Microsoft’s Bing search engine is not as good as Google. Believe it or not, it seems nobody — not even Microsoft CEO Satya Nadella — disputes that fact. But over hours of contentious testimony from Nadella during the landmark US v. Google antitrust trial, the reason for that inferiority became the question of the day.
Nadella, in a dark blue suit, took the stand early Monday morning after a few minutes of scheduling updates and a delay long enough that Judge Amit Mehta asked jokingly, “Mr. Nadella didn’t go back to Seattle, did he?” But eventually, questioning began from Adam Severt, a lawyer at the Department of Justice.
At first, Severt simply asked Nadella to explain why he even wanted to try and compete with Google. Nadella’s answer? Money. “I see search as the largest software category out there by far,” he said. “I used to think of Windows and Office as attractive businesses until I saw search.” He explained that Bing didn’t have to win the market to be a big business — and that Bing already turns a profit for Microsoft. (Google’s lead counsel, John Schmidtlein, later joked that he wished his law firm could count “marginally profitable” in the billions of dollars, as Nadella did with Bing. “You should get into the search business!” Nadella gleefully replied.)
“I used to think of Windows and Office as attractive businesses until I saw search”
Severt’s questions focused for a long time on Google’s billion-dollar deal to be the exclusive search provider on Apple devices and what it might mean to Microsoft if it were to have that deal instead. “It would be a game-changer,” Nadella said. He said that Microsoft was prepared to give Apple all of the economic upside of the deal if Apple were to switch to Bing — and said he was prepared to lose up to $15 billion a year in the process. Nadella even said he was willing to hide the Bing brand in Apple users’ search engines and respect any of the company’s privacy wishes, so urgent was his need to get more data at any cost. “Defaults are the only thing that matter,” he said, “in terms of changing user behavior.” He called the idea that it’s easy to switch “bogus.”
For Nadella, becoming Apple’s default search engine wouldn’t be about the money, at least not directly. “We needed to be less greedy and more competitive,” he explained. A sudden increase in distribution, he said, would give Bing an increase in what Nadella called “query flow,” which essentially just means more people would do more searches. More incoming searches means more data the Bing team can use to improve the search engine and more reasons for advertisers to come to the platform. An improved search engine gets used more, which means more data, and round and round it goes. This is the virtuous cycle of search engines, and Nadella believes Bing could use that cycle to quickly catch up to Google’s quality. Or, if you’re Bing — the losing party that can’t get the queries, the data, the advertisers, or the users — “it’s a vicious cycle.”
Has Microsoft tried to become Apple’s default search engine, Severt asked? Yes, Nadella said. How’d it go? “Not well,” Nadella deadpanned. Not only are the economics of the Google deal hugely favorable for Apple, he said, but Apple may also be afraid of what Google would do if it lost default status. Google has a number of hugely popular services, like Gmail and YouTube — what if Google used those apps to relentlessly promote downloading Chrome, thus teaching people to circumvent the Safari browser entirely? That fear, Nadella claims, keeps Apple and Google together as much as anything.
Both Severt and Mehta asked Nadella about how AI — and specifically Microsoft’s massive partnership with OpenAI, which has completely changed the way Bing works — will change the search market. Severt even specifically referenced Nadella’s comment about “making Google dance,” which Nadella said to The Verge earlier this year. Nadella walked that one back a bit: “Call it the exuberance of someone who has 3 percent share,” he said.
“It’s a vicious cycle”
While Nadella said AI has the potential to shake up the market a bit, he also believes it could further entrench Google’s dominance. Search engines are fundamentally reliant on websites allowing themselves to be crawled so that the engines can understand their content and direct users to those sites. Nadella called search engines “the organizing layer of the internet” in that sense. But as large language model-powered systems continue to grow, publishers and platforms are growing wary of how their data is ingested and used to train AI systems. Those publishers, Nadella said, may start to sign exclusive deals that allow Google — and only Google — to use their data. That would essentially crush every other search engine on the market. “What is publicly available today, will it be publicly available tomorrow?” he asked; “That’s the issue.” He said he’s already hearing from publishers with a deal in place with Google, asking Bing to match it.
Ultimately, Nadella’s story was not that different from what other upstart search engines say: Google makes it impossible to compete by making itself the default search engine everywhere. Since most people don’t change their defaults, that means no other company has a chance to get in front of users and get the data they need to build a great product and build a meaningful competitor.
When Google had a chance to cross-examine Nadella, Schmidtlein made a different case. In his view, Bing is not an inferior search engine because it was deprived of oxygen by Google; Bing is inferior because Microsoft has mismanaged its search and mobile products for the better part of two decades. A key part of Google’s defense is that it’s not illegal to build the best search engine, and Schmidtlein argued that is the only thing Google did.
Schmidtlein led Nadella on a nearly two-hour tour of Microsoft’s failures, from MSN Search in 1998 through the ugly end of Internet Explorer, the expensive failure of Windows Phone, the endless renaming and rebooting of Microsoft’s search products, its hugely problematic deals to bundle Bing search with BlackBerry and Nokia phones, and much more. (Nadella, as he did so often during the cross-examination, nodded and said “correct” and “that sounds right.”) In every case, Schmidtlein argued, Google simply out-invested and out-executed Microsoft.
One frequent point of emphasis from lawyers on both sides was the way Bing and Edge are bundled into Windows. Schmidtlein pointed out that even though Microsoft bundles Edge and Bing with practically every Windows PC on the planet, Chrome and Google Search are both vastly more popular among Windows users. That, he argued, as Google has throughout this trial, proves that defaults don’t actually matter much. Nadella and the DOJ said it proved the opposite. The very fact that Bing has market share of any kind on Windows — which is somewhere in the teens, Nadella said, as opposed to “low, low single digits” on mobile — is proof that defaults do work. More people used Bing, which helped make Bing better, which made fewer people switch. Not everyone would drop Google immediately, he said, but controlling the defaults has helped Microsoft begin to make a dent.
Nadella repeatedly said he believes that defaults matter in a big way, no matter what the Windows market share numbers say. When Mehta asked him to respond to the idea that users can easily switch search engines, he said that “my only argument against that is that users don’t switch.” His best example: Apple Maps, which started out disastrously bad but has still gained market share in the last decade because it’s preinstalled on every iPhone. “People use it — it’s the default,” he said.
“I’m not interested in competing with TikTok”
The power of defaults is one of the central questions of the entire US v. Google case and will continue to come up. (The witness after Nadella is former Neeva CEO Sridhar Ramaswamy, who has also said his search engine was crushed in part because overcoming Google’s default status was so difficult.) Nadella is in the rare position to have seen both sides — what it’s like to be the default and what it’s like to contend when you’re not — and argued resolutely that defaults are the only thing that truly matters. Google, on the other hand, says that building the best product is the only thing that truly matters and that Bing has never come close to doing that. Which side of that debate Judge Mehta agrees with may be the story of this entire trial.
At the end of his testimony, Nadella spent a few minutes debating with Schmidtlein how big the search engine market really is. (That’s the other question of this — and practically every — antitrust case: what’s the market we’re debating, and how competitive is it really?) They discussed whether vertical search engines like Yelp and Tripadvisor pose a threat, whether Microsoft competes with Amazon and Facebook for search ads, and whether user behavior is shifting away from the so-called “general search engines” like Bing and Google.
Schmidtlein argued that search engines have a huge and growing list of competitors. Nadella largely dismissed the idea. “I’m not interested in competing with TikTok,” said the same man who once nearly acquired TikTok. Schmidtlein laughed in response. “We’ll see how that goes.”