mr. Nadella once suggested during Bing’s rollout earlier this year that the technology represented a “new day” in search, but in court Mr. Nadella argued that his “enthusiasm” during the rollout was due to search’s ” “This is thanks to someone who has a market share of about 3%,” he said. I’m the one who started thinking, “Maybe he can get a 3.5 percent share.”

According to WSJ, as of August, even that modest goal had not been achieved. Third-party data shows that “Microsoft’s share of the search market has changed little” since adding AI capabilities to Bing, but Google’s chief trial lawyer John Schmidlein said this claimed otherwise, saying it was a “direct result of Microsoft’s failures in Internet search.” This is due to Google’s market dominance.

Mr. Nadella disagreed, telling the court that even ChatGPT was not in a position to overtake Google in the search market because Google is the most easily accessible and obvious choice for most users.

“You wake up in the morning, you brush your teeth, you search on Google. When you form habits like this, the only way to change them is to change the default,” Nadella said.

Nadella also warned that far from creating opportunities for competitors like Bing, new AI technology could ultimately further cement Google’s dominance in search without court intervention. expressed concerns.

“The distribution advantage that Google has today hasn’t gone away,” Nadella said on stage. “In fact, despite the enthusiasm that there are new angles to AI, I’m very concerned.” The cycle I’m in may even get worse, as defaults are reinforced. “This will be an even worse nightmare for the advancement of search,” he added, “because it creates a new avenue for Google to ‘essentially’ shut down what feeds its AI models: content.” It is,” he added.

For the Justice Department, Mr. Nadella’s testimony shows that Google’s dominance in the market is so insurmountable that a company of Microsoft’s size cannot compete, even if it potentially invests more than Google. was the purpose.

But that doesn’t stop Microsoft from trying. Nadella said in court that search is a “difficult game for Microsoft to break through, but no one can fault them for not being persistent.”

“I think search and Internet search is the largest software category,” Nadella testified. “We’re a very low-share player. But we’re sticking with this because we think it’s a category of software that we can contribute to.”

Google did not immediately respond to Ars’ request for comment.

Judge: Can startups compete with Google?

While Mr. Nadella was on the stand, Judge Amit Mehta seemed interested in learning more about how Google’s market dominance could potentially stifle innovation. Mehta interjected his own question to Nadella about “whether startups can use innovations in artificial intelligence to take market share from Google,” the Journal reported.

“It’s very difficult for startups,” Nadella told Mehta, noting that Microsoft has invested more in search than Google, and that in some ways Microsoft’s investment has led to some search alternatives. He claimed that it was the only thing keeping the means alive.

“Frankly, the investments that Microsoft has made in search have even kept all of the other search players competing for search, such as DuckDuckGo, alive because they use our search index.” Nadella said.

It will be up to Mehta alone to decide whether Google has an unfair monopoly on internet search. His cross-examination of Mr. Nadella echoed testimony Mr. Mehta heard last week from Jonathan Tinter, Microsoft’s head of business development, who argued that Microsoft had offered Apple better terms than Google, and that Microsoft had offered more favorable terms to Apple than Google, and that it would sell more Apple devices. Even if it was willing to lose billions of dollars to secure the default search placement on Apple, it still plans to sign a deal with Google, which it claimed to have chosen, Bloomberg reported. Nadella said in court that Microsoft was willing to accept years of losses just to get this deal “to break new ground in this search race.”

The company had no interest in acquiring Bing from Microsoft because Apple’s default search deal with Google seemed so lucrative, Tinter testified. Nadella said in court that Google has apparently locked down search on Android devices and the popular Chrome browser, so much so that Microsoft’s CEO “every year of his tenure” has decided that Apple will make Bing the default search engine. He said he has focused on determining whether it is “positive or not.” on that device.

He also pointed out that Apple Maps’ popularity is largely due to its placement as the default on Apple devices, calling it the best case study of “the power of default.” Nadella said that whatever tools Apple sets as defaults in the operating system, “they’re basically king” on its devices. (Note that Google Maps remains popular on Apple devices. Despite praising the recent overhaul of Apple Maps, Mac Rumors notes that “Apple Maps comes preinstalled on every iPhone. However, the vast majority of iPhones in the US downloaded Google Maps instead.”

Nadella said in court that Google’s defense of its default position is a “carrot and stick game.” No matter how much competitors offer to lure partners away from his Google, Google wins because:

Google has a carrot and a big stick. One of the big sticks is to remove Google Play if you’re not using it as your primary browser. Without Google Play, your Android smartphone is ruined. And that’s the type of thing that’s impossible to overcome.

In another example cited so far during the trial, the Justice Department shared an email Tinter sent to Nadella advising Microsoft to “take a different approach” to how it “talks about search and browsers” with Samsung. did.

“This is a sensitive topic for Samsung,” Tinter warned Nadella, insisting that Samsung executives had no intention of “making a big move” on Bing with their mobile devices “because of the partnership with Google.”

“Right now we are at an impasse,” Tinter wrote in an email.

Startup co-founder: “Google made it very difficult”

Following Nadella as a trial witness on Monday was Sridhar Ramaswamy, co-founder of a startup called Neeva. Ramaswamy also told the court that Neeva’s failure to grow was primarily due to Google’s squeeze on the search market.

Neeva was a potential rival to Google, launched in 2019 by former Google executives hoping to revolutionize internet search. Her dreams were dashed when her company closed earlier this year.

To differentiate its search experience, Neeva aimed to operate on a subscriber model rather than an ad-based model. Bloomberg reported that Ramaswamy told the court that he believes the advertising “has gradually undermined the quality of Google’s products.”

This apparent decline in Google’s quality appears to have left Neeva with room to shake things up, Ramaswamy said Monday.

“People who tried our AI experience absolutely loved it. It was a better, easier, more polished experience,” Ramaswamy said, but in part because of Google’s default placement. , Neeva said it “couldn’t grow its subscriber base fast enough.” ” To stay in business.

Ramaswamy said Apple has no intention of adding Neeva to the list of search engines users can choose to switch from Google in Safari, and that wireless has some influence over which apps come pre-installed on Android devices. Promising negotiations with carriers have reportedly come to nothing.

“The complex nature of the contract they had with Google made it very difficult for them to even offer Neeva as an option,” Ramaswamy said.

Ramaswamy and Nadella said in court that Google’s default rankings are holding back innovation, but not all Google search rivals feel they can’t ultimately overwhelm Google. He said no.

Some startups say Google’s advantage may erode over time, as younger generations don’t seem to sell as well on Google as older internet users. But while building the next big platform is key to locking in young search users, Ramaswamy says Google’s default arrangement has historically been slow enough for startups to survive. This has made it difficult to attract a wide range of users to new products.