Microsoft CEO says tech giants battling for content to build AI

In a landmark U.S. trial against Google, Microsoft CEO Satya Nadella testified on Monday that tech giants are vying for substantial amounts of content required to train artificial intelligence. Nadella criticized Google for securing content through expensive and exclusive deals with publishers, which he believes hinders competition in the industry. He compared the situation to the early stages of distribution deals, stating that it is problematic when companies lock up exclusive agreements with major content makers. Nadella’s testimony took place in the first major antitrust case against Google since the U.S. sued Microsoft in 1998.

The U.S. Justice Department’s antitrust lawsuit against Google argues that the company illegally pays around $10 billion annually to be the default search engine on devices from smartphone makers and wireless carriers, giving it an unfair advantage. Google’s dominance in the search market translates into significant influence in the profitable advertising industry.

Nadella emphasized that developing artificial intelligence requires computing power and data to train the software, both of which Microsoft is willing to invest in. However, he expressed concern over the exclusivity deals that other companies, including Google, have signed with content creators. According to Nadella, publishers have mentioned that Google has given them lucrative exclusive deals, and as a result, competitors like Microsoft are pushed to match those offers.

During the trial, Nadella also revealed that Microsoft had attempted to make its Bing search engine the default option on Apple smartphones, but was unsuccessful. This revelation came as John Schmidtlein, Google’s lead lawyer, questioned Nadella about instances when Microsoft won default status on computers and mobile phones but still faced low user adoption of Bing. Schmidtlein contended that Microsoft’s strategic errors, such as the failure to invest in Bing’s improvement and adapt to the mobile revolution, contributed to the search engine’s lack of traction.

Seeking to counter Google’s argument that its dominance is due to superior quality rather than illegal practices, Judge Amit Mehta asked Nadella why Apple would switch to Bing given its lower quality compared to Google. This indicates that the judge is considering the argument raised by Google and is interested in determining whether its dominance is a result of its product’s quality.

Nadella’s testimony comes more than two decades after Microsoft faced its own federal antitrust lawsuit. The 2001 settlement resulting from that lawsuit forced Microsoft to make significant changes to its business practices and opened the door for companies like Google to thrive. Since then, Microsoft and Google have become fierce competitors, with overlaps in various areas including browsers, search engines, and email services. They have also recently entered the race in artificial intelligence, with Microsoft investing heavily in OpenAI and Google developing its own AI technologies.

The trial, taking place in the U.S. District Court for the District of Columbia, will determine potential antitrust violations by Google in its search and advertising businesses. As the case unfolds, it is expected to shed light on the practices used by major tech companies and their impact on competition in the industry.