A tale of two software companies
On Day 11, we heard how Google's search engine default agreements presented an obstacle for companies of all sizes.
Today we heard testimony about two very different software companies.
One is the world’s largest software maker by revenue with a market cap of over $2 trillion. The other is the venture capital-funded brainchild of a couple of Stanford Business School students founded in 2014.
As different as they are, both companies say they have the same problem: Google’s default search engine agreements.
You might have guessed that first company by now. It’s Microsoft — a company that figures into the current antitrust case against Google in more ways than one. This morning, its CEO of Advertising and Web Services Mikhail Parakhin continued his testimony about Bing’s struggles to compete with Google search’s dominance.
During direct examination from the State plaintiffs, Parakhin testified about what he felt were his futile attempts to persuade Apple to open up their default placements to Bing. “My impression is that Apple doesn’t really consider switching….[T]hey use us as a bargaining chip against Google,” Parakhin said.
On cross examination from Google, Parakhin testified it was “uneconomical” for Microsoft to invest more in mobile search — which he acknowledged was not as good as Google’s mobile search — because they would not be able to distribute mobile search at scale. That raises a bit of a chicken-and-egg problem: how can Microsoft claim it is unfairly excluded from the market if it has not invested in making its mobile search better than Google’s?
But Parakhin’s earliest testimony on direct examination claimed that Bing is already better than Google on desktop. According to Parakhin, even Apple executive John Giannandrea agreed with him about this. And yet Google has long remained the default on Macs. So from Microsoft’s perspective — and the DOJ’s as well — Google’s search engine defaults deter competitors from even trying to make a better product than Google search in the first place.
As for the second company? That’s one you might not have heard of before called Branch Metrics. This afternoon, we heard testimony from the company’s founder Alex Austin, who served as its CEO until only a few months ago.
At the beginning of his testimony, Austin described the initial mission that Branch focused on: building a search engine for apps that would allow users to pull up specific app pages from search queries through “deep linking” technology. For example, if you searched for “Pizza” on a Branch-integrated search bar, you would get results that brought you directly to pizza-related pages on apps you might own like Yelp or UberEats, as well as suggestions for apps that you hadn’t yet downloaded.
Austin thought this technology would create a win-win-win. Phone manufacturers and carriers could add another feature to their phones that would not only enhance the user experience but also create a new source of ad revenue, and app developers would get a new way to grow and distribute their apps outside of crowded app stores.
But Austin and his team soon discovered a familiar barrier: Google’s search engine default agreements. According to Austin, every single potential partner that he pitched Branch to turned it down for the same reason. Their contract with Google wouldn’t allow it.
Branch pivoted by developing an “offline” device search. This was apparently the only way that phone manufacturers like Samsung could implement Branch without violating their revenue share agreements (RSAs) with Google, which he understood to require that Google be the only “web-connected” search function pre-loaded onto a device.
This offline search was a severely limited version of Branch’s initial product. According to Austin, it also meant that Samsung restricted Branch to searching a pre-set list of about 25 apps, because Samsung needed to be able to manually verify that none of the deep links to those apps connected to the web. These restrictions were mandated after Branch had already made huge investments in developing the technology and code to deep link hundreds of apps.
Austin faced cross examination from Google at the end of the day that will continue tomorrow morning. After Austin finishes his testimony, the rest of the day will most likely be spent hearing testimony from Jon Tinter, another Microsoft executive who serves as the company’s Corporate Vice President of Business Development.
Public posting of exhibits
After a lot of back and forth about DOJ’s public posting of admitted exhibits on its website, the website was put back up tonight: https://www.justice.gov/atr/us-and-plaintiff-states-v-google-llc-2020-trial-exhibits.
I haven’t been able to look through these posted exhibits carefully yet, but I think there are still a good number of missing exhibits. I imagine that there was a bit of a backlog that DOJ and Google had to work through after nothing was posted for a week, so it’s possible we will be seeing more previously admitted exhibits added to this site.
Trial schedule
This Friday was scheduled as an off-day for the trial due to a scheduling conflict for Judge Mehta, but Judge Mehta said that his conflict was canceled. He still wants to try to finish trial for the week tomorrow — so he’s starting court early at 8:15 AM instead of 9:30 — but he said they could potentially have court on Friday morning if Tinter isn’t able to finish his testimony on Thursday.
For the first time, he also asked DOJ if they knew what would happen if/when the federal government shuts down. It didn’t seem like anyone fully knew who gets to decide whether the DOJ attorneys can continue working, but Judge Mehta expressed that he does not want to stop the trial.
Believe it or not, those weren’t the only two pieces of trial schedule news from today. Google also filed a motion to enforce the court’s pre-trial scheduling order after the DOJ indicated that it wanted more time to present its case. We haven’t heard any discussion of this yet in court — and DOJ has not yet filed a response — but this is clearly a consequential decision for Judge Mehta. If he grants Google’s motion and holds DOJ to the original schedule, DOJ will have to figure out ways to streamline the rest of its case.
Google included several attachments to its motion, including DOJ’s most recent proposal for their witness schedule. I believe this is the first time that the public has been able to see a full list of the DOJ’s planned witnesses. Google also attached the witness schedule that DOJ proposed on August 15 before the trial started. It’s apparent from this earlier proposal why DOJ wants more time for its case as there are several witnesses listed for the first three weeks of the trial whom we have yet to hear any testimony from.
That’s all for today. I’ll be back in court for an early start time tomorrow morning.
Hey Yosef, your writing here has allowed me to follow the trial and become interested in it. I think the work that you are doing is valuable and I hope it sets a precedent for other writers reporters to cover important, public-facing trials in the same way on platforms like Substack.
Thank you Yosef! Keep up the good work.