Microsoft CEO says tech giants are fighting for content to develop AI

WASHINGTON, Oct 2 (Reuters) – Microsoft ( MSFT.O ) Chief Executive Satya Nadella said on Monday the tech giant was competing for the vast amount of content needed to train artificial intelligence, and complained that Google was locking up content with expensive and exclusive deals with publishers.

Testifying in a landmark US trial against its rival Google, the first major antitrust case brought by the US since suing Microsoft in 1998, Nadella testified about the tech company’s efforts to build content libraries to train large language models. Phases of Supply Agreements.”

The distribution agreements are at the heart of the US Justice Department’s antitrust battle against Google. The government says Google, which accounts for 90% of the search market, illegally pays smartphone makers like Apple and wireless carriers like AT&T ( TN ) $10 billion annually to be the default search engine on their devices.

Influence in search gives Google more leverage in the lucrative ad market, increasing its profits.

Building artificial intelligence requires computing power or servers and data to train software, Nadella said. On the servers, he said: “No problem, we’re happy to deposit dollars.”

But without naming Google, he said it would be “problematic” if other companies locked in exclusive deals with big content producers.

“When I meet with publishers now, Google is going to write this check, it’s exclusive, and you have to match it,” he said.

Rejected by Apple

Nadella testified that Microsoft tried to make its Bing search engine the default on Apple ( AAPL.O ) smartphones, but was rebuffed.

Google’s lead attorney, John Schmittlin, pressed Nadella in cases where Microsoft won the default position on computers and mobile phones, but users still avoided Bing and continued to use Google.

Smitlin argued that Microsoft made a series of strategic errors that led to Bing’s inability to gain a foothold, including failing to invest in servers or engineers to improve Bing and failing to foresee the mobile revolution.

Schmittlin said Microsoft’s success in becoming the default — on some Verizon phones in 2008 and on BlackBerry and Nokia in 2011 — ended with the same result: users avoided Bing and did most of their searches on Google.

Among laptops, most of which use Microsoft operating systems, Bing is the default search engine and has less than 20% market share, Nadella acknowledged.

“You wake up in the morning and brush your teeth and search on Google,” he added of Google’s dominance in search.

A question of quality

Judge Amit Mehta, who is presiding over the case in the U.S. District Court for the District of Columbia, asked Nadella why Apple would switch to Pink when Microsoft’s product quality was inferior.

The question suggests Google’s argument — that it dominates because of its quality and not because of illegal activity — caught the judge’s interest.

Nadella became Microsoft’s CEO in 2014, not long after the tech giant faced its own federal antitrust lawsuit. That court battle, which ended in a 2001 settlement, forced Microsoft to end some business practices and opened the door to companies like Google.

As Google, founded in 1998, became the industry-leading search engine, the two became bitter rivals. Both have browsers, search engines, email services and other overlays. They have recently become competitors in artificial intelligence, with Microsoft OpenAI and Google building part AI chatbots among other investments.

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