Google banked on ‘habit’ and ‘power of default’ to get users addicted to search, US DOJ economist testifies

Google banked on ‘habit’ and ‘power of default’ to get users addicted to search, US DOJ economist testifies

14 September 2023
By Khushita Vasant and Chris May

Google was aware that search engine defaults generated a "sizeable and robust bias" toward the default when it came to consumer choice, and it worked to "get users addicted" to its interface and tools through sheer habit, a behavioral economist testified today for the Department of Justice in a landmark US monopolization trial.

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Google was aware that search engine defaults generated a "sizeable and robust" default bias when it came to consumer choice, and it worked to "get users addicted" to its interface and tools through sheer habit, a behavioral economist testified today for the Department of Justice in a landmark US monopolization trial.

Antonio Rangel, a California Institute of Technology professor of behavioral biology and economics, also testified that defaults act as a "point of gravity," and the more "friction" they cause a user to change a default search setting on a mobile phone or personal computer, the "stickier" the default becomes.

The second day of the historic joint federal-state government antitrust trial in Washington, DC, also featured testimony from Google's chief economist, Hal Varian, who testified that large profits are an indicator of monopoly and that defending Google’s profits is difficult. There was also testimony from a former company employee about how revenue-sharing and distribution agreements Google signed with phonemakers and wireless carriers were critical to making its search services dominant on Android phones.

'Power of defaults'

Rangel’s two-hour direct examination — which continues tomorrow — by DOJ attorney Josh Hafenbrack made for engrossing testimony where he said that not only do search engine defaults create the "sizeable and robust bias" towards the default in consumer choice, but that the effects of defaults are stronger on mobile phones than personal computers. The "power of defaults" also affects consumers' privacy decisions while making searches.

The economist, an iPhone user, said he purchased a Samsung Galaxy Android phone when he was tasked by the DOJ to evaluate the impact of Google’s search defaults.

"Most search engine choice is implicitly driven by habit," Rangel said. "Behavioral biases and choice friction further strengthen Google’s defaults."

In behavioral economics, friction refers to a factor or obstacle that increases the time or effort an individual needs to make a decision. Tech companies, for instance, can make a desired action more accessible and convenient to increase the likelihood of users adopting their services. On the flip side, increasing choice friction can help in discouraging an undesirable action.

Rangel testified that a vast majority of individual searches on the Internet are "carried out in habit," and habit is a fundamental concept in behavioral economics.

The economist testified to having reviewed internal Google documents where senior executives used terms such as "the power of habit,” and "people are creatures of habit."

In one slide, a Google executive said – referring to Apple's competing browser – "We need to break the Safari habit… and Safari is a deeply-ingrained habit.”

In a 2003 memo titled “Thoughts on Google v Microsoft,” the company's longtime chief economist, Hal Varian, talked about the need to “get users addicted to our interface and tools, particularly those where we have intellectual property protection.”

The DOJ's Hafenbrack introduced slides on Google’s default agreements. A 2015 memo titled “Code Red,” on the impact of Google's search losing default status on Apple devices, said, “Our brand is in good standing among iPhone users… but our position is still very vulnerable if defaults were to change.”

Google’s recognition of the importance of behavioral economics to its business came not only from the “hundreds of millions of dollars” it reaped from tweaking default daily ad spend settings for advertisers, Rangel said, but also after the search giant struggled against the power of defaults when trying to break into maps and podcasting apps.

A 2019 internal presentation on Google Podcasts said, “There are other podcasting apps that we believe offer an equivalent or better user experience, but Apple Podcasts still has a [redacted] share over all other apps combined. This goes to show the power of the default.”

Rangel cited an episode where Apple Chief Executive Tim Cook publicly apologized for the initial bugginess of its Apple Maps application. Documents showed Google executives discussing how Apple Maps’ status as a default on iOS devices insulated it from competition even though Google Maps was a “superior product.”

Rangel testified that of the “tiny fraction” of users who try to change default settings on their phones or computers, many will become frustrated and simply leave the default as originally set.

