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Guess who’s really winning the Streaming Wars? 📺💣

Today, I’m gonna talk about what everyone was talking about a couple of weeks ago …. 

The Google Monopoly.

Wherever I went on the internet, it was all everyone was talking about.

Scrolled through social media  …. saw post on Google Antitrust.
Opened up Slack …. saw messages on Google and the DOJ.

Even the Amazon delivery guy asked me if I heard about it. So, let’s dive into it. 

In 2020, The US Department of Justice filed an antitrust case against Google. 

The allegation?

Google, which controls about 90% of global internet searches, was accused of unfairly monopolizing online search. The case questioned how Big G was using its power to block competition and keep other search engines from catching up. 

Fast forward to a couple of weeks ago and US federal Judge Amit Mehta ruled that Google did indeed break the law to become a search monopoly. It’s the first anti-monopoly ruling against a Big Tech company in decades, and obviously a major L for Big G.

In case you want to go through the 276-page ruling document, check it out here: Google Antitrust Ruling

But in case that’s not your jam, we’ve got you covered. We’ve gulped all of it.

The Question of Default Distribution

Google started as a simple website that helped users find other websites. Thanks to its superior PageRank algorithm, more and more people started using Google, which led to even better search results and, in turn, attracted even more users. 

Once people started using Google at scale, that usage itself created far more signals:

1. Which results you clicked on.

2. How you changed your searches to get better results.

3. What else you searched for before and after. 

More users mean more advertisers, and more advertisers mean more revenue. And as the number of Google searches has grown, so has its advertising dollars.

This leads to a virtuous cycle. Everyone uses Google because it has the best results, and it has the best results because everyone uses it. 

So far, so good, right? Great. Now, have a look at this chart. It shows where Google gets its traffic from in the US.

Let’s break this down:

1/ Direct Traffic (30% of US queries)

This is when people go out of their way to use Google - typing google.com into their browser or opening the Google Search app.

This traffic source reflects Google’s pure merit - people are making a conscious decision to use Google.

But what about the rest? How is that different? 

Well, a huge chunk of Google’s traffic isn’t because it's the best - it’s because it’s the default search engine almost everywhere.

Let’s break down the other traffic sources:

2/ Chrome Browser (20% of US queries)
Since Chrome is owned by Big G, the default search engine on it is Google. 

Anything you type into the Chrome Search bar -> Straight to Google.

3/ Apple Devices (28% of US queries)
All Apple devices are loaded with Safari as the default browser and care to make a guess as to the default search engine on it? 

 Hint: It starts with G and ends with oogle.

4/ Android Devices (19% of US queries)

If you’re not into the whole Apple ecosystem thing, welcome to Android, where Google has even more control. Chrome comes pre-installed onto the Android devices, and there’s a search bar on the homescreen that defaults to - you guessed it - Google.

5/ Third Party Browsers (3% of US queries)

Even if you’re a die-hard Firefox user, GUESS THE DEFAULT ON IT.

So, Google is used so widely not because people intentionally search on it but also because it's the default. But it’s the default because it’s the best right?

Well, Yes and No. 

Google is the default because it’s the best, sure. But it’s also the default because Google pays other companies billions of dollars to keep it that way.

It’s all about the money, honey.

And that’s exactly what the Department of Justice’s case against Google is all about.

Paying Billions to Earn More Billions

The case filings reveal that Google has agreements with multiple companies and platforms to keep itself as the default search engine on them in exchange for a portion of their revenue.

These payments are structured as revenue-sharing agreements, where partners like Apple and Android device manufacturers receive a cut of the advertising revenue generated from Google searches on their platform. 

Google calls these hefty payouts Traffic Acquisition Costs (TAC). And when I say hefty, I mean HEFTY.

In 2022 alone, Google shelled out around .…*checks notes*.... $20 billion to Apple (which made up 17.5% of Apple’s profit) and nearly $10 billion to other companies to keep Google as the default search engine.

But why is Google willing to drop so much cash just to be the default?

Here’s the thing: most of us are creatures of habit. We don’t change the default settings unless the default is really bad. And since the default option (a.k.a. Google) usually works pretty well, we stick with it.

Think about it: there are billions of websites out there, but only one default—your browser’s homepage. Being that default is what Google pays top dollar for. Changing the default takes effort. That’s what we call friction, or as the economists say, “switching costs.”

With nearly 90% of the market share, Google didn’t just get to the top because it’s the best. It got there because it made sure it’s the first and only option that comes to mind—by literally paying to be your first choice.

Who Benefits the Most From This?

So, who stands to gain the most if Google’s grip on default search engine contracts loosens? 

Well, after Google, the next biggest player in the search engine world is Microsoft’s Bing. So, this must be Bing’s golden opportunity, right? If Google is banned from making these default deals, Bing could finally have a fair shot at snagging that prime default space.

Well, Bing already did try that. Back in 2015 when the Google-Apple search contract was up for renewal, Bing did try to make a bid. At that time, Google was offering Apple a 33% cut of the search ads revenue. Care to guess what was the bid that Bing made? 

Offer them a 50% cut? 75%??

How about 100%? Yes, that’s right. Microsoft Bing was ready to pay Apple all of the revenue that they drove to them to capture market share. Well, that sounds like a pretty sweet deal. So why didn’t Apple take it? 

Well, I’ll let you hear it from the VP of Apple services himself:

Essentially, Google as a search product is so superior in quality that even a 30% revenue share from them would have resulted in more money and other qualitative benefits for Apple than getting a 100% revenue share from Bing.

So what happens next? Well, the DOJ is definitely going to stomp on the default distribution contracts and Google’s dominance is now under intense scrutiny.

While Google's vast resources and superior search capabilities have solidified its position, the ruling could prompt changes in how search engines vie for prominence.

As the antitrust battle unfolds, expect a lot of shifts and shake-ups in the search engine world, and maybe even a little less Google everywhere you turn. All we can say is, Stay tuned!

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☄️ Asteroids ☄️

Elon Musk denies a report that Tesla and his AI startup, xAI, are cozying up for a tech swap, claiming xAI’s models are too huge and unwieldy for Tesla’s needs. 🚗🤖

Apple’s iPhone 16 could spark a “supercycle” if AI features live up to the hype, but delays and regional hiccups might dampen the excitement. 🕒📱

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