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Speaker 1: Google doesn't have to sell its popular Chrome web browser,
Speaker 1: a federal judge ruled Tuesday in the Justice Department's landmark
Speaker 1: anti trust case against the search engine. The ruling allows
Speaker 1: Google to avoid one of the most severe remedy requests
Speaker 1: from the US government after the court found that the
Speaker 1: company had an illegal monopoly in the search market. The
Speaker 1: judge did bar Google from entering into exclusive contracts for
Speaker 1: Internet search.
Speaker 4: All Right, we knew we wanted to talk with our
Speaker 4: man deep seeing of our Bloomberg intelligence team. He's here
Speaker 4: in studio. Google shares are up. I mean, was this expected?
Speaker 5: First of all?
Speaker 2: No.
Speaker 5: I think that's why you see such an instance stock reaction,
Speaker 5: because the judge was quite vocal about how Google had
Speaker 5: created a monopoly because of all the assets, and Chrome
Speaker 5: was one of the most prominent assets that you know,
Speaker 5: they the judge focused on so.
Speaker 2: Clearly in this case.
Speaker 5: The fact that the ruling says that they don't have
Speaker 5: to divest Chrome, it's positive news. And look, all the
Speaker 5: exclusive arrangements with Apple and for their operating system.
Speaker 2: I think that was.
Speaker 5: Expected remedy really, I mean it kind of allows Apple
Speaker 5: to pick the partner they want. There won't be an
Speaker 5: exclusive arrangement. But look, from an Apple perspective, they can
Speaker 5: still say Google has the best LLM and you know
Speaker 5: they want to do business. So from that perspective, that's
Speaker 5: why Apple is up too. So you know, this sort
Speaker 5: of clears all the uncertainty for both the companies.
Speaker 1: Look, I'm going to ask you crazy question here. Do
Speaker 1: we care about search the way that we used to
Speaker 1: care about search in the sense of typing something into Google,
Speaker 1: or increasingly do we care more about which LLM people choose.
Speaker 5: Well, so the search market has definitely expanded because of
Speaker 5: generative AI. So think of how Google had a ninety
Speaker 5: percent plus share. I'm sure if this lawsuit came to
Speaker 5: the scene and the hearing was happening now, the jet
Speaker 5: would say Google doesn't have ninety percent plus share because
Speaker 5: CHATGPT has got one billion monthly active users, it's got
Speaker 5: the query volume not comparable to Google, but almost you know,
Speaker 5: one third of Google, And so that search market is
Speaker 5: not the same as it was. You know, probably three
Speaker 5: years back before the launch of Chat GPT, and from
Speaker 5: that perspective, I mean, look, the search pile has grown.
Speaker 5: The fact that Google owns Chrome is a big advantage.
Speaker 5: So when I look at generative AI deployments, browser is
Speaker 5: a critical aspect of how AI agents will be deployed.
Speaker 5: That's why you're seeing such a stock reaction because everyone
Speaker 5: knows if you take out Chrome from Google, even if
Speaker 5: Google has their own chips and they have got their
Speaker 5: own LLM, without a browser, the advantage just goes away.
Speaker 2: So divesting Chrome would have been a big, big blow.
Speaker 5: And you know that's why the combined entity owning Chrome
Speaker 5: and owning all the other assets that Google has is
Speaker 5: such a big advantage when it comes to generative way.
Speaker 2: Why are we getting through this ruling?
Speaker 4: And I guess I'm just bringing up in a world
Speaker 4: where we have a White House that I think it's
Speaker 4: fair to say it's transactional, and we have seen various
Speaker 4: tech executives make their way to the White House. Is
Speaker 4: there something that was going on behind the scenes of
Speaker 4: I don't know that caught the attention. I don't know
Speaker 4: what are you hearing?
Speaker 5: And I mean there are obviously lobbies for these companies,
Speaker 5: it's not a surprise regardless of the administration.
Speaker 2: But look in this case, clearly, as you said.
