Welcome to the Techmeme Ride Home for Tuesday, August 6, 2024. I'm Brian McCalla. Today, three big stories to catch you up on. A federal judge has ruled Google is an illegal monopoly. The Game of Thrones-style drama at OpenAI is just getting weirder. And what if all those weird aquahires in all but name are actually mercy killings? Here's what you missed today in the world of tech. Sometimes it just all comes in waves after weeks of sort of slow summer news days, lots of big
stories to catch you up on today. A federal judge has ruled that Google illegally monopolized the search market, including through deals to be the default search option on phones and browsers. quoting Bloomberg. Judge Amit Mehta in Washington said that the alphabet units $26 billion in payments to make its search engine the default option on smartphones and web browsers
effectively blocked any other competitor from succeeding in the market. Google's distribution agreements foreclose a substantial portion of the general search services market and impairs rivals opportunities to compete. Meta said in a 286 page ruling by monopolizing distribution on phones and browsers. Google has been able to consistently raise the prices of online advertising without
consequences. Meta said the trial evidence firmly established that Google's monopoly power maintained by the exclusive distribution agreements has enabled Google to increase text ads prices without any meaningful competitive constraint. He wrote Google said it plans to appeal the decision. Quote as this process continues, we will remain focused on making products that people find helpful and easy to use. Kent Walker, president of Google's Global Affairs said in a statement.
Meta's decision focuses solely on Google's liability nine months after the Justice Department and a group of states held a 10 week trial in federal court. Meta scheduled a hearing for next month to discuss the timing for a separate trial on the remedy. The Justice Department hasn't yet said what changes it will seek though it presented evidence that efforts by European regulators to
require Google to offer users a choice of search engines led few to switch. The agency could demand the separation of Alphabet's search business from other products like Google and Android or Chrome, which if ordered by the judge would mark the biggest force breakup of a US company since AT&T was dismantled in 1984. More on the possible repercussions for Google from Fortune. Quote, the judge will rule on the remedy or remedies essentially the business model penalties that Google
will face. Evercore ISI Research Analyst Mark Mahoney tacked them off in a research note on Monday evening. Quote, the exact remedy is key and so far it's hard to pick a winning horse among the range of outcomes he wrote. One, forbidding payment from Google altogether to a cap on the amount of distribution agreement fees. Three, pushing Apple to implement a choice screen or for something else.
In any case, we expect at least another six months to a year before we would know the exact remedies or longer if the judge decides to stay the remedies phase pending Google's appeal. So aside from that, which obviously would be unbelievably seismic, Google having to break itself up, what are the other possible ramifications here? Well, at the very least it seems likely that these paid search deals are over if all this is upheld, which would have a knock on effect for a lot of
companies. Apple and Mozilla, for example, will take big revenue hits if those search deals go away. For example, in 2021 to 2022, $510 million of Mozilla's $593 million in revenue came from its Google deal, quoting Fortune again. The ruling immediately prompted speculation about the impact to Apple, which receives as much as $20 billion from Google every year in exchange for putting the search engine front and center on its iPhones via the Apple Safari web browser.
But while Apple would certainly take a big hit if the ruling is upheld, Apple is a large diversified company with many sources of revenue. That's not the case for another partner of Google's located in the Fallout Zone of Monday's ruling. Mozilla, the nonprofit tech org that makes the Firefox web browser. If that number, $510 million, were to go away entirely, Mozilla will have a serious problem on its hands. Mozilla is putting on a brave face for now and not directly addressing
the existential threat that the ruling appears to pose. Mozilla has always championed competition and choice online, particularly in search. A spokesperson said in a statement to Fortune on Monday and quote, now as Mark German points out to bring back to Apple, Apple might accidentally be the beneficiary of good timing here with Apple's AI shift kicking into gear. They could move some searches to Siri and AI chatbots instead of web browsers and Google, softening the blow somewhat.
