A US judge found that Google had a monopoly and was exploiting this dominance to strengthen its market position.

The ruling, which can be appealed, brings the US regulator closer to the European Commission in its approach to tech giants such as Google, Meta and Amazon. Regulators now agree that the way these companies do business means that the market ultimately becomes a monopoly dominated by a single large company.

It has therefore become the state’s job to protect consumers from the tech giants that are cementing their dominance. As a company, 80% of Alphabet’s (Google’s owner) revenue comes from advertising, totalling $146 billion (£114 billion) in 2021. Almost everything the company does must be viewed through this perspective.

Google’s main source of advertising revenue comes from its 90 percent market share in general search engines, one of the oldest and most important services on the Internet.

To provide users with answers ranging from the best apple pie recipe to a recommendation for a new vacuum cleaner, Google first collects information about every page available on the Internet. It then uses its database of websites, the keywords used to search, what other people have typically liked in response to similar queries, but also everything it knows about you to evaluate possible answers.

Companies then pay for the right to display their own text prominently alongside the real search results. Higher quality search results mean more customers, which makes it easier to attract advertisers. It also means that the ad can be tailored to consumers’ tastes and is therefore more valuable to advertisers.

Although research has shown that the true return on investment (ROI) for companies from digital advertising is unclear and sometimes even negative, search advertising remains in high demand, accounting for 66% of Google’s revenue and growth over the last decade.

Other services such as Google Maps and YouTube also contribute to this. First of all, they generate advertising revenue. But they provide even more information to tailor search advertising. This includes how much time a user spends on a page, what they click on, whether they react positively or negatively to a result, where they are physically located and how they got there.

All of this information about you is stored and serves a single purpose. It creates a very detailed profile of you as a consumer, which is of enormous value to advertisers who want to personalize ads directly for you.

In order to collect all this valuable data, Google absolutely has to maintain its market dominance. Google reportedly spends more than $26 billion each year to ensure that it appears as the default search engine for most users.

Standard provider

On any Android or Apple phone, Google search is the default, accounting for 94.9% of the market share. Google is also the default in nearly every web browser. And research shows that even if the cost of switching to another search engine is low, the default creates a vicious cycle. When consumers stick with the default, it means the potential alternative doesn’t have enough consumer data to offer quality search or be attractive to advertisers.

Google spends $8.4 billion annually to run its search engine—on top of the huge sums it already spends to maintain its position as the default search engine. Today, the only search engine that really rivals Google is Microsoft’s Bing, which spends billions to index the entire World Wide Web.

At one point, Microsoft offered to initially share 100% of its Bing revenue with Apple in order to secure the standard instead of Google. Apple still declined: the amount was less than what Google could offer. Google is not necessarily much better as a search engine. On Microsoft Edge, the only browser that comes with Bing pre-installed by default, 80% of users stick with Bing. Apple also reportedly has no interest in buying Bing from Microsoft.

Google Search is simply so big and so good at making money from advertisers that it is very costly to deviate from it. In fact, in many ways the market for advertising on search engines is very similar to legal monopolies like water or rail, where the cost of building the infrastructure is so high that there is simply no room for more than one company.

In a statement, Kent Walker, President of Global Affairs at Google, said: “This decision recognizes that Google offers the best search engine, but concludes that we should not be allowed to make it easily accessible. We welcome the court’s finding that Google ‘is the highest quality search engine in the industry, which has earned Google the trust of hundreds of millions of daily users,’ that Google ‘has long been the best search engine, particularly on mobile,’ ‘has continued to innovate in search,’ and that ‘Apple and Mozilla occasionally evaluate Google’s search quality compared to its competitors and find that Google’s is superior.'”

“With that in mind, and given that people are increasingly looking for information in more and more ways, we plan to appeal. While that process continues, we will continue to focus on building products that people find helpful and easy to use.”

Possible next steps

In the latest US case, the judge has not yet announced what means Google intends to use to end its monopoly position.

Some competitors want to separate Google’s advertising business from its search engine. Another solution would be to force Google to share the data it collects. This could improve search results for everyone.

Just as it makes little sense to have competing pipes bringing water into your home, it also makes little economic sense to have multiple companies paying billions to collect the exact same data. That’s why some groups support Google sharing its data.

But existing attempts to impose precise rules on big tech companies sometimes have no obvious benefit for consumers. For example, the European Commission wanted Alphabet to stop sending Google search results for locations directly to Google Maps. But according to one analysis, when Google removed the clickable maps from its search results along with the Google Maps link, there was only a modest increase in searches for other mapping services. Visits to Google Maps, meanwhile, changed little.

Despite all the legal steps taken to create more competition in this market, huge questions remain as to what practical steps regulators can take without further worsening the consumer experience.

This article is republished from The Conversation under a Creative Commons license. Read the original article.