There’s a lot at stake if the Justice Department succeeds in breaking up his empire, from control of his search data and Android operating system to the loss of his Chrome browser.
But the biggest threat the company faces is a search business that is deeply intertwined with parent company Alphabet’s (GOOG, GOOGL) technology ecosystem.
Of the $307.3 billion in revenue Google earned in 2023, $175 billion came solely from that ad-driven search engine business. The DOJ wants to impose dozens of restrictions on how Google connects that engine to consumers.
Other parts of Alphabet could also be affected. The DOJ also asked for a ban on the company from favoring its video subsidiary YouTube, which is part of the YouTube Ads business unit.
That unit, which generated $31.3 billion in revenue by 2023, makes money through ads that appear on and around YouTube videos. Google Search promotes YouTube video links in response to user queries.
Google’s digital advertising business, a division that would generate $31.5 billion in revenue by 2023, could also be jeopardized by a restriction of search results in favor of YouTube. Both advertisers and content creators use Google’s buyer and seller platforms to target consumers and monetize video content.
It will be up to District of Columbia Judge Amit Mehta, who sided with the DOJ monopoly argument in a lawsuit that concluded earlier this year, to approve the plaintiffs’ proposals. That could include the sale of Google’s Chrome browser and a divestiture of the Android mobile operating system.
Even investments in artificial intelligence that will pay off in the future could be threatened. Prosecutors also called on Google to divest within six months of any investment or ownership in competing search-based AI products and competing search text advertising technology products.
That would force Google to end its partnership with generative AI startup Anthropic. Google has invested $2 billion in Anthropic and at the same time hired the founders of another AI startup, Character.AI.
Taken together, the Justice Department’s requests would dramatically change the technology landscape. Some legal experts said Mehta is unlikely to agree to any of the prosecutors’ proposals.
“I think it’s quite unlikely that the government will be successful in obtaining these things,” Erik Hovenkamp, an antitrust professor at Columbia Law School, told Yahoo Finance.
“In particular, I don’t expect the court to order any divestiture. Contrary to popular belief, antitrust rarely breaks up monopolies.”
The remedy most likely to be granted, according to legal experts, is a request to ban Google from entering into agreements that would secure its search engine as the default in browsers and on mobile devices.
That could hurt Google partners more than Google itself.
One of these is Apple (APPL). In 2022, Google paid Apple approximately $20 billion for the default placement of Google Search in Apple’s Safari browser and for enabling search access points such as the Siri voice assistant.
“Google wouldn’t have to pay $20 billion anymore, so they would increase their market capitalization,” said Jean-Paul Schmetz, head of advertising at search engine rival Brave. “And that would be super perverse, because suddenly the perpetrator is compensated.”
The money from Google’s payments falls under Apple’s services segment, which generated about $78.1 billion in 2022. Eliminating Google’s payments would essentially cut 25% of the services segment’s revenue from that year.
Schmetz hypothesized that if Google’s standard contracts were banned and money stopped flowing between browsers and search engines, Apple would lose $500 billion in market capitalization and Google would gain $500 billion.
“There would be $23 billion times the multiple of Apple essentially ceasing to exist,” Schmetz said.
Another roughly $6 billion flows from Google to a group of browsers, mobile device makers and wireless service providers, including Mozilla, Samsung, Sony, AT&T, Verizon and T-Mobile.
Some experts question whether the DOJ’s plans will effectively open the search and mobile markets.
Instead of dismantling Google, the Justice Department should force Google and Big Tech cohorts to be more open and interoperable, says Christian Catalini, founder of the MIT Cryptoeconomics Lab and research scholar at the MIT Sloan School.
“I think it’s a foolish endeavor,” Catalini told Yahoo Finance.
If the DOJ remedies are rejected “then it will all be for nothing,” but if they are accepted the remedies are likely worse than the underlying problem. And ironically, much more can be done to restore competition in all countries. these sectors through much simpler measures.”
Those measures, he said, could include making it easier for third parties to offer their own payment services and app stores on mobile devices.
“Imagine forcing multiple stores to have the same level of service in the Google ecosystem on mobile,” says Catalini.
Google makes money from selling ads through the Play Store and cuts 13% on app store sales. The company’s Android ecosystem also acts as a flywheel for ad sales by driving users to Google Search and other services.
“Enabling different parties to offer payments instead of just the Google payment flow in its app stores, or interpretability in messaging and in the services that platforms like Apple and Google dominate today. I think that would go a long way [further] in terms of really giving companies an opportunity to compete.”
Another proposal from the DOJ is to force Google to sell its Internet index at a “marginal cost” and make its search results, ranking signals, and search insights available to competitors for 10 years.
The proposal is risky, according to Schmetz, because if Google has to make its own search data available, it could wipe out the Brave Search API and the Bing Search API – the two other US search engines that crawl and index the Internet. APIs or application programming interfaces provide search results to other search engines.
“Google’s price can’t just be the marginal price of providing an API — which is basically zero,” he said, “because it would destroy other existing, thriving businesses.”
There is no guarantee that Mehta will agree to move forward with all or even some of the DOJ’s proposed remedies. And Google has said it will appeal the initial antitrust decision.
For now, the company will have to wait and see how Mehta will rule on the penalties, which is expected to happen after a legal remedy process that will take place in 2025.
Google is also facing a new antitrust lawsuit that could end with restrictions on its separate ad tech businesses if the Justice Department has its way.
Prosecutors who brought this case during President Biden’s administration have already asked for a judge to force Google to divest the Google Ad Manager package, including the publisher-side ad server, DFP, and the ad exchange, AdX.
Closing arguments in that case took place on Monday and a judge is expected to rule before the end of the year.
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