Maybe it's time for them to spin up that long rumored Apple search ads product. But, but there's obviously more potential for collateral damage to everyone. As the time says, Google losing its US antitrust case may have major ripple effects for Apple, Amazon, Meta, everybody. That is currently in the crosshairs of regulators. Quote US regulators have also accused Apple, Amazon and Meta of violating antitrust laws by ad vanaging their own products on the platforms they run
and acquiring smaller rivals. The Google ruling and potential remedies to be decided by Judge Meta are likely to weigh heavily on those cases, including a second lawsuit against Google over ad technology, which is scheduled to go to trial next month. Judge Meta's ruling is quote, a predictor of what other courts might do said Rebecca Ha, Alan's worth, a Vanderbilt University law professor who studies antitrust. You can also expect other judges to read this opinion and be
influenced by it, she said. The influence of the late 90s Microsoft antitrust case was, in fact, apparent in the Google decision. In Judge Meta's 277 page, Judge Meta appeared on 104 pages, both as an aspiring rival to Google and as a legal precedent. Google has said it will appeal the
ruling. After years of little enforcement antitrust activism has taken off over the past few years first under the Trump administration and then under President Biden's, the heads of antitrust enforcement at the Justice Department and the Federal Trade Commission Jonathan Cantor and Lena Khan have sued the other tech giants over allegations that they are monopolies engaged in illegal corporate behavior. All of those cases hinge on the 19th century Sherman antitrust act, which makes
it illegal for a monopoly to engage in corporate conduct to thwart competition. But that law, designed for companies like Standard Oil, faces the continuing challenge of being applied in a different industrial environment to the new technology of its day. And both agencies have sought to test the old law by applying new legal arguments when it comes to the tech giants. Without major cases, quote, the law will stagnate. Mr. Cantor said in a speech in 2022, Congress designed antitrust a
lot of play out in the courts. In the 1990s Microsoft was the ruling digital platform with its Windows software controlling the experience of users on more than 90 percent of personal computers. Today, Google has a comparable grip on internet search. That changed for Microsoft after a judge ruled it was a monopoly. Regulators had brought to the suit after the software giant waged a campaign to try to crush an upstart, net scape, the pioneering commercial browser company.
Microsoft bully PC makers with contracts that effectively stopped them from offering the net scape browser. Ultimately, Microsoft was prohibited from restricting in its contracts, the freedom of PC makers to offer other software and was forced to open up some of its technology. The time, money, and management attention spent, as well as the adverse public scrutiny, some antitrust experts say, did have a deterrent effect moderating the company's behavior.
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the cause of some of the recent strife at that startup. But now Schoelman says, quote, I'm not leaving due to lack of support for alignment research, but, you know, dot, dot, dot. On top of that, Open AI president Greg Brockman says he's taking a sabbatical through the end of the year and sources say, Open AI product leader Peter Deng, who joined in 2023, has also left the
company. So let me let Dar Obasanjo sum this up for you just a bit. Quote, Open AI is losing its president who's going on a leave of absence, a key co-founder who's joining Anthropic to work on alignment and another senior product leader. Despite being the hottest startup on the planet, Open AI can't hold on to its best employees. And quote, and in the background of this, there has been a steady drum beat of folks inside the AI community over the last few months saying, you know, maybe Open AI
is no longer the cutting edge when it comes to AI. Take this Nathan batches tweet to stand for that line of thinking that again, I've been hearing quite a lot recently, quote, possibly related note, we shifted 80% of our LLM spending to Anthropic recently. And I bet a lot of other companies have done the same really hard to beat clawed models right now. Also the clawed web interface is
super good. And quote, and here's Samuel Lee, quote, an Open AI co-founder leaving for Anthropic further adds to my belief that Open AI has fallen behind a lot of top level technical talent has moved from Open AI to Anthropic, but not the reverse. Whatever technical secrets Open AI has are Anthropics and quote, here's Birch Singh, quote, great day for habitual Open AI critics, Brockman taking time off in the middle of the next model generation fight is something to worry
about. Hopefully this could be more like Chris Cox leaving Facebook and rejoining later. End quote. And then there's as I said, the whole Game of Thrones style thing is this now entirely Sam Altman's personal kingdom, not to mention the longest underlying speculation on this whole thing, quoting Gary Marcus, your regular reminder that chaos at Open AI itself a regular occurrence since last November is a strong argument for strong AI regulation. If they can't govern
themselves, how can we expect them to keep AI safe? Spoiler alert, we can't end quote. And also, does this feel like a company firing on all cylinders if everybody's heading for the exits? Whatever happened to GPT five? Quoting tech crunch. Peter Deng, a product manager who joined Open AI last year after leading products at Metta, Uber and Air Table also exited some time
ago, the company confirmed. Shulman posted about his decision on X today saying that it stemmed from a desire to deepen his focus on AI alignment, the science of ensuring AI behaves as intended, and engage in more hands-on technical work. I've decided to pursue this goal at Anthropic where I believe I can gain new perspectives and do research alongside people deeply engaged with the topics I'm most interested in. Shulman said, I am confident that Open AI and the teams I was part of
will continue to thrive without me end quote. Shulman's involvement with Open AI being shortly after he completed a PhD in electrical engineering and computer sciences at UC Berkeley, he played a pivotal role in creating the AI powered chatbot platform chat GPT by leading Open AI's reinforcement training organization, which finds Tunes' genitive AI models to follow human
instructions. Following the departure of AI safety researcher Jan Leakey, who also now works at Anthropics, Shulman became head of Open AI's alignment science efforts also known as the post-training team. He was also a member of Open AI's recently formed safety committee. It's unclear who might replace Shulman in that role. Despite the controversy swirling around Open AI, particularly with the regard to the company's approach to and treatment of AI safety research, Shulman said that he wasn't
leaving Open AI due to lack of support. Quote, company leaders have been very committed to investment in alignment research. Shulman said, my decision is a personal one based on how I want to focus my efforts in the next phase of my career. With Shulman's departure, only three of Open AI's 11 original founders remain. Open AI CEO Sam Altman, Brockman, though again he's going on vacation, and we check Zoremba, lead of language and code generation.
