WEBVTT - How Google Cheated Their Way To Billions 0:00:02.120 --> 0:00:03.239 CAUs Media. 0:00:05.000 --> 0:00:08.080 Hello and welcome back to Better Offline. I'm your host 0:00:08.200 --> 0:00:08.799 ed Zetron. 0:00:09.039 --> 0:00:21.800 Of course, in. 0:00:21.760 --> 0:00:24.159 The last episode, I went over why Google's monopoly is 0:00:24.200 --> 0:00:26.439 such a problem and why monopolies are a form of 0:00:26.480 --> 0:00:29.720 societal cancer. And in this episode, I'll go over want 0:00:29.760 --> 0:00:32.360 my App and next to Google after their anti trust trial. 0:00:33.040 --> 0:00:34.479 And by the time you hear this, it will have 0:00:34.479 --> 0:00:37.040 been a few weeks since Judge a Amit Meta ruled 0:00:37.080 --> 0:00:40.520 that Google was an illegal monopoly in search and online advertising. 0:00:41.000 --> 0:00:44.320 The next phase of this saga, though not including any appeals, 0:00:44.479 --> 0:00:48.040 will decide what penalties will come. Although it will be 0:00:48.120 --> 0:00:50.839 several months and most likely several years before we learn 0:00:50.920 --> 0:00:53.479 exactly what happens to Google, it's clear that the company 0:00:53.520 --> 0:00:56.960 sits on a dangerous precipice. In addition to a monetary 0:00:57.000 --> 0:00:59.960 penalty which is fairly likely and which could certainly be 0:01:00.040 --> 0:01:02.600 in the billions of dollars, Judge Meta will likely force 0:01:02.640 --> 0:01:05.360 Google to want to take some action that would effectively 0:01:05.440 --> 0:01:08.240 end its monopoly status or at the very least support 0:01:08.280 --> 0:01:10.959 more competition, and we'll get to those in the second 0:01:11.360 --> 0:01:13.480 But it's worth noting that we need to talk about 0:01:13.520 --> 0:01:17.039 how we got here. For this I'm going to be 0:01:17.080 --> 0:01:20.880 heavily relying on Judge Meta's three hundred page ruling. Judge 0:01:20.920 --> 0:01:23.479 Meta didn't concern himself with how Google got big because 0:01:23.520 --> 0:01:26.520 nanto trust law, there's nothing really prohibiting you from achieving 0:01:26.560 --> 0:01:29.560 dominance by being good and better than the competition. And 0:01:29.640 --> 0:01:31.800 to be fair, for the first couple of decades, Google 0:01:31.920 --> 0:01:35.759 was genuinely superior to any alternative. This was evidenced by 0:01:35.760 --> 0:01:38.319 its early reviews with Danny Sullivan, who now works for 0:01:38.360 --> 0:01:40.399 Google as a guy who occasionally pretends to care about 0:01:40.400 --> 0:01:42.680 what reporters think, but at the time he wrote for 0:01:42.760 --> 0:01:45.600 Search Engine Watch and he said, so how about results. 0:01:45.920 --> 0:01:48.080 I think many people will be pleased, especially for the 0:01:48.120 --> 0:01:50.880 ever popular single and two word queries. A search for 0:01:51.000 --> 0:01:53.720 Bill Clinton brought the White House site up at number one. 0:01:54.000 --> 0:01:57.160 A search for Disney top Rankdisney dot Com and sections 0:01:57.160 --> 0:01:59.360 with it like Disney World, the Disney Channel, and Walt 0:01:59.400 --> 0:02:03.720 Disney Picture. Yet interesting alternative sites like Werner's unofficial Disney 0:02:03.760 --> 0:02:07.040 Park links also made it to that list. Now let's 0:02:07.120 --> 0:02:09.800 just taken aside here. I'm just gonna go to Google 0:02:09.800 --> 0:02:11.920 dot Com as we speak. I'm gonna take Disney in 0:02:11.960 --> 0:02:14.880 I'm gonna read you what's on there. So the first 0:02:15.120 --> 0:02:17.680 things at the top are all sponsored. It's sponsored, and 0:02:17.720 --> 0:02:20.920 then tickets and tours is very big font and then 0:02:20.960 --> 0:02:27.560 there's five different options to buy something on trip dot com, 0:02:27.720 --> 0:02:31.359 some sort of vacation package, and then another thing from 0:02:31.400 --> 0:02:34.800 a company called Undercover Tourist. And then the results are 0:02:35.000 --> 0:02:39.560 Disney dot Com and disneyplasen well Disneyworld. But that those 0:02:39.600 --> 0:02:42.960 are like the They are the smallest thing on this 0:02:43.000 --> 0:02:45.800 page compared to the Disney store link in Vegas, and 0:02:45.880 --> 0:02:49.440 the four or five different sponsored pieces of content. And 0:02:49.480 --> 