DoJ Recommends Chrome to be Divested
Earlier this year, the Department of Justice (DoJ) deemed that Google search is a monopoly, with over 90% of searches directed to Google. With the definition of a monopoly being “The exclusive possession or control of the trade in a commodity, product, or service” according to the OED, Google search certainly fits this case. Many of us can’t even remember the last time we used Bing, or an alternative search engine.
The monopolistic nature of Google search is partly due to the extreme difficulty in building a browser. Not only is it capital intensive, with significant infrastructure needed, it also gets better as more people use it, thereby enabling a positive feedback loop for the biggest players, and making competition even more difficult. Bing, despite Microsoft’s best efforts, and the wide-spread sentiment that Google search is in decline, is still second tier; in China, where Google search is banned, Baidu is the dominant search engine, with little competition.
The DoJ has suggested that in order to remedy this, Alphabet, the parent company of Google, should seek to sell its browser division, Chrome. Furthermore, Alphabet should be barred from paying companies like Apple for setting Google search as the default search engine, and share data and search results with rivals. This is dependent on if U.S District Judge Amit Mehta agrees with the DoJ’s suggestions.
Proponents of the DoJ’s suggestions claim that Chrome, which is loss making, is able to collect vast amounts of data from user’s browsing activity, in addition to funneling billions of users into Google search, where it is able to collect data and serve targeted advertisements. These advertisements, despite recent efforts to diversify to cloud computing and workspace areas, still make up the vast majority of Alphabet’s revenue. In addition, by paying companies such as Apple to have Google search as their default, which reportedly costs $20 billion, they gain access to billions of Apple users, who will use Google’s services and allow for data collection. It should be noted however, in this particular arrangement, Apple executives have suggested that no amount of money will make them switch to Bing from Google.
The DoJ proposal is certainly controversial and deemed radical by many. Notably, finding a buyer for Chrome may prove to be tricky. According to Bloomberg, the Chrome browser division is worth up to $20 billion. Few companies will be able to afford this, and of those that could, many are fellow large technology companies. This raises the question as to if the problem will be resolved, given that it may enable another big tech company to harvest user’s browsing data to serve their own advertising interests. Not only this, the money Google pays companies in order to be the default search engine is critical revenue in some instances. Mozilla, the company behind Firefox, a rival browser to chrome, relies heavily on Google’s payouts given its focus on open source. Should the DoJ rule that these payments cease, it would critically affect Mozilla’s ability to function, which would be a blow to the open source community. Google itself also contributes to the open source community, with Chromium, which most modern browsers including Brave and Edge are based on, being an example of that.
Whether this move stimulates competition is unclear. Bing, a search engine by Microsoft, has struggled to gain users, despite heavy pushes including efforts linking it to Microsoft’s AI endeavours. Most users have a very sceptical attitude towards it and a very frequent query on Bing is “Google”. New entries to compete in the search engine market would likely be elusive; with few set to succeed.
Equally important to consider is if this DoJ recommendation is likely to occur. The US government is set to change shortly, which has all sorts of implications to the business landscape. It is entirely possible that the new administration has a friendlier view towards tech companies, which could eliminate Google’s issues. The Vice-President elect, though, has made hawkish comments on big-tech companies in particular.
Latest AI Developments & Roundup
xAI, the AI company launched by billionaire Elon Musk, is set to close a new $5 billion funding round, implying a valuation of $50 billion. Whilst significant, it falls short of OpenAI’s earlier funding round, which valued the company at a whopping $157 billion.
This is set to benefit X investors, who have lost a considerable amount of money as the value of X has tumbled. Elon Musk previously promised that X investors would have a 25% stake in the AI startup.
Not only is this a further development in the ever-accelerating AI craze, it also comes in a backdrop of a “never bet against Elon” sentiment among Silicon Valley investors, no doubt allowing his companies to enjoy heightened valuations.
Not to be left behind, rival AI startup Anthropic, which was founded by former OpenAI engineers unhappy at the direction it was going in terms of safety, had Amazon, the largest cloud provider, invest a further $4 billion in it.
Amazon is no doubt keen to not fall behind rival tech giants Microsoft and Google, both of which have significant investments in other AI startups.
The largest AI startup of them all though, OpenAI, has announced that it endeavours to grow to 1 billion users. Currently, it already boasts hundreds of millions of monthly active users on its flagship LLM, ChatGPT. With its recent partnership with Apple, it is set to tap the latter’s user base, which is in the billions, to further promote its AI capabilities. Given this, it seems inevitable that OpenAI will meet its goal very shortly.
Despite this, all customers are not equal. Whilst Microsoft, who are particularly successful at getting enterprise customers to pay extortionate amounts for what some would argue is very mediocre software, can easily upsell copilot, an OpenAI integration, the everyday consumer may be less willing to pay.
This phenomenon of consumers being unwilling to pay for digital services is not new. Whilst consumers may be happy to dish out on takeaways, beauty products, clothes and other discretionary spending, getting people to pay for digital services has always been more difficult. This is especially true of things that people take for granted - things like email, social media, and news sites. This also includes AI. AI is unique though, whereby it is difficult to pay for the cost just by collecting user data, as is the case with other free digital services. Additionally, a lack of understanding in the methods of using AI also contributes towards this, with many struggling to get the desired output from generative AI. Perhaps more education and awareness will contribute towards the understanding of the capabilities of AI, which can be immense, and therefore let people see the value of an AI subscription.
Australia Bans Social Media for Under 16 Year Olds
Australia has passed a landmark social media ban for minors. It became the first country to ban social media use of under 16 year olds after the bill passed with a majority in the country’s senate. This will impose fines of up to AUD 50 million for technology companies who fail to implement steps to prevent children from having social media accounts.
It seems clear that there are a plethora of negative consequences of young people using social media. It often creates and exacerbates mental health issues, it can lead to “doom-scrolling” and shortened attention spans, and can lead to lesser in-person contact with peers and loneliness. Whilst social media has positives, including enabling contact of those in different geographical locations, and the creator economy, it is increasingly the trend to have stricter rules on social media, especially for young people.
This bill though, may be idealistic. Age verification is traditionally very challenging for technology companies. In order for this to be done reliably, it inevitably requires some form of government ID. This raises questions of who should handle this, and where should this be stored. Cybersecurity is of course also a concern. Nefarious actors would be delighted to have access to such crucial information. Furthermore, the AUD 50 million fine is not the most substantial. Tech companies have swallowed fines much more substantial than that, with minimal impact on their operations and performance. Nevertheless, it is clear from widespread lawmaker sentiment around the world that whilst Australia was first, it certainly won’t be the last.
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