I think it's instructive to look at the rest of the market. How is Mozilla funded? Basically a single gigantic contract with Google. Even Apple accepts payment from google to become the default, and it's not cheap: https://fortune.com/2018/09/29/google-apple-safari-search-en... The same logic applies to pretty much anything Alphabet spins off -- there's little difference between ownership and those contract.
About the only competition this setup produces is the ability for Mozilla to walk away to a competitor bid, which they did for like a year before bailing out at the first opportunity. There's a huge incumbency bias in these contracts. The first parallel that comes to mind is employer provided health insurance. Everyone gets to bid, but the incumbent knows the claims history far better than the competition and we'd only expect them to lose bids to companies overly optimistic about that history. Google knows how valuable various traffic sources are, but their competitors have to guess, and only when their guess is higher than Google's does it pay off. Does anyone think Yahoo winning Firefox was a good deal? I haven't seen any analysis to support that.
> My hope is a complimentary effect to the above also happens: Google no longer gets gobs of personal data from its other services, allowing other search engines to approach its efficacy.
Wouldn't the most profitable thing for these broken up companies be to sell their slice of the personal data pie as many parties as possible? This seems like a net loss for privacy. How much extra would it be worth to set up an exclusive arrangement?