0:02:52.720 if you scroll down, it's Disney Products YouTube, Disney, Disney 0:02:52.720 --> 0:02:54.800 on Eggs, Disney Parks. Oh, this is all pretty good, 0:02:55.040 --> 0:02:58.200 but no original content. There's like one hundred thousand different 0:02:58.240 --> 0:03:00.800 Disney blogs that just aren't on there. Google don't give 0:03:00.840 --> 0:03:04.560 a shit, but they used to. Google also outclassed the 0:03:04.560 --> 0:03:07.000 competition on a technical level, as noted by Brian Durell, 0:03:07.080 --> 0:03:09.640 former sceening of Director of Production Operations at Alta Vista, 0:03:09.919 --> 0:03:12.880 in a hacker Use post. He blamed Altavista's demise on 0:03:12.960 --> 0:03:15.720 its failure to update its result indexes, which in turn 0:03:15.960 --> 0:03:18.000 meant that many of their front page results led to 0:03:18.000 --> 0:03:22.160 outdated or dead links, and I quote this was particularly 0:03:22.200 --> 0:03:25.320 bad because one of our earliest strong points was fresh indexes. 0:03:25.560 --> 0:03:28.200 Our ability to refresh the supplementary index on the flight 0:03:28.360 --> 0:03:31.400 was awesome. When you lose one of your primary strengths, 0:03:31.520 --> 0:03:34.960 it's noticeable, he said, adding that the decline in Altavista's 0:03:35.000 --> 0:03:37.440 index quality was due to a loss of focus within 0:03:37.480 --> 0:03:40.560 the company. Oh would hate for that to happen to Google. 0:03:41.400 --> 0:03:44.920 Google was at the time, both objectively and subjectively better 0:03:44.920 --> 0:03:47.200 than anything else, and so it grew, and like I 0:03:47.240 --> 0:03:49.400 said last episode, it became a verb, kind of like 0:03:49.440 --> 0:03:52.280 how we say photoshop instead of airbrush, or xerox instead 0:03:52.280 --> 0:03:56.960 of photocopy, and better offline listener instead of average criminal. 0:03:57.680 --> 0:04:00.160 Not only did it fend off its earliest competitors, but 0:04:00.200 --> 0:04:02.400 it also brushed past anyone that would try to steal 0:04:02.440 --> 0:04:06.720 its market share, like damp musk Acolyte Jason Kalakanis's Malhallow, 0:04:07.040 --> 0:04:09.400 which was a human created search engine, a bit like 0:04:09.400 --> 0:04:12.640 the early version of Yahoo and Kull, which emphasized its 0:04:12.720 --> 0:04:16.840 larger search indexes and privacy centric ethos as the thingishing factors. 0:04:18.320 --> 0:04:21.000 Just so we are clear, being popular or superior is 0:04:21.080 --> 0:04:24.919 not an antitrust valulation. No, no, no, no, that's not 0:04:25.000 --> 0:04:27.960 the problem. What Google did afterwards was the problem, and 0:04:28.000 --> 0:04:30.359 in the eyes of Judge Meta and the US government, 0:04:30.440 --> 0:04:32.880 was also illegal as a though, a lot of the 0:04:32.880 --> 0:04:35.400 things am about to cite are from this ruling, which 0:04:35.400 --> 0:04:37.800 makes linking to them kind of hard. Please don't be 0:04:37.839 --> 0:04:41.080 mad at me. But much of this ruling discusses something 0:04:41.080 --> 0:04:44.119 called distribution, which refers to how Google makes its search 0:04:44.160 --> 0:04:47.680 product accessible to users. The Google website is the most 0:04:47.680 --> 0:04:50.400 obvious example of that, but it also includes browser and 0:04:50.440 --> 0:04:53.920 device integrations. You ever wonder why the default browser option 0:04:54.000 --> 0:04:57.000 on Safari and Firefox is Google? I kind of said 0:04:57.040 --> 0:05:00.360 it last episode. It's because Google pays these but he's 0:05:00.400 --> 0:05:03.479 a lot of money. In the United States, half of 0:05:03.480 --> 0:05:06.120 all searches happen through an access point were Google is 0:05:06.120 --> 0:05:08.920 paid to be the default. A further twenty percent come 0:05:08.960 --> 0:05:11.279 through Google Chrome, which is made by Google. And does 0:05:11.320 --> 0:05:15.200 it follows that Google is the default search engine? Little 0:05:15.200 --> 0:05:19.200 monopoly and your monopoly hit my ride. Only thirty percent 0:05:19.279 --> 0:05:22.240 of US search queries take place in environments where Google 0:05:22.320 --> 0:05:25.719 is not the default browser, Which is not to say 0:05:25.760 --> 0:05:27.560 that all those searches are going to Duck duck go 0:05:27.760 --> 0:05:30.320 or bing, but rather that consumers have made an active 0:05:30.360 --> 0:05:33.479 decision to use whatever browser they've selected. And while you 0:05:33.520 --> 0:05:36.479 could argue that the consumers could choose to change the 0:05:36.520 --> 0:05:39.920 default on Safari or Firefox to something other than Google, 0:05:39.920 --> 0:05:43.200 the reality is, as shown by Google's own internal research 0:05:43.240 --> 0:05:46.440 and communications, that most consumers either don't know how or 0:05:46.560 --> 0:05:51.159 just don't care to. Another internal study mentioned in the judgment, 0:05:51.240 --> 0:05:53.520 this time from twenty twenty, showed that half of all 0:05:53.640 --> 0:05:56.359 US iPhone users didn't even know what search engine they 0:05:56.400 --> 0:06:00.000 were using. The ruling also points out that in some cases, 0:06:00.360 --> 0:06:03.400 there are inherent points of friction dissuade users from changing 0:06:03.400 --> 0:06:07.120 their default search engine. Switching on Android was arguably more 0:06:07.120 --> 0:06:10.120 difficult than nonios, the ruling said, also noting that the 0:06:10.120 --> 0:06:12.920 smaller screen of a smartphone and general fiddliness of things 0:06:13.000 --> 0:06:16.880 was a further deterrm. Google's own estimates show that if 0:06:16.880 --> 0:06:20.000 it lost search placement on iOS to another provider, it 0:06:20.000 --> 0:06:23.080 would lose between sixty and eighty percent of its traffic 0:06:23.560 --> 0:06:25.719 just because of how tricky it is to change these 0:06:25.720 --> 0:06:30.360 default settings. And so you're starting to get an understanding 0:06:30.440 --> 0:06:33.160 of the importance of these default placement deals for Google 0:06:33.200 --> 0:06:35.560 and how critical they are to its bottom line. In 0:06:35.600 --> 0:06:38.760 twenty twenty one, Mozilla made eighty percent of its operating budget, 0:06:38.839 --> 0:06:41.920 or four hundred million dollars, by selling default placement to Google. 0:06:41.960 --> 0:06:46.800 Two these monopolies have real consequences. Apple meanwhile, owns a 0:06:46.800 --> 0:06:50.200 percentage of advertising revenue from queries made from Safari and Chrome, 0:06:50.560 --> 0:06:53.640 even though Apple doesn't actually bundle Chrome with its devices. 0:06:54.279 --> 0:06:57.200 In twenty twenty two, this amounted to about twenty billion dollars, 0:06:57.240 --> 0:06:59.560 which was double the figure of twenty twenty and amounted 0:06:59.560 --> 0:07:02.560 to one six of Apple's operating profit from that year. 0:07:03.680 --> 0:07:07.360 Google also assigned deals with several US carriers like T Mobile, Verizon, 0:07:07.440 --> 0:07:10.360 in AT, and T, as well as other Android manufacturers, 0:07:10.360 --> 0:07:13.800 including Samsung and Motorola. The terms of these deals differ 0:07:13.840 --> 0:07:16.920 between companies, but they usually account for a percentage of revenue, 0:07:16.960 --> 0:07:20.960 with the actual percentage varying from contract to contract. While 0:07:21.000 --> 0:07:23.160 these deals are undoubtedly good for the balance sheets of 0:07:23.160 --> 0:07:26.040 these companies, they do impose restrictions on what these companies 0:07:26.080 --> 0:07:28.920 can do. Take Samsung, for example, which has around thirty 0:07:28.960 --> 0:07:32.320 one percent of US smartphone market share, second only to Apple. 0:07:33.080 --> 0:07:36.360 In twenty nineteen, Samsung wanted to integrate technology from a 0:07:36.360 --> 0:07:38.880 startup called Branch, which would allow users to search for 0:07:38.920 --> 0:07:42.600 content within installed applications, as well as to a limited extent, 0:07:42.800 --> 0:07:45.000 content from the Internet, although it was not to be 0:07:45.120 --> 0:07:49.240 clear a proper search engine in any real sense. Despite 0:07:49.320 --> 0:07:51.680 how there was a little bit of initial excitement around this, 0:07:52.120 --> 0:07:56.920 Samsung also saw h kind of become clear that the 0:07:56.960 --> 0:07:59.920 way Branch worked conflicted with their agreement with Google, and 0:08:00.120 --> 0:08:01.920 so the software had to be reworked in a way 0:08:01.960 --> 0:08:05.920 that massively limited its functionality. While the partnership went ahead, 0:08:06.000 --> 0:08:09.120 it was nowhere near as lucrative as Branch first hoped. 