Speaker 5: The administration is transactional, and this was the best outcome
Speaker 5: for Alphabet, you know, not having to divest anything. There
Speaker 5: is another pending lawsuit, the ad Tech lawsuit, but even
Speaker 5: if they have to divest something there, it's not that
Speaker 5: big of for DLAZ Chrome. Chrome is like the prized
Speaker 5: asset when it comes to Alphabet. When you think about
Speaker 5: YouTube and you know all the other things, Chrome is
Speaker 5: right up there. Without a browser, generative AI deployments get
Speaker 5: hard and that's where owning the distribution through Chrome is
Speaker 5: paramount for a company like Alphabet.
Speaker 4: We just want to point out shares of Alphabet are
Speaker 4: up more than six percent here in the aftermarket, and
Speaker 4: then Deep mentioned that Apple shares are also higher, and
Speaker 4: Tim they're up about four percent here.
Speaker 1: I want to bring in Tom Giles, he senior executive
Speaker 1: editor for Global Technology. He joins us from our San
Speaker 1: Francisco bureau. Tom, this ruling obviously coming as a surprise
Speaker 1: to investors. Look no further than shares of Alphabet higher
Speaker 1: by six point four percent in the after hours. Why
Speaker 1: do you think that we got this ruling today.
Speaker 3: I mean, this is a huge sigh of relief, right.
Speaker 3: This is, as men Deep said, they avoided the most
Speaker 3: harsh penalty here, which would have been selling Chrome Home,
Speaker 3: which you know Google has woven into its products and
Speaker 3: is really an integral part of of their value proposition
Speaker 3: to many customers. So major side of relief there. They're
Speaker 3: really allowed to continue to do a lot of the
Speaker 3: things that they have been doing. They're going to have
Speaker 3: to change certain uh certain terms. But something else that
Speaker 3: they are can they will continue to be allowed to
Speaker 3: do is is paying for browser placement. They can still
Speaker 3: make these big cash payments that give their browser, you know,
Speaker 3: a special uh placement on an on a smartphone for example.
Speaker 3: They just need to change they can't have the kinds
Speaker 3: of exclusivity that they have used in the past. That's
Speaker 3: really what it came down to, and is you know,
Speaker 3: we're still parsing the decision, so let me be clear
Speaker 3: about that. But what they what they said was that
Speaker 3: if we if we go too far and for example,
Speaker 3: say no to these payments, that would be onerous to
Speaker 3: the larger ecosystem, that would hurt some of the small players,
Speaker 3: some of the manufacturers, some of the other players in here,
Speaker 3: and I don't think that the DJ clearly does not
Speaker 3: want to do that at this stage. Remember that some
Speaker 3: of these decisions are going to be revisited. This is
Speaker 3: a six year decision. We just had some headlines on that,
Speaker 3: so you know, Google's going to have to continue to
Speaker 3: mind its p's and q's in the coming years to
Speaker 3: ensure that it doesn't run a foul of this ruling.
Speaker 3: But on its face, the headline here is this is
Speaker 3: great news for Google. This is great news for Apple,
Speaker 3: and you're seeing it in those shares rallying as we speak.
Speaker 4: Yeah, as you said, we've got Alphabet up six and
Speaker 4: quarter percent Tom and then you've got Apple shares up
Speaker 4: three point six percent to Mendy Pooh. Beyond Apple and
Speaker 4: Alphabet are kind of watching this decision and maybe a
Speaker 4: little upset about it.
Speaker 5: I mean, remember the news and Perplexity wanted to buy
Speaker 5: Chrome and they put a value I think it's thirty
Speaker 5: four billion.
Speaker 1: Yeah, we're talking about this earlier. Yeah, put Perplexity on
Speaker 1: the map. Everyone was like, wait, you don't even have
Speaker 1: that cash.
Speaker 5: Even if Google had to divest Chrome, thirty four billion
Speaker 5: is too low. Off a price tag for an asset
Speaker 5: you know that has got over three billion monthly active users.