The economist testified about an instance in which Samsung changed its interface for the SBrowser on Android phones, which led to reduced choice friction for users seeking to change the default browser. Google sent a complaint to Samsung saying the change violated its contract, and the Korean phonemaker later walked it back.

Rangel said documents he reviewed were "consistent with the idea that this degree of choice friction is being monitored and enforced according to the contract."

Yesterday, Google counsel Jonathan Schmidtlein told US District Judge Amit Mehta that Google doesn’t have data on users switching defaults and is “not able” to track it.

‘Monopoly’ profits

Continuing the direct examination of Varian from yesterday, DOJ attorney Kenneth Dintzer pulled up an e-mail exchange with an economic consultant who said it's an "elephant trap" to defend Google's profits in search.

"You can argue that you don't have market power in search, but it's going to be extremely difficult to win that argument until you stop making large amounts of money," wrote advisor David Stallibrass of the UK-based consultancy Fingleton.

"I agree with the point that defending Google’s profits is difficult, but I'm going to try anyway," Varian responded.

Dinzter asked Varian if he agreed that “large profits is an indicator of monopoly.” The Google economist said, “in some cases, yes.”

During cross-examination, Google attorney Kenneth Smurzynski asked Varian to elaborate on the justification for that defense, which included an e-mail excerpt where the Google chief economist linked the company’s profits to lower ad prices and increased “ad effectiveness.”

“My point is Google’s profit is due to its performance. We built a better mousetrap,” Varian said.

Market Definition

The DOJ displayed an e-mail exchange where Stallibrass told Varian he had "sympathy with not wanting to define a market," characterizing the exercise as “drawing a bright binary line which doesn't really exist.”

Once you’ve defined “general search” as a product, however, “it's relatively easy to conclude that Google has market power in it,” he said.

But Varian challenged the existence of a market in general search, expressing concern that the word “market” usually involves “financial transactions of some sort.”

“There’s no such ‘market’ for search, though there is a market for search advertising, of course,” Varian wrote.

Varian evaded attempts by the DOJ to link his statement to a key question in the case: whether the government’s market definition passed legal muster.

During cross-examination, he also downplayed his antitrust expertise when asked by Smurzynski whether his claim about the existence of a market for search advertising was “distinguishing [between] different types of ads that could appear in a digital space.”

Android

Chris Barton, a former executive responsible for Google’s search distribution agreements, also testified for the DOJ today. 

He described a “complicated” mobile device ecosystem when he worked at Google between 2004 and 2011 – a period when the platform competed to offer devicemakers and mobile carriers revenue-sharing deals to secure default search engine status in a burgeoning handset market.

At the time, “a very young and small part of Google” was working to establish the open-source Android operating system and accompanying suite of app stores and other software, Barton told DOJ attorney Catherine Wright.

“Our philosophy is that we are paying revenue share *in return for* exclusivity,” Barton wrote in a 2011 e-mail to a Google executive involved in securing distribution partnerships.

The goal was to lock in Google’s default position on device “access points” where users conduct internet searches, without which “Bing or Yahoo can come and steal away our Android search distribution at any time,” Barton said.

“Android is by far the greatest opportunity for search monetization in mobile over the next years and is very strategic to Google,” Barton wrote. “You can bet that Microsoft and Yahoo will enter contracts for search on Android through carrier deals if we do not.”

He told the court about his mixed success winning exclusive distribution agreements with the likes of AT&T, T-Mobile and Verizon by touting Google’s superior monetization of searches despite offering lower revenue-sharing percentages compared to rivals.

Along with device manufacturers like BlackBerry and PalmPilot who had their own budding operating systems and app stores, “Microsoft Windows could have been a potential winner in that space,” Barton said.

At one point, the judge quizzed Barton about the link between Google’s default distribution deals and licensing agreements for bundles of popular apps like Maps, Chrome and Android’s app store.

Signing a mobile application distribution agreement, or MADA, would give companies like Samsung the “option” to put Google apps and search on phones, but search distribution deals that included revenue sharing would be a commitment to include search on “many types of phones,” Barton replied.

“At the time I was doing those deals, there was no revenue share economics around the MADA,” Barton told Wright.

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