0:08:09.400 --> 0:08:13.200 The software was crippled and thus much less attractive. Similarly, 0:08:13.280 --> 0:08:15.600 AT and T also wanted to pre install Branch on 0:08:15.640 --> 0:08:18.320 its devices, but decided against it when it couldn't get 0:08:18.320 --> 0:08:20.640 clarity from Google whether it violated the terms of its 0:08:20.680 --> 0:08:24.480 revenue sharing deal. Google, it seemed simply stonewalled AT and 0:08:24.520 --> 0:08:27.560 T into submission. And this is again going back to 0:08:27.560 --> 0:08:31.720 the Matt Stolar interview I did. When you have rules 0:08:31.760 --> 0:08:33.800 like this, when you have monopolies, they do operate like 0:08:33.880 --> 0:08:37.200 miniature governments. And indeed, this is an example Google didn't 0:08:37.200 --> 0:08:39.959 even need to intimidate these people. In most cases, they 0:08:40.040 --> 0:08:42.280 just made enough money and they were scared enough of 0:08:42.360 --> 0:08:45.360 violating the deal that they literally made their devices worse. 0:08:45.400 --> 0:08:49.040 They didn't install cool software for fear that Google might 0:08:49.120 --> 0:08:52.280 sue them and cut off a lucrative revenue share. It's 0:08:52.440 --> 0:08:56.720 nasty even Apple, a company that is at varying times 0:08:56.960 --> 0:09:00.120 close to or the most valuable company in the world, 0:09:00.160 --> 0:09:03.640 itself constrained by this devil's deal with Google. At one point, 0:09:03.679 --> 0:09:06.800 Google insisted on altering the terms of its agreement to 0:09:06.800 --> 0:09:09.400 prevent Apple from suggesting relevant links to users through the 0:09:09.400 --> 0:09:11.800 Safari search bar, as such a feature would be and 0:09:11.840 --> 0:09:15.880 I quote, substantially similar to Google search. Apple, for what 0:09:15.960 --> 0:09:18.240 it's worth, has said that it did not feel constrained 0:09:18.240 --> 0:09:20.520 by these restrictions, which makes it fine with me. Then 0:09:20.559 --> 0:09:23.720 I'm kidding the kidding. I'd argue that they would say 0:09:23.760 --> 0:09:25.920 that because they were making twenty billion dollars each year 0:09:25.920 --> 0:09:28.160 from Google. And if I'm honest, if somebody gave me 0:09:28.240 --> 0:09:30.400 twenty billion dollars, I'd let them do whatever they wanted. 0:09:30.880 --> 0:09:32.559 Hit me with a baseball back, roun me over with 0:09:32.600 --> 0:09:34.319 your car. I don't care call me a pig. I'll 0:09:34.320 --> 0:09:37.760 oink for you. Give me twenty billion dollars. I need 0:09:37.800 --> 0:09:40.680 twenty billion dollars. Please give it to me now. But 0:09:40.760 --> 0:09:43.160 if you can't give me your money, then perhaps you'll 0:09:43.160 --> 0:09:45.840 hand it to one of the extremely well targeted advertisements 0:09:45.960 --> 0:09:48.320 that follow this wonderful message once that will make you 0:09:48.360 --> 0:09:50.280 say wow. This is definitely one that Ed wanted to 0:09:50.280 --> 0:10:03.000 follow what he just said, and we're back. And we're 0:10:03.040 --> 0:10:06.640 back with Google. As I've kind of hinted at, I 0:10:06.679 --> 0:10:10.320 don't think without their ad monopoly and with their Google 0:10:10.320 --> 0:10:13.160 Search monopoly, I don't think Google is a profitable business. 0:10:13.160 --> 0:10:16.080 And I definitely don't think Google Search is a profitable business. 0:10:16.320 --> 0:10:19.160 I think it's actually kind of a cost center. Search 0:10:19.360 --> 0:10:21.880 is in effect the vehicle in how Google gets people 0:10:21.880 --> 0:10:25.200 to look at billions of dollars of advertisements every single day, 0:10:25.440 --> 0:10:28.520 and Google doesn't allow any other competing business to show 0:10:28.559 --> 0:10:31.880 adds on its turf. It has exclusivity, and as the 0:10:31.960 --> 0:10:35.400 ruling found, that exclusivity has allowed Google to raise prices 0:10:35.400 --> 0:10:37.960 at will, looking to see how far it can push 0:10:37.960 --> 0:10:40.720 advertisers before they walk away, you know, to the other 0:10:40.760 --> 0:10:44.640 place they can advertise to this many people in twenty seventeen, 0:10:44.679 --> 0:10:47.640 the company ran an experiment where it strongly increased certain 0:10:47.679 --> 0:10:51.840 prices for a cohor fifteen percent of advertisers for six weeks. 