Finally today, how is this related to all of that? Also, maybe some of the problems in the tech sectors of the stock market recently as well. The journal takes a look at all those aquaher and all but name deals that we've been seeing recently. What if they're actually bailouts? What if there may be mercy killings? Quote, artificial intelligence startups raised billions of dollars last year aiming to become winners in the latest tech driven boom. Now many are struggling
to survive and asking Silicon Valley's biggest companies to bail them out. At least three once hot AI startups have been rescued via a new type of deal that many in the tech industry say are acquisitions and everything but name. These deals have the advantage of scourting the typical regulatory process at a time when big techs growing control over generative AI is being scrutinized by governments. On Friday, character AI announced a deal for Google to use its technology and hire many of its
researchers and executives including its co-founders Nome Shazir and Danielle DeFreetes. Google negotiated a licensing fee worth $2 billion for the startup's technology to help buy out early investors people familiar with the matter said. The two companies considered an outright acquisition but concluded that that was unlikely to get past regulators according to a person familiar with
the matter. Microsoft cast the mold for this deal type in March when it hired nearly all of the employees from AI developer inflection to start a new consumer AI division and paid around 650 million dollars to license its technology. More exits either pseudo acquisitions or real ones are coming investors say as a bubble built by the excitement around generative AI is showing signs of peeking. Creating the large language models that power generative AI often requires hundreds
of millions of dollars in upfront investment before returning a cent of revenue. Many startups are discovering that they don't have the resources and runway to get there. There were a lot of companies that raised on a big vision but not tangible examples and actual details said Sean Johnson, a founding partner at the AI focus venture firm AIX Ventures. Anxiety about the outlook for the AI boom has contributed to a tech swoon in the public market recently that has knocked about
13% off the tech heavy NASDAQ composite over the past month. Character AI might be an emblematic example. It created AI powered chatbots that can simulate anyone from a psychologist to an anime character to Elon Musk. Many people use the service for romantic roleplay which the company
discouraged. Last year the company raised 150 million dollars in a deal that valued it at $1 billion but it struggled to generate enough revenue from paid users and by this summer was talking to Facebook parent meta about a bailout according to people familiar with the matter. Ultimately character honed in on Google where Shazir used to work and where he co-wrote a seminal 2017 paper that laid the groundwork for much of the generative AI technology in use today.
Shazir, character's chief executive is still highly regarded at Google and is close with co-founder Sergei Brenn who helped seal the deal. Google's licensing fees come on top of an earlier $500 million investment from the tech giant made in character. The money from Google will be used to buy out early shareholders at a valuation at $2.5 billion or more than twice the level last year and to fund the startup's growth. Shazir and about a quarter of characters employees are joining
Google's AI Research Division to work on its flagship Gemini systems. The rest will remain at character to continue working on chatbots and will use more open source AI models a cheaper approach than relying solely on their own. Again, you know I don't like to wait into politics but this RFK Jr. and the dead bear in Central Park thing is maybe the craziest thing I've ever heard. Anyone who has lived in New York City
for even six months could find you a better place to stash a body in about 10 minutes. I could take you five blocks down from my house right now to Goannas or five blocks into Windsor Terrace. Heck, I used to live on the Upper West Side. There are places on 57th Street toward the Hudson River that would do or Dumbo. They sure cleaned up the Brooklyn Bridge Park all nice but there's that big electric plant like three blocks from my office right on the East River.
Even Prospect Park, there are some deep dark places in Prospect Park. I'm just saying off the top of my head I just came up with five places where it would take days for a dead bear to be discovered. Central Park is like trying to stash a body in Disney World. I don't know, want to be the leader of the free world? You need to display some better competency in terms of disposing of a corpse to win my vote. Talk to you tomorrow.