By Renaud Foucart, Lancaster University; The Conversation
This AI-driven shift in consumer behaviour threatens not only Google’s business model but also that of most internet based companies. (File Photo: Pawel Czerwinski/Unsplash)
A year ago, Google faced the prospect of being dismantled. Today, artificial intelligence (AI) and a new court judgment has helped it avoid this fate. Part of the reason is that AI poses a grave threat to Google’s advertising revenues.
“Google will not be required to divest Chrome; nor will the court include a contingent divestiture of the Android operating system in the final judgment,” according to the decision.
Google must share certain data with “qualified competitors” as deemed by the court. This will include parts of its search index, Google’s inventory of web content. Judge Mehta will allow Google to continue paying companies like Apple and Samsung to distribute of its search engine on devices and browsers. But he will bar Google from maintaining exclusive contracts.
The history of this decision goes back to a 2024 ruling by federal judge Amit Mehta. It found that Google maintained a monopoly in the search engine market, notably by paying billions to companies including Apple and Samsung to set Google as the default search engine on their devices.
Almost a year later, the same US judge issued his final ruling, and the tone could not be more different. Google will not be broken up. There will be no choice screen on new phones.
The nature of the search engine market, where more users generate more data, and more data improves search quality, made it impossible for competitors to challenge Google, the court found in 2024.
The 2024 ruling itself was controversial. While high quality data enables a dominant firm to extract more profit from consumers, it also allows it to provide a better service. Decades of research in economics has shown that determining which effect is more important is not straightforward.
At the time, the US Department of Justice deemed the issue so serious that it considered breaking up Google as the only viable solution. For instance, it suggested forcing the company to sell its web browser, Google Chrome.
The government also proposed forcing device manufacturers to offer users a choice of search engines during set up, and compelling Google to share most of its data on user behaviour and ad bidding, where advertisers compete in auctions to get their ads shown to users for a specific search query or audience. These so-called “remedies”, measures Google would be required to implement to end its monopoly, aimed to restore competition.
Limited sharing
So, what has changed in a year to so radically change the perception of Google’s market dominance? The main answer is AI – and specifically, large language models (LLMs) like ChatGPT, Claude, and Google’s own Gemini. As users increasingly turn to LLMs for web searches, Google responded by placing AI-generated summaries at the top of its search results.
The way people navigate the internet is quickly evolving, with one trend reshaping the business models of online companies: the zero click search. According to a Bain & Company survey, consumers now default to accepting AI-generated answers without further interaction. The data is striking: 80% of users report being satisfied with AI responses for at least 40% of their searches, often stopping at the summary page.
Threat to ad revenue
This AI-driven shift in consumer behaviour threatens not only Google’s business model but also that of most internet based companies. Advertising accounts for roughly 80% of Google’s revenue, earned by charging companies for prominent placement in search results and by leveraging its vast amount of user data to sell ad space across the web. If users stop clicking links, this revenue stream evaporates.
More importantly for this ruling, the market Google once monopolised may no longer be the relevant one. Today, Google’s primary potential competitors in search are not Microsoft Bing, but AI models like ChatGPT, Claude, and Perplexity. In the global race for AI dominance, the outcome is far from certain.
From an antitrust standpoint, there is little justification for penalising Google now or forcing it to cede advantages to competitors. What would be the benefit for consumers of forcing Google to accept the £24.6 billion offer from Jeff Bezos’ Perplexity AI to buy the Chrome browser?
In essence, the judge acknowledges that Google monopolised the search engine market for a decade but concludes that the issue may resolve itself in the years ahead.
This situation echoes the first major monopolisation case: Internet Explorer. For years, European and US regulators battled Microsoft to dismantle the dominance of its web browser, which was bundled with the then-dominant Windows 95 operating system.
By the time all appeals were exhausted, however, the monopoly had vanished. Internet Explorer was partly a victim of the rise of smartphones, which did not rely on Windows. The new king in town was a newcomer: a certain Google Chrome.
How you view the economic and political power of tech giants will shape which lesson you draw from this story. An optimistic view I suggested (with the economist Jana Friedrichsen) is that winner-takes-all markets can intensify competition through innovation. In such markets, incremental investment is not enough; to challenge Google, a competitor must offer a vastly superior product to capture the entire market.
Precisely because they ruthlessly defend their monopoly positions, tech giants show competitors that the potential gains from radical innovations are massive. The pessimistic view, however, is that years of dominance have left these firms largely unaccountable, which could embolden them in future.
Renaud Foucart, Senior Lecturer in Economics, Lancaster University Management School, Lancaster University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
