In a dramatic turn of events, a longstanding five-year truce between tech giants Alphabet Inc. and Microsoft Corp. crumbled in 2020, as these behemoths clashed over their respective web-search enterprises, as disclosed during the ongoing US government’s antitrust trial against Google.
After enduring a tumultuous decade of rivalry, both companies had inked a non-aggression agreement back in 2016, envisioning a fresh beginning in their previously contentious relationship. However, this détente began to unravel three years ago, as testified by Jonathan Tinter, a Microsoft vice president of business development, in a Washington courtroom.
The turning point was an insistence from Alphabet that Microsoft include a Google search widget prominently on the main screen of its Surface Duo touchscreen smartphone. This condition was set as a prerequisite to license the Android operating system, effectively rejecting Microsoft’s proposition to employ its own search engine, Bing. Tinter, who led the negotiations in the spring and summer of 2020, revealed that Alphabet went further, prohibiting Microsoft from instructing users on how to switch the default search engine to Bing.
Tinter explained, “Ultimately, for the Duo to be successful, we needed the license from Google. We wanted the search entry points to be Bing. They wanted the search entry points to be Google.”
This courtroom testimony is part of a series of appearances by Microsoft executives in the Justice Department’s antitrust lawsuit against Google. Microsoft’s Chief Executive Officer, Satya Nadella, is scheduled to testify in the coming week. The government’s claim revolves around Google’s alleged monopolization of the online search market through contractual agreements involving substantial payments to Apple Inc. and smartphone manufacturers, compelling them to make Google the default search engine on browsers and mobile devices. Google’s defense contends that consumers prefer its search engine, and switching to it is convenient.
Ultimately, Microsoft and Google arrived at a “compromise” concerning the Surface Duo. Both search engines, Google and Bing, would coexist on the device. Specifically, a search widget, the Chrome browser, and the Google Search app would employ Google, while Microsoft’s Edge, the device’s default browser, would utilize Bing.
The Surface Duo, a dual-screen folding smartphone priced at $1,400, was unveiled by Microsoft in August 2020, marking the company’s return to the smartphone market following a previous withdrawal in 2016 after its acquisition of Nokia Oyj’s handset unit resulted in substantial losses. Despite some initial enthusiasm, the Duo struggled, with Microsoft offering discounts within months of its launch. Less than a year later, it was available for less than half its original price.
While the Surface Duo’s release appeared to signal a thaw in the relationship between these tech giants, behind the scenes, tensions were simmering. Tinter disclosed that he personally advocated for “strategic cooperation” with Google, citing the success of Microsoft’s Office products on the Android platform. However, there was internal debate regarding the extent of collaboration with Google, with the Bing ads team opposing closer ties.
The agreement to end hostilities between the companies established a formal process for resolving disputes that might have previously been brought before regulators. In March 2020, Microsoft officially complained to Google about its Search Ads 360, a tool for managing advertising campaigns across multiple search engines, alleging that it was not keeping pace with the evolving features and ad types on Bing.
This dispute triggered discussions between the companies’ top legal minds – Microsoft’s Brad Smith and Google’s Kent Walker. Tinter was also involved, conversing with Google’s Don Harrison, the president of global partnerships and corporate development.
In response to Microsoft’s escalation, Google raised its own complaint, asserting problems with the terms of Microsoft’s cloud program that excluded Google Drive products – direct competitors in productivity software encompassing word processing, email, and spreadsheets. Tinter revealed that Microsoft informally agreed to fund Google’s modifications to Search Ads 360 in a bid to resolve the impasse.
However, despite negotiations, the two giants could not find common ground on either the cloud issue or the search advertising tool. Consequently, no agreements were reached, and the parties ultimately walked away from the table.
It’s worth noting that in 2021, Microsoft and Google allowed their peace agreement to expire, marking a notable chapter in the ongoing rivalry between these tech titans.
