Key insights
- The article alleges Alphabet is inflating Gemini's active user numbers through deals with OEMs like Samsung and Motorola, where Gemini is pre-installed and linked to the power button. This potentially anticompetitive behavior, as suggested by the Department of Justice filings, could lead to regulatory scrutiny and negatively impact Alphabet's stock price due to concerns about misleading investors and unfair market practices.
Bulls: "OpenAI is losing market share to Gemini, with Alphabet reporting 750 Million monthly active users of the Gemini app"
Reality: Google is paying OEMs like Samsung and Motorola not just to automatically distribute the gemini app on all of its phones, but change the default behavior of the power button to open the Gemini app(rather than locking the screen). Assuming Google uses the same methodology they use for Google Play Console, anyone that pressed their lock screen button on an affected Android Device, which automatically opens Gemini, is counted as a monthly active user
https://www.justice.gov/atr/media/1402141/dl
While Google secured Gemini distribution on Motorola and Samsung[...]
"435. Google’s agreement with Samsung requires Samsung to implement a number of Gemini entry points to receive revenue share. Rem. Tr. 2495:1–4 (Pichai (Google)). " [...]
Samsung receives up to $[REDACTED] million a month in fixed payments if Samsung’s Gemini Qualified Devices meet certain Gemini App usage levels, or “Key Performance Indicators” (“KPIs”). Rem. Tr. 250:21–251:12 (Fitzgerald (Google)); PXR0571 at -384–87 (Attachments A, A-1). 312. Google’s fixed monthly payments to Samsung could go down “if certain KPIs weren’t met.” Rem. Tr. 251:4–9 (Fitzgerald (Google)); PXR0571 at -384–85 (Attachment A). 313. Samsung also receives a bounty payment, up to $[REDACTED per device for premium devices sold in the United States, for activation of Gemini Qualified Devices. Rem. Tr. 251:14– 252:9 (Fitzgerald (Google)); PXR0571 at -388 (Attachment A-2).
These deals are potentially anticompetitive:
(Motorola wanted to preinstall Copilot as a default on a subset of its devices, but Google threatened to stop all revenue share payments.)
AT&T has been subjected to Google’s deal framework and has had “limited negotiating power” in discussions.); Des. Rem. Tr. 66:11–67:5, 67:18–21, 67:23–68:23 (Beard (Microsoft) Dep.) (explaining that Motorola wanted to pursue a Copilot carveout deal with Microsoft but the deal fell through because Google would not permit a carveout if Motorola wanted to keep Google’s revenue sharing.); Des. Rem. Tr. 252:8–253:15 (Beard (Microsoft) Dep.) (describing Microsoft’s understanding that Google provided Motorola with financial incentives to cancel a planned Copilot distribution deal);
observing Google’s “stronghold” on the mobile ecosystem in the context of Motorola negotiating with Microsoft); PXR0156 at -424 (Before Motorola and Microsoft could finalize a Copilot integration deal, “Google ultimately intervened with a significant financial offer and Motorola cancelled the Razr [Copilot] integrations.”
Google’s revenue share payments also incentivize carriers and OEMs to partner with Google on GenAI distribution, limiting AI competitors’ negotiating strength. Rem. Tr. 726:6–727:8 Shevelenko (Perplexity)) (Perplexity cannot simply replace Google’s revenue because of Google’s size and will need some time to get up to the scale to replace Google’s payments.)
TL;DR: Google is not only spending huge sums of money to distribute a free app with 0 ads, but the deals are contingent on KPIs, aka pumping up user numbers that they can report to shareholders. These deals have also restricted the ability of competing LLM products to enter distribution details.
Of the reported 750 Million "monthly active users" of the Gemini app, only a fraction of them actually intentionally engage with it.