0:10:52.240 --> 0:10:55.679 It found that half of the initial revenue getting stuck, 0:10:56.080 --> 0:10:58.840 and found that there was no significant evidence that advertisers 0:10:58.840 --> 0:11:02.160 were changing what products they don Google would later do 0:11:02.240 --> 0:11:05.280 further studies where it significantly hyped prices on advertisers, and 0:11:05.320 --> 0:11:07.720 each time it learned that it could charge more without 0:11:07.720 --> 0:11:10.880 losing them. While Google acknowledged there was a limit to 0:11:10.920 --> 0:11:13.120 how far it could push things, they believed that there 0:11:13.200 --> 0:11:15.640 was still more value to extract from its customers, and 0:11:15.679 --> 0:11:18.360 so it's set upon a strategy of gradually, though significantly, 0:11:18.360 --> 0:11:21.800 I should add raising prices across short intervals, as in 0:11:21.880 --> 0:11:24.800 the siding. Goddamn, is this company so fucking evil? They 0:11:24.800 --> 0:11:28.280 should be eradicated from existence. The fact that people like 0:11:28.320 --> 0:11:30.640 this function in good societies only prove that there are 0:11:30.679 --> 0:11:33.320 things wrong in the world. Every time I read about them, 0:11:33.320 --> 0:11:38.200 I feel poison in my veins. But there's more. These 0:11:38.280 --> 0:11:42.400 price rises Judge Meta noted were oftentimed when Google was 0:11:42.440 --> 0:11:44.640 at risk of not meeting its revenue goals, and when 0:11:44.640 --> 0:11:46.760 the company was at risk of showing some sort of 0:11:46.760 --> 0:11:49.560 slow down in its ads business. Hey remember the code 0:11:49.640 --> 0:11:52.920 yellow from twenty nineteen from the man that destroyed Google Search, 0:11:53.480 --> 0:11:56.559 that was all around raising metrics because they were worried 0:11:56.559 --> 0:11:59.959 about query growth. Google does not care. They will do 0:12:00.240 --> 0:12:03.600 whatever they need to to make revenue. They will make 0:12:03.679 --> 0:12:06.760 your products worse, they will make it more expensive for 0:12:06.800 --> 0:12:09.920 advertisers to advertise to you. And it's all thanks to 0:12:09.960 --> 0:12:14.120 their goddamn monopolies and these changes, these increases through the 0:12:14.160 --> 0:12:17.320 pricing of advertising and the way that they took money 0:12:17.360 --> 0:12:20.240 from advertisers. They were done with this insane lack of 0:12:20.240 --> 0:12:24.319 transparency and this is really stomach turning, this beer. This company. 0:12:24.520 --> 0:12:27.360 People should be in jail for this. Google didn't tell 0:12:27.440 --> 0:12:29.800 advertisers that the costs were going up, but rather they 0:12:29.840 --> 0:12:32.960 were timing these increases so that these increases could be 0:12:32.960 --> 0:12:38.280 dismissed as noise or ordinary price fluctuations generated within advertising auctions. 0:12:39.120 --> 0:12:41.280 The last point is important, by the way, as Google 0:12:41.320 --> 0:12:43.800 also tried to rig these auctions in their own favor. 0:12:44.320 --> 0:12:46.559 One way they accomplished this, by the way, is by 0:12:46.600 --> 0:12:50.199 removing the ability for advertisers to remove themselves from certain auctions. 0:12:50.720 --> 0:12:52.840 When someone buys a text out on Google, what they're 0:12:52.880 --> 0:12:55.520 really doing is selecting a keyword or keywords under which 0:12:55.520 --> 0:12:58.000 they want their ads to appear. The problem is that 0:12:58.000 --> 0:12:59.880 people may use different words for a search with the 0:13:00.080 --> 0:13:03.480 same intent. So one person might say kid's clothing where 0:13:03.520 --> 0:13:06.000 another might say children's clothing. And this is a problem 0:13:06.080 --> 0:13:07.760 for advertisers because you want to make sure that you 0:13:07.800 --> 0:13:10.240 capture the audience you want, right, And this is a 0:13:10.240 --> 0:13:13.040 problem that Google fixed by adding other relevant keywords to 0:13:13.120 --> 0:13:17.800 an advertiser's bid without telling them. Now, this might seem 0:13:17.840 --> 0:13:19.640 like a nice thing that Google did, making sure that 0:13:19.679 --> 0:13:24.360 your money goes further, right, The problem