Microsoft CEO Says AI Will Help Google Extend Search Edge (1)

Microsoft Corp. Chief Executive Officer Satya Nadella said artificial intelligence could help Google extend its dominance of the search market, as he took the stand Monday in the Google antitrust trial.

When Microsoft introduced its new Bing AI-based search in February, beating Google to the punch, Nadella touted the technology as a way for Bing to get back in the market and make Google uncomfortable. But now, he told the judge, Google could accelerate its current lead by using the massive profits it makes from search to pay publishers for exclusive rights to content it can use to make its search AI better than rivals.

Nadella also left no doubt about his perception of Google’s dominance. “You get up in the morning, you brush your teeth and you search on Google,” he said.

The Department of Justice has accused Alphabet Inc.’s search division of unlawfully maintaining a monopoly by paying $10 billion a year to rivals, smartphone manufacturers and wireless carriers to make its search engine the default option on mobile devices and web browsers. Google has denied the allegations.

To help prove its case, the DOJ hopes to use testimony from Nadella and other executives from Microsoft to show how even a company of its size and resources couldn’t unlock Google’s hold on the search market.

Satya Nadella, center, arrives to federal court in Washington, on Oct. 2.

Photographer: Nathan Howard/Bloomberg

Last week, Microsoft business development executive Jonathan Tinter testified that the Redmond, Washington-based software giant failed to secure a deal to put its Bing search app on Apple’s products, even though it was willing to offer far better terms than Google and lose multiple billions of dollars on the agreement. In the end, Apple signed a fresh deal with Google.

During his testimony Monday, Nadella said Apple was using Microsoft to “bid up the price” it receives from Google.“Do you think Google would continue to pay Apple if there was no search competition? Why would they do that?”

Tinter also told the court that Microsoft’s Surface Duo smartphone was required to use Google search in order to license the Android mobile operating system and was limited from using Bing on its own devices. Nadella was personally involved in discussing some of these issues with his Google counterpart, Sundar Pichai, and was expected to be queried about those conversations.

Nadella was instrumental in the development of Bing, created by Microsoft in an ultimately doomed attempt to catch up with Google and capture a chunk of the online advertising market. On Monday he said Microsoft had invested $100 billion in its search engine.

“I see search or internet search as the largest software category out there. We are a very, very low share player,” he testified. “But we continue to persist in it because we think of it as a software category we can contribute to.” Nadella added: “It’s a hard game to make any breakthroughs, but no one can accuse us of not being persistent.”

While Bing has gained share on desktop computers, where it was integrated with Microsoft’s Internet Explorer and later Edge browser, it has lagged on mobile devices where people overwhelming use Google. Three or so years ago, Microsoft even discussed selling Bing to Apple, a transaction that would have replaced Google as the default option on the iPhone maker’s devices, Bloomberg reported. But a deal never came to fruition.

(Updates with Nadella testimony throughout.)

--With assistance from Todd Shields.

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Robin Ajello, Mark Milian

© 2023 Bloomberg L.P. All rights reserved. Used with permission.