🔍 The power of defaults: How Google's $18B payment changed consumer behavior [Warning: Deepfake Video]

🚨 Caution: The video above is FAKE! ⛔️ It’s not me—it’s an AI avatar I made to read today’s special-edition article. This week, you’re better off reading the article than watching the full video.

And stay tuned for a teardown in future weeks of HeyGen and Tavus—top AI avatar companies. 🤖 ✨

In 2020, Google paid Apple $18 billion to be the default search engine on iPhones. This payment is the subject of a recent Department of Justice lawsuit that just found Google guilty of antitrust violations. 

Even without the lawsuit, the colossal sum raises questions: Why would Google make such a hefty payment? 

They understood human behavior. And history. 

In 1995, Netscape was arguably the best browser and was winning the market with 80% share. And yet a little more than 5 years later Internet Explorer had over 90% of the browser market. How did that happen? 

Internet Explorer became the default on all Windows computers. Consumers didn’t have to download anything anymore—their browser came pre-installed with Windows 95, their operating system. 

Google understood that if they weren’t the default on iPhones they may suffer Netscape’s fate. They knew that consumers (more often than not) use what’s in front of them. 

• We get a car loan from the dealer that sells us the car

• We get a credit card from the bank that already has our checking account

• We get an MRI at the clinic our doctor faxes the referral to

• We use a specific escrow and title company because they’re integrated into the mortgage process

If something is not part of our workflow already, we are unlikely to go out of our way to try it. Since people access search through their phones, Google needed to be the default.

Google paid for it. A lot. And it paid off.

By becoming the search default on Apple devices, Google became the path of least resistance for millions.

The vast majority of users didn’t switch to a different search engine, not because they couldn’t (Apple allowed it), but because it was easier not to. While exact figures can vary, Google's market share in search was above 90% on mobile devices following the payment.

Critics will say that Google and Apple colluded to manipulate our choices, but there are two things to consider before siding with the DOJ. One is evidence Google argued in their case and the other is evidence they left out.

Included: People like Google Search

Google included evidence during the trial that showed the search default was in line with consumer preferences. 

In 2018 the European Union ordered Google to offer a ‘choice screen’ that allowed users to actively set their search engine default. The result?  Some European users switched to Bing when offered the choice screen but these user quickly reverted to Google after less than a month - the Bing share went from 3.34% to 4.48% back to 3.46%

This idea—that preferences influence the default—is in line with most consumerism. We don’t ask consumers to pick which tire brand goes on their Toyota car. Toyota has a default tire brand they use for each model. The brand of tires represents the preferences of their consumers. We don’t ask consumers to choose all of the mutual funds that go into their 401k. The employers and fiduciaries do this.  

In a world full of choices, it just happens that companies end up making many decisions for us and these are reasonably based on what the market supports. Google argued that consumers would choose Google—even without the default.

Excluded: People like Apple

Something Google did not mention in their case:a big reason consumers like Apple is because they do things in their products like reduce choice and include defaults. 

Apple designs for simplicity. 

What does this mean? Apple would have always set a search default on the iPhone, with or without this $18B payment. Either they would have built their own search and set it as the default or set Microsoft’s search engine as the default—but someone would have gotten that default. 

We don’t buy iPhones because they give us all the choices. If we want choices, we buy Android. We buy iPhones because they take away the choices. 

Giving consumers freedom of choice also requires that consumers can choose to limit their choices. Given the option, consumers are choosing Apple, not Android. Choice architecture in and of itself is a consumer preference. 

• Casper made waves by offering just one style of mattress

• Trader Joes has 10% of the products that Safeway carries

• Allbirds offers a small range of shoe styles

• In & Out burger offers limited selection of burgers

• Neiman Marcus only carries selective high-end brands

By contrast, Walmart, Amazon, and Wayfair typically DO carry all brands and all styles. That is also why we like shopping at these places. For these companies, we actively choose choice. 

Overall, it’s unlikely the chips would have fallen any other way because of this core idea. Apple would have given the golden key of defaults to someone. Why not give it to  Google, since consumers liked them the most and Google was willing to pay?

The ruling

But we should be sympathetic to the ruling. 

Yes, “pay to play” is a normal strategy in capitalist markets (grocery stores give brands exclusive placement deals all the time) but this is Search. This is how we access the internet. Search has become more of a public good than your local checkout aisle. The public deserves some competition—and even Eric Schmidt thinks Google has slowed its innovation. He recently publicly ribbed Google engineers for going home early and taking the foot off the gas. 

It’s unlikely the answer is to “break up Google”. It may be closer to what the 1956 antitrust ruling against AT&T that brought us: access to communications IP. AT&T’s research arm Bell Labs was required to make all 7,820 of its patents available to the public and provide future ones at a reasonable cost. This matters because Bell Labs built most of the core communications technologies we rely on today—from the Unix operating system to communication satellites, the transistor, and the laser. And it worked. Most scholars agree that these innovations wouldn’t have had the same impact had AT&T retained solo rights to commercialize them.

Regardless of how you fall on the DOJ ruling, defaults came out the winner. They proved to be powerful enough to not only garner an $18B payout, but also garner an antitrust lawsuit. The judge was clear: defaults change behavior. 

While the case had compelling arguments on both sides, one thing people aren’t arguing: consumers take the path of least resistance. So if you want to be in a consumer’s life, you need to make yourself their default. Just don’t do it if you might be considered a monopoly.

🚨 Caution: The video above is FAKE! ⛔️ It’s not me—it’s an AI avatar I made to read today’s special-edition article. This week, you’re better off reading the article than watching the full video.

And stay tuned for a teardown in future weeks of HeyGen and Tavus—top AI avatar companies. 🤖 ✨

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