is, as the 0:13:24.440 --> 0:13:28.120 ruling showed, the Google interpreted the word relevant in the 0:13:28.120 --> 0:13:31.400 broadest way possible, so kids clothing would, as one shot 0:13:31.440 --> 0:13:35.480 shown in the ruling showed, include phrases like newborn children's 0:13:35.480 --> 0:13:39.640 clothing or kid's clothing Canada or Tjmax kids wear. And 0:13:39.720 --> 0:13:41.760 what's great is if you don't like this, you have 0:13:41.880 --> 0:13:44.640 no one else to advertise, with no other choices. And 0:13:44.679 --> 0:13:47.880 while Google initially allowed advertisers to opt out of this feature, 0:13:47.880 --> 0:13:50.720 which they called semantic matching, or use a limited version 0:13:50.760 --> 0:13:55.240 that would only include grammatical variations like pluralization, so children clothing, 0:13:55.400 --> 0:13:58.000 children's clothing, and so on and so forth, They of 0:13:58.000 --> 0:14:01.319 course remove these options. It means that unless the advertiser 0:14:01.440 --> 0:14:04.800 explicitly states what keywords they don't want their advert to 0:14:04.800 --> 0:14:07.520 appear under, they're going to be bid on search results 0:14:07.760 --> 0:14:10.679 that aren't relevant to their needs. And guess who controls 0:14:10.960 --> 0:14:14.720 what are relevant? Google? Google. Google's the one that tells 0:14:14.720 --> 0:14:16.880 you how much money to spend on Google. You don't 0:14:16.960 --> 0:14:19.600 like it, well, you can work with Google to advertise 0:14:19.640 --> 0:14:22.880 on Google, and otherwise you go fuck yourself. And this 0:14:22.960 --> 0:14:25.680 in turn increases the amount of advertisers bidding for space 0:14:25.720 --> 0:14:28.440 in an auction, which in turn results in higher prices 0:14:28.440 --> 0:14:33.880 for advertisers in a completely unpredictable way that's predictably evil. 0:14:34.680 --> 0:14:38.400 Not only does Google control the supply, they literally control 0:14:38.440 --> 0:14:42.000 the demand. And while Google at one point provided advertisers 0:14:42.000 --> 0:14:45.560 with detailed information about their matched keywords and the algorithmically 0:14:45.600 --> 0:14:48.320 selected ones at that it no longer does so. As 0:14:48.360 --> 0:14:51.080 a result, advertisers are effectively forced to guess what keywords 0:14:51.080 --> 0:14:53.000 their ad might appear under, and they have no other 0:14:53.080 --> 0:14:55.280 vendor to go to who might be a little more transparent. 0:14:55.840 --> 0:14:57.880 This in turn, by the way, pushes them to larger 0:14:57.920 --> 0:15:00.800 advertising agencies who have a better relation and ship with Google, 0:15:00.920 --> 0:15:03.240 who might have keyword banks that they know that they 0:15:03.280 --> 0:15:05.200 can cut out so that the advertising dollars are more 0:15:05.200 --> 0:15:08.800 efficiently spent. This in turn makes advertising agencies, especially the 0:15:08.840 --> 0:15:12.320 bigger ones, more powerful and hurt small businesses. It's so 0:15:12.560 --> 0:15:16.000 cool watching this happen. It doesn't make me angry at all. 0:15:17.200 --> 0:15:19.920 But in his ruling, Judge Meta found that Google's practices 0:15:20.040 --> 0:15:23.080 had degraded the quality of its text advertisements and charge 0:15:23.160 --> 0:15:27.000 super competitive prices for text advertisements. At the same time, 0:15:27.200 --> 0:15:30.760 by maintaining Google's stranglehold on the search market, they effectively 0:15:30.760 --> 0:15:33.920 limited how much rivals like Being can make from advertising. 0:15:34.600 --> 0:15:37.480 Even if Microsoft built a better ad tech platform than Google, 0:15:37.640 --> 0:15:39.760 its share of spending would remain in line with its 0:15:39.800 --> 0:15:43.520 market share and I quote here By locking in a 0:15:43.600 --> 0:15:47.880 huge comparatative query volume advantage through its exclusive agreements, Google 0:15:47.960 --> 0:15:50.520 ensures that advertisers will continue to spend ninety percent of 0:15:50.560 --> 0:15:53.320 their text ad dollars with Google, regardless of increases in 0:15:53.400 --> 0:15:57.160 price or decreases in quality. That is an anti competitive 0:15:57.160 --> 0:15:59.320 effect in the marketplace, and as Judge Metter is said 0:15:59.320 --> 0:16:03.400 that is