Microsoft and Google Fail to Reach Agreement on Search for Surface Duo

During the US government’s antitrust trial against Google, it was revealed that the previously established five-year truce between Alphabet Inc. and Microsoft Corp. collapsed in 2020 due to conflicts arising from their competing web-search ventures.

After a decade of fighting, the companies signed a non-aggression pact in 2016 as they wanted a fresh start in their fraught relationship. But three years ago, the situation began to deteriorate, Microsoft business development director Jonathan Tinter testified Thursday in Washington.

Alphabet demanded that Microsoft put a Google search widget on the main screen of its Surface Duo touchscreen smartphone in order to license the Android operating system, rejecting the software company’s request to use its own search engine Bing, said Tinter, which is negotiating the deal. in spring and summer 2020.

Google also banned Microsoft from advising users to change their default search engine to Bing, he said.

“Ultimately, for Duo to be successful, we needed a license from Google,” he said. “We wanted Bing to be the entry point for the search. They wanted Google to be the starting point for the search.

Tinter is one of several Microsoft executives to testify as part of the Justice Department’s antitrust lawsuit against Google. Microsoft CEO Satya Nadella is expected to make a statement next week. The government alleges that Google has monopolized the online search market with deals in which it paid billions to Apple Inc. and smartphone makers to make its search engine the default search engine on browsers and mobile devices. Google has said that consumers like its search engine and it’s easy to switch.

Microsoft and Google eventually “compromised” Duo so that both search engines would appear on the device, Tinter said. The search widget, Chrome browser, and Google search app would all be on the phone and use Google, while Microsoft’s Edge, the device’s default browser, would use Bing.

Microsoft began taking orders for the $1,400 dual-screen foldable Duo in August 2020, marking the company’s return to the mobile phone market after an ignominious retreat in 2016 when its acquisition of Nokia Corporation’s mobile unit led to a costly write-down. Although it had some fans, Duo did poorly, and after a few months Microsoft was already offering discounts on the product. Barely a year later, it sold for less than half the original sticker price.

While the launch of Duo appeared to represent a thaw between the tech rivals, behind the scenes the relationship was less cordial, Tinter said. Tinter said he personally favors a “strategic collaboration” with Google, citing the success of Microsoft’s Office products on the Android platform.

“There was a discussion about how much we should collaborate with Google or not,” he said. “The Bing Ads team argued that we shouldn’t.”

The companies’ agreement to cease hostilities established a formal, expedited process for handling disputes that previously could go directly to regulators. In March 2020, Microsoft formally complained to Google that its Search Ads 360, which allows marketers to manage ad campaigns across multiple search engines, cannot keep up with Bing’s new features and ad types.

The controversy sparked discussions between the companies’ top lawyers — Microsoft’s Brad Smith and Google’s Kent Walker. He said Tinter was also involved in discussing the issues with Don Harrison, Google’s director of global partnerships and business development.

Tinter said that in response to Microsoft’s rampage, Google formally complained about a problem in the terms of Microsoft’s cloud program that prevented Google Drive products from participating — competing productivity software for word processing, email and spreadsheets.

In response to questions from the Justice Department, Tinter said Microsoft had informally agreed to pay Google to make changes to SA360.

“It was half a negotiation strategy,” Tinter said. Harrison “said, ‘This is too expensive.’ I said, ‘Great, let me pay for it.'”

The two companies eventually negotiated a solution in the cloud, but were unable to resolve the issues with the search advertising tool, he said. As a result, nothing was ever signed on either issue, Tinter said.

“We ended up walking away and couldn’t come to an agreement,” he said.

Microsoft and Google also let their peace agreement expire in 2021.