Speaker 5: That is at the core of deploying generative AI. I
Speaker 5: mean that's why you know, when you look at individual
Speaker 5: assets for Google, everyone looks at how much money does
Speaker 5: this make? Chrome doesn't make any money on a standalone basis,
Speaker 5: But when it comes to the value of Chrome, we're
Speaker 5: talking fifty billion plus even higher. I mean, I wouldn't
Speaker 5: be surprised if it's close to one hundred billion as
Speaker 5: just a standalone product, given how important it is when
Speaker 5: it comes to deploying AI.
Speaker 2: So Tom Giles, come on back in here.
Speaker 4: So if you were sitting down or I don't know
Speaker 4: if Alphabet's going to do any kind of call or
Speaker 4: what have you, what would you want to be asking
Speaker 4: them right now?
Speaker 3: Well, first of all, is there a plan to appeal?
Speaker 3: And what does that look like? What are the grounds?
Speaker 3: I hate to put it this bluntly, but you guys
Speaker 3: got off really easy here. You avoided the worst possible scenarios.
Speaker 3: As we've said, as man Deep and I have been
Speaker 3: talking about, are you going to appeal? What are the
Speaker 3: grounds for that? They may see something in here that
Speaker 3: is owners to them that they feel is going to
Speaker 3: tie their hands in the future. Again, it's a six
Speaker 3: year decision. DJ is giving itself leeway to kind of
Speaker 3: revisit at least part of this, and so is are
Speaker 3: there are there clauses? Are the things that they want
Speaker 3: to change? And do they you know, do they do
Speaker 3: they want to send the signal that we don't think
Speaker 3: we're monopolist here, which is of course what they've been
Speaker 3: saying all along. Do you want to hit that home
Speaker 3: with with with sending this into an appeals process?
Speaker 4: Same question to you, man, Deep So you're sitting down
Speaker 4: with these execs ever at Alphabet and what you what
Speaker 4: you would want to know?
Speaker 5: I mean, it sounds like they don't want Google to
Speaker 5: be making any exclusive payments to Apple, like the twenty
Speaker 5: billion dollar tack payment going forward, which again I view
Speaker 5: it as a positive because on the one hand, it
Speaker 5: opens up you know, other search companies to bid for Apple.
Speaker 5: But Apple has no choice but to go with Google.
Speaker 5: I mean, their users are used to, you know, the
Speaker 5: Google experience, and so it sort of saves the twenty
Speaker 5: billion dollars that Google is paying Apple and that helps
Speaker 5: their growth. Martin, So I don't think there's anything bad
Speaker 5: here in terms of, you know, the judge restricting Google
Speaker 5: from having an exclusive arrangement with Apple.
Speaker 4: Is there anything Tom that we'd be worried though about
Speaker 4: the EU and their view on this.
Speaker 3: We always need to worry if you're Google, if you're
Speaker 3: one of the major US tech platforms, you always need
Speaker 3: to worry about what the EU is doing, what they're thinking,
Speaker 3: where they might land on some of these decision. So
Speaker 3: I do think it's a slightly different paradigm across the pond,
Speaker 3: as it were. But I do want to come back
Speaker 3: to and I'm curious I want to hear from man
Speaker 3: Deep too about you know, does the removal of the
Speaker 3: exclusive agreements, what kind of opening does that give to
Speaker 3: the other platforms? How might they try to gain an
Speaker 3: advantage here? It does make a huge difference when you
Speaker 3: buy your new iPhone or you buy a new smartphone.
Speaker 3: It makes a huge difference that that there's going to
Speaker 3: be some kind of institutional or you know, existing support
Speaker 3: for Google to be the default if you cannot. If
Speaker 3: you yes, it's okay to make these payments, but if
Speaker 3: you can't have exclusive agreements, what about what about Claude?
Speaker 3: What about chat GPT. Can some of these other tools
Speaker 3: start to present themselves as alternatives and do it more readily? Mandy,
Speaker 3: please tell me if i'm you know, yeah, no.