bluddy well right, So what happens next. There's 0:16:03.440 --> 0:16:05.880 four un likely outcomes here, each with their own advantages 0:16:05.960 --> 0:16:08.920 or disadvantages and their own level of probability have come 0:16:08.960 --> 0:16:11.360 into pass and had tip by the way to Adam 0:16:11.440 --> 0:16:16.560 Kolovicik for highlighting these. Google may be ordered to cease 0:16:16.600 --> 0:16:19.480 engaging in default search deals kind of the most obvious one, 0:16:19.560 --> 0:16:21.920 leaving the likes of Apple, Samsung, and Mozilla free to 0:16:22.000 --> 0:16:25.160 sign agreements with other search providers, although these agreements would 0:16:25.360 --> 0:16:28.120 almost certainly be less favorable than their current ones, and 0:16:28.240 --> 0:16:31.840 indeed would be I don't know competitive, It's going to 0:16:31.880 --> 0:16:34.480 be a mess. As the ruling showed, both Apple and 0:16:34.520 --> 0:16:37.520 Mozilla have at times flirted with or been courted by 0:16:37.520 --> 0:16:39.960 the likes of Microsoft and Yahoo, although the terms were 0:16:39.960 --> 0:16:42.400 never as favorable as I mentioned, and guess what they 0:16:42.400 --> 0:16:45.640 didn't take them Judge Meta might although the how is 0:16:45.680 --> 0:16:48.640 pretty difficult here, as Apple and Mozilla aren't defendants in 0:16:48.680 --> 0:16:51.240 this case. Force browser developers to offer use as a 0:16:51.280 --> 0:16:53.760 ballot screen where people could choose what search engine they'd 0:16:53.800 --> 0:16:57.840 like to use. This would probably boost the market share 0:16:57.840 --> 0:17:01.080 of smaller search providers by a small degree, although I 0:17:01.080 --> 0:17:04.439 imagine most would just opt, through habit or preference, to 0:17:04.480 --> 0:17:08.520 pick Google at the very least until a viable alternative 0:17:08.520 --> 0:17:12.640 gains momentum. But this is still a start. It's still good. Well, 0:17:12.640 --> 0:17:15.560 then again, it's entirely possible that people might try something 0:17:15.600 --> 0:17:17.879 new and either because they like what they've selected or 0:17:17.920 --> 0:17:20.680 through sheer inertia, they don't go back to Google. As 0:17:20.680 --> 0:17:23.920 Google's data shows, this is a real threat, especially on mobile, 0:17:23.960 --> 0:17:26.560 which accounts for a massive portion of its search traffic 0:17:26.560 --> 0:17:29.920 and thus its ad revenue. Google may be forced to 0:17:29.920 --> 0:17:32.560 share click and query data with rivals, although again this 0:17:32.680 --> 0:17:36.000 poses its own thorny issues, especially when it comes to privacy. 0:17:36.440 --> 0:17:38.760 At the very least, it should at least tell advertisers 0:17:38.760 --> 0:17:41.280 what keywords they're buying and give them meaningful opportunities to 0:17:41.320 --> 0:17:44.240 opt out of irrelevant queries. While this sounds like a 0:17:44.280 --> 0:17:46.240 minor slap on the wrist, it has the potential to 0:17:46.280 --> 0:17:50.679 cost Google billions. Google's made so much money from forcing 0:17:50.720 --> 0:17:53.119 advertisers to buy slots on searches they don't want or 0:17:53.160 --> 0:17:55.639 care about, and by forcing people into auctions against their 0:17:55.640 --> 0:17:58.800 will or knowledge. When buyers are empowered, it follows that 0:17:58.840 --> 0:18:01.160 the price of ads will decrease commensurate with the lower 0:18:01.240 --> 0:18:04.119 levels of demand, And I don't know consumer choice is 0:18:04.119 --> 0:18:06.639 good and Google does not like consumer choice, so I 0:18:06.720 --> 0:18:11.000 assume it's less profitable to let people choose things. But finally, 0:18:11.119 --> 0:18:14.160 Judge Meta may order the actual breakup of Google, compelling 0:18:14.240 --> 0:18:18.160 the company to divest Chrome, Android, or more than likely 0:18:18.200 --> 0:18:22.120 its advertising division. This remedy is arguably the most potent 0:18:22.440 --> 0:18:24.879 and one that Google is most likely to oppose, and 0:18:24.920 --> 0:18:28.360 it's also the most funny. But let's get into why 0:18:28.400 --> 0:18:31.960 it's thorny. Chrome and Android are based on open source products, 0:18:32.000 --> 0:18:35.040 the chromeum Project and the Android open Source Project, respectively, 