Google’s Cash Makes Rivals Less Eager for Antitrust Crackdown

By Mark Bergen, Gerrit De Vynck and Mark Gurman

After the government sued Google as a monopolist, Mozilla Corp., you’d think, might have celebrated. Mozilla makes Firefox, a web browser that Google undercut by using massive engineering resources, financial muscle, and—according to ex-Mozilla staffers—dirty tricks to promote its own Chrome. The smaller company has periodically raised alarms about Google’s business practices and once even put up a billboard in the Bay Area that read, “Big Browser Is Watching You,” with the word “browser” fashioned to resemble Google’s logo.

Yet within hours of the federal Department of Justice filing its antitrust lawsuit against Alphabet Inc.’s Google on Oct. 20, Mozilla published a blog post offering a stern warning to the government: Please don’t go too far. The Justice Department’s case centers on Google’s practice of spending billions of dollars a year to become the default search engine on browsers, smartphones, and other gadgets. Google pays Mozilla for it to be the default search engine on Firefox, and the money accounts for the vast majority of Mozilla’s revenue.

The arrangement is also good for people who use Firefox, according to Roxi Wen, Mozilla’s chief financial officer. “This deal exists because our users want Google search,” says Wen. “We’ve been emphasizing to the regulators that harming a company like Mozilla is really not the path to increase competition or benefit consumers.”

The case against Google highlights the complicated dynamics of its interactions with key competitors. Google runs the world’s leading search engine, and other companies have reason to provide easy access to it—especially when Google is willing to pay them to do so. But each time someone searches Google instead of a competitor, it gathers additional data that widens Google’s lead. Previously unreported details about these secretive deals also show how they’re structured to dissuade competitors from making it easy for users to choose other options or from developing rival search engines.

Google is effectively paying to prevent the emergence of rivals, government officials have argued in recent regulatory filings. “Particularly on mobile devices, the current scale and breadth of payments by Google harms competition between search engines,” the U.K.’s antitrust regulator concluded in an investigation published in July.

The biggest of these deals is with one of Google’s primary competitors. For at least a decade, Google has been the default search engine on Apple’s iPhones, iPads, and the Mac’s Safari browser. Google is also used for some queries in Siri, Apple’s digital assistant. Eddy Cue, Apple’s services chief, has been the lead negotiator on these agreements, which in their current form are based on the two companies sharing the revenue coming from Google searches on Apple devices. Apple also gets a slice of revenue from searches made through some of Google’s own apps, such as Chrome, installed on iPhones, iPads, and Macs, according to a person familiar with the arrangement who asked not to be named discussing private business agreements.

The cooperation between Apple and Google is crucial for both companies. Apple gets as much as $12 billion a year from its deal with Google, accounting for about 4% of its overall revenue. Almost half of Google search traffic last year came from Apple devices, according to the Justice Department.

In 2019, Apple executive Kyle Andeer told a congressional hearing that the company picked Google’s search engine as the default because it’s the best one. Consumers can switch to Microsoft Corp.’s Bing, Yahoo Search, DuckDuckGo, and will soon also be able to choose environmentally friendly search engine Ecosia. But this requires changing from the default choice in the settings, something many users probably never even consider. Some other search engines also pay Apple, but those deals are a lot less lucrative.

When asked for comment, a spokeswoman for Google pointed to the company’s public response to the government’s lawsuit, in which Google notes how easy it is for users to change settings. 

If Apple does send less traffic to Google, it loses out financially, says the person familiar with the search deals. Google has crammed the top of its search results with ads in recent years, and it makes more money from each search than do its rivals. This makes it harder for a company like Microsoft to outbid it, even if it offers Apple a more generous revenue share, the person familiar with Apple’s deal says. 

Before the latest Google agreement was finalized around 2017, Apple was using Microsoft’s Bing as the search engine for Siri and some other queries on iPhones and iPads. Apple had internal discussions to consider staying with Bing and even making it the default for the Safari browser, the person said. Apple has also weighed launching its own search engine or customizing a licensed version from a provider such as Microsoft. It’s instead built closer ties to Google.

Apple declined to comment.  

Mozilla is bound even tighter to Google financially, and a government action that halts those payments could be devastating. In recent years the arrangement has provided as much as 80% of Mozilla’s revenue, according to regulatory disclosures and people familiar with the terms.

There are signs that Google has made the deal more beneficial to Mozilla for non-financial reasons. Despite a drop in Firefox’s popularity, Google gave Mozilla a higher revenue share in a deal struck in 2017, going from a single-digit percentage to more than 10%, according to one person familiar with the terms. The agreement was renewed this year. A spokeswoman for Mozilla declined to comment on the terms. 

Navigating the alliance with Google has been tricky for Mozilla, according to former employees. “It’s difficult to work for Mozilla and not be aware of the tension with Google as both a crucial partner and a fierce competitor,” says Dan Callahan, a software engineer who left Mozilla earlier this year.

The relationship turned stranger after Chrome passed Firefox in popularity in 2012. As Chrome grew, Mozilla’s coders noticed that things that seemed to work smoothly on Chrome caused small hitches on Firefox. Certain Google sites wouldn’t load as easily; Gmail and Docs would trip up on Firefox. When informed, Google staff acknowledged the problems, describing them as bugs and promising to fix them, according to Johnathan Nightingale, a former Mozilla vice president. Soon, though, he determined that Google was “running out the clock,” he wrote on Twitter. “We lost users during every oops.”

Nightingale declined to comment beyond his tweets, but others at Mozilla confirmed his version of events. “It may not be malice, but Google’s product managers are clearly willing to ship products which only work—or only work well—on Chrome,” says Callahan. A Google spokeswoman said the company doesn’t degrade its products on FireFox. 

Google wanted to beat Firefox, but it also made sense to keep it around, say people inside Mozilla. They sometimes joked that Google had to support them as an “antitrust hedge.” The latest versions of their arrangement are more generous to Mozilla in some ways. In addition to giving Mozilla a larger slice of the revenue, Google no longer requires Mozilla to sign a revenue-sharing deal spanning the globe. 

But the deal, like all of Google’s search contracts, is structured to keep Mozilla from competing with Google’s core business. Google keeps Mozilla from accessing data about search queries made by Firefox users, depriving it of the data it could have used to build its own search engine. Mozilla’s spokeswoman said the company doesn’t collect information about its users’ web activities out of concern for their privacy.

Mozilla had toyed around with building its own search service, and in 2016 it invested in Cliqz, a German startup that offered a privacy-focused search product. The effort was notable because Cliqz built its own search index, a gargantuan task requiring it to essentially scan the entire internet, rather than rely on Google’s or Bing’s web crawlers. Programmers at Mozilla also worked on an entirely new browser focused on privacy, with such features as the ability to block advertising trackers. DuckDuckGo was to be the default search engine. The browser project fizzled. According to a person involved, fear of upsetting Google was a factor, though others say it failed for additional reasons.

At the end of April, Cliqz shut down. While it mostly blamed the pandemic, it also lacked the scale to sustain itself. “We can only hope that someone else picks up the ball,” Cliqz wrote in a blog post. “It’s still true: The world needs a private search engine that is not just using Bing or Google in the backend.”

©2020 Bloomberg L.P.