Speaker 2: You're all right.
Speaker 5: So I mean Google search ninety percent plus share is
Speaker 5: driven by these exclusive arrangements, So you're right. But I
Speaker 5: look at it this way. I mean, some of the
Speaker 5: ruling says Google may have to share their search index
Speaker 5: with you know, other providers. I have to read the
Speaker 5: fine print, but that again could make chatchpt better in
Speaker 5: terms of solving for all the use cases that we
Speaker 5: use Google for. So from that perspective, it is a risk.
Speaker 5: At the same time, I mean, on Android, they own
Speaker 5: the operating system, so I don't think anything will change
Speaker 5: from a search experience perspective. And for Apple, again, they
Speaker 5: want their users to get the best experience, so I
Speaker 5: don't think they're going to take a chance by completely
Speaker 5: completely overhauling the search experience and you know, bring in
Speaker 5: a clot or a chat GPT for the native browser search.
Speaker 2: I would be very.
Speaker 5: Surprised if they did that. But the I guess the
Speaker 5: finer point here is if Google were forced to share
Speaker 5: some of their search index, then that could draw in
Speaker 5: more competition, and that is a risk.
Speaker 4: I just want to point out that our Josh Cisco,
Speaker 4: who's got the write through on the Bloomberg terminal, says
Speaker 4: the order is one of the most monumental court decisions
Speaker 4: affecting the tech sector in more than a quarter century
Speaker 4: and could offer a blueprint for other judges who may
Speaker 4: end up weighing similar choices in cases against Meta, Amazon,
Speaker 4: and Apple. So, I mean, Mandy, first to you, what
Speaker 4: are those like, what do we need to know about
Speaker 4: those cases and what that could mean for those companies.
Speaker 5: I mean, there is nothing as serious as there is,
Speaker 5: you know when it comes to Alphabet losing one of
Speaker 5: their core assets. I think for others, even in the
Speaker 5: case of Meta, I would have expected more fines than
Speaker 5: you know, a divestiture. I don't think anybody is forcing
Speaker 5: Meta to divest in Instagram or you know, whats not
Speaker 5: the same. It's not the same. In the case of Google,
Speaker 5: the monopoly lawsuits said they had ninety percent plus share.
Speaker 2: That was the basis for the lawsuit.
Speaker 5: So the fact that the judge is not saying, you know,
Speaker 5: they have to divest Chrome and it is a testament
Speaker 5: to where the market is right now. The search market
Speaker 5: has changed completely over the course of the last three
Speaker 5: years so quickly. Yes, right, and so that's why I
Speaker 5: do think it's a fair ruling from that perspective.
Speaker 4: Tom Giles saving forty five seconds.
Speaker 3: Final thoughts, I am curious about what kind of precedent
Speaker 3: this does set. There had been a lot of fear
Speaker 3: about a breakup of Meta. If you're telling Google that
Speaker 3: it doesn't have to sell Chrome and look, as Matt
Speaker 3: Deep said, Google's a very different animal from the Meta situation.
Speaker 3: Google is making these huge there's these huge payments that
Speaker 3: are being made right in favor of you know, getting
Speaker 3: that browser on. You're not seeing those kinds of same
Speaker 3: payments as big, multi billion dollar payments heading to or
Speaker 3: from Meta. So that's another reason why to think that
Speaker 3: you're not. You don't you even have less reason to
Speaker 3: worry about a judge coming in or one of these
Speaker 3: regulators coming in and saying Meta, you need to divest
Speaker 3: WhatsApp or you need to divest Instagram.
Speaker 4: Well, certainly caught our attention, some big news and got
Speaker 4: some stocks moving. Hey guys, thank you so much. Bloomberg
Speaker 4: Intelligence Global head of Technology Research mandeep Seeing in our
Speaker 4: new York Studio and senior executive editor for Global Technology
Speaker 4: out there on the West Coast, Tom Giles, Thanks so
Speaker 4: much to both of you.