0:18:35.440 --> 0:18:38.639 and short of prohibiting Google from contributing code or providing funding, 0:18:38.800 --> 0:18:40.800 it would have a leading role in these developments and 0:18:40.840 --> 0:18:45.119 thus real influence. Moreover, Google's presence in Android isn't just 0:18:45.160 --> 0:18:48.280 in the operating system itself, but everything else called Google 0:18:48.320 --> 0:18:52.600 Mobile Services or GMS. GMS is the package of software 0:18:52.600 --> 0:18:55.040 that turns an Android phone into a Google phone. It 0:18:55.119 --> 0:18:57.119 includes the apps that company installed when you buy a 0:18:57.160 --> 0:19:00.720 Samsung or Gaomi phone, like Gmail, Google Chrome, Google Assistant, 0:19:00.760 --> 0:19:03.920 and so on, and also Google Gemini, as well as 0:19:03.920 --> 0:19:07.480 the APIs that allow third party applications to integrate with them. 0:19:07.680 --> 0:19:10.480 Any ruling that doesn't force Google to divest these components 0:19:10.600 --> 0:19:13.159 is for the most part, toothless, and any ruling that 0:19:13.200 --> 0:19:15.680 says effectively that Google can no longer build apps, or 0:19:15.760 --> 0:19:18.159 rather build apps for the mobile os it's most closely 0:19:18.200 --> 0:19:23.280 associated with, it's kind of hard to imagine. Moreover, Google 0:19:23.320 --> 0:19:26.440 could also just ditch Android. It's already working on its 0:19:26.440 --> 0:19:30.360 own OS called Future. It's already using Future in production devices, 0:19:30.400 --> 0:19:33.160 though it's unclear how invested they are in the project, 0:19:33.400 --> 0:19:35.560 and as I've previously mentioned in the last episode, I 0:19:35.560 --> 0:19:37.840 don't know how much staying power anything new and Google 0:19:37.880 --> 0:19:41.720 actually has. Combine this with native support for existing Android apps, 0:19:41.720 --> 0:19:44.119 which it likely already has and if not, could be 0:19:44.160 --> 0:19:47.800 implemented as others like Microsoft and Huawei have pretended to, 0:19:48.680 --> 0:19:52.000 it would effectively skirt any restrictions imposed on Google's involvement 0:19:52.040 --> 0:19:56.840 in Android proper. The biggest scariest thing for Google would 0:19:56.880 --> 0:19:59.520 be any separation of church and state between Google Search 0:19:59.560 --> 0:20:03.000 and its ap avertising platform. Doing so would be potentially 0:20:03.080 --> 0:20:05.639 ruinous for this company, which is why Google will do 0:20:05.720 --> 0:20:08.439 literally anything to stop it. But it's the remedy that 0:20:08.440 --> 0:20:12.480 would actually change things. Google's lack of competition in search 0:20:13.040 --> 0:20:15.399 is a symptom of its ability to set pricing in 0:20:15.480 --> 0:20:18.119 terms of advertising on search, and it's a problem that 0:20:18.119 --> 0:20:20.480 can be solved by removing its ability to do so. 0:20:20.680 --> 0:20:23.000 And let's face it, Google Search doesn't make that much 0:20:23.040 --> 0:20:25.159 money on its own. The thing that brings home the 0:20:25.200 --> 0:20:27.520 bacon is the ads on search and the ads you 0:20:27.560 --> 0:20:30.360 get with each query. If the ad business becomes its 0:20:30.359 --> 0:20:33.800 own separate entity, Google will have to entirely rethink how 0:20:33.840 --> 0:20:38.280 it monetizes search. And for san Da Pischai, that's a 0:20:38.400 --> 0:20:41.800 terrifying thought. I mean, what's he do? How do you 0:20:41.960 --> 0:20:44.880 rig the tables if you don't own the casino? And 0:20:44.920 --> 0:20:46.800 by the way, I'm in beautiful Las Vegas, Nevada. We 0:20:46.840 --> 0:20:51.520 they never rigged the tables here. That's sacrilegious. But it's 0:20:51.560 --> 0:20:53.920 not like there's another business for him to fall back upon. 0:20:54.359 --> 0:20:56.159 As a discussed at the end of the last episode, 0:20:56.200 --> 0:20:58.919 Google's largely lost the ability to innovate and execute on 0:20:58.960 --> 0:21:01.640 new ideas, and a new ideas that do eventually hit 0:21:01.640 --> 0:21:05.400 the market are usually and often just in a few months. Murdered, 0:21:06.000 --> 0:21:09.280 the bolt gun comes out chunk. They throw them in 0:21:09.320 --> 0:21:12.360 the open grave with Google Reader. But seriously, what does 0:21:12.400 --> 0:21:14.959