Details of Google’s search engine antitrust
Please refer to my detailed explanation of another article I published a few days ago on the establishment of a monopoly on Alphabet’s Google search engine: “Why Apple plummeted by Google antitrust ruled a monopoly?“
The worst scenario
The DOJ’s current proposals
According to reports, the U.S. Department of Justice filed documents on October 8, 2024, proposing a series of potential options to the federal court, from behavioral restrictions to breakup, to solve what a judge said is that Google has an illegal monopoly in the search field. .
The document said the government is considering a “comprehensive range of tools” to restore competition, including “structural” changes to Google’s business to prevent it from using products such as the Chrome browser or the Android mobile operating system to give Google’s search engine an advantage.
Google responded in a blog post that the Justice Department’s preliminary proposal to reform the search engine market was “radical and far-reaching” and could have “negative unintended consequences for American innovation and American consumers.”
Forced spinoff
After Google was ruled by a U.S. court to have illegally monopolized the online search and text search advertising markets, it is reported that the U.S. Department of Justice is considering handling methods including forced spin-offs. The two major businesses most likely to be locked include the Android operating system and browsers. Chrome department.
In addition to the possibility of splitting up the Android and browser Chrome departments, the forced sale of the online advertising platform AdWords is also an option.
Note: Approximately 2.5 billion devices worldwide use Android.
The possibility of splitting is not high
In the 2000s, Microsoft was also convicted by a federal court of monopolizing the market. At that time, it was considered to spin off Microsoft, but in the end it was not implemented. Microsoft paid a settlement fee of up to 1.8 billion US dollars and was subject to a number of restrictions.
If Google is ultimately forced to break up, it would be the largest breakup of a U.S. company since AT&T in the 1980s. It can be seen that it is very difficult to actually implement and implement it.
Diminishing the competitiveness that Google has
If the federal court does not choose the extreme option of breaking up Google, requiring Google to share more customer data with other competitors may be an option. Google may also be required not to sign exclusive contracts or participate in transactions that harm competitors.
The impact on Alphabet is actually not big
Why?
Google is appealing the ruling, and the legal process is lengthy and uncertain. Generally speaking, remedial proceedings and appeals in antitrust trials will take several years.
History proves that most of them are in vail
In business history, antitrust remedies have a history of ineffectiveness. Microsoft is a good example. In the end, it had no impact at all, but instead contributed to the expansion of the Microsoft empire.
Google may make partial concessions
Follow Microsoft’s case
Google may learn from Microsoft’s approach and actively choose to make partial concessions, so that Google’s harm can be minimized. At that time, in order to fear being forced to split up, Microsoft chose to sell some departments on its own and no longer forced Internet Explorer to be bundled with the Windows operating system when shipping. Together with some legal concessions, the result was that Microsoft escaped from dismantle and avoided being forced to split up. .
The least impactful solution
The current unanimous view of the industry and Wall Street is that in this monopoly case, Google is most likely to choose to imitate Microsoft’s mistakes, which is also in line with the expectations of all parties and can minimize the impact.
Sell part of of its advertising platform
It was reported in mid-September 2024 that Google was willing to sell its advertising exchange platform AdX, an intermediary market where publishers can instantly provide their unsold advertising space to advertisers, to end the EU’s antitrust investigation. The US antitrust agency hopes to force Google to sell its advertising manager products, including AdX and Google’s Publisher Ad Server (DFP).
Possible damages to Google
Loss huge traffic from partners
The judge cited Google’s internal estimates that losing this preset position on the search engine could result in Google losing 60% or more of iPhone searches and about $30 billion in revenue.
Loss of revenue
Considering Google’s $200 billion in annual search ad revenue and its $50 billion to $75 billion in annual free cash flow; the ruling is only a small deterrent.
European case
A few years ago, European antitrust regulators forced Alphabet to offer search engine options to Android phone users. European regulators have also fined Google approximately $10 billion in various antitrust cases, but Bocconi researchers believe that “Google’s market share has not changed at all.”
Everyone overestimate the impact
The impact on revenue is actually not big
Baird analyst Sebastian believes that Google will suffer a derivative profit loss as a result, and Google will lose more than one-third of its advertising revenue from the iPhone. Even a 60% loss in iPhone ad revenue would only reduce Google’s annual revenue by 5%, according to Sebastian’s 2025 profit forecast. He thinks it’s unlikely to have any significant impact on Google.
Google has great power
“I believe that Google’s market share does reflect superior quality,” said Stanford University’s Vasquez Duque, adding that Google’s dominance gives it a data-gathering advantage that further improves search quality. These advantages accumulated over the years are difficult to surpass in reality.
Users will still choose Google
And don’t forget that users’ trust in Google and their usage habits that have been formed over the years are unlikely to change much as a result of this case. In short, users will still choose Google in the end.
Competitors are too weak
Artificial intelligence-based startups like Perplexity and OpenAI are working to break Google’s long-standing monopoly on search. But it’s still a possible development, and other vendors are tiny compared to Google. And don’t forget, Google also has its own powerful artificial intelligence technology, which will put pressure on these emerging opponents.
Cooperation with Apple
$20 billion in transactions per year
A U.S. judge may order a ban on exclusive contracts that Google has signed as a result of this monopoly, such as its deal with Apple. The $20 billion Apple receives every year is almost directly transferred into Apple’s net profit. “If this money disappears, it will cause a maximum loss of 15% to Apple’s profits.”
Apple can bring huge traffic
On the contrary, it will save Google a lot of money, because it will no longer have to pay Apple about $20 billion in default search fees every year. Of course, Google will also lose a lot of traffic, advertising, and the revenue brought to it by Apple devices.
Apple can cooperate with other vendors
Apple may seek a similar default agreement with another search engine, such as Microsoft’s Bing. Bing currently accounts for only 1% of the search market on smartphones, but the resulting price competition in search advertising will reduce Apple’s revenue.
Lessons learned from the three behemoths are not far away
Microsoft
However, the new product with better functions provided by the Chrome web browser developed by Google caused Netscape, Microsoft, and other similar browser products to be abandoned by most users.
Apple
The Apple App Store was also judged to be a monopoly, requiring Apple to change the charging methods and channels of the App Store. For details, please see the analysis in my previous article: “Did Apple Really Lose the Lawsuit with Epic Games?”
In the nearly three years since the verdict, Apple has used many subsequent legal, technical, and commercial operations measures to minimize the impact of the court’s decision on Apple. Facts have proved that the impact on Apple’s revenue is actually minimal.
Alphabet
Economists at Milan’s Bocconi University studied what happened when antitrust regulators in Europe, Russia and Turkey ordered Alphabet’s Google to stop defaulting Google Search as an online search engine on Android phones. Condition. Starting from 2020, users in these countries can set their own search engines on their mobile phones.
In Russia and Turkey, the Russian search engine Yandex has captured 5% to 10% of the market share from Google. Yandex performed well in Russian searches, but in Europe, the change in Google’s market share was negligible.
There is reason to believe that the same results will now play out in the United States.
A spnoff is possible. But Wall Street doesn’t believe it because history and rule of thumbs denied it.
Conclusion
Among the current seven major technology stocks, the one with the lowest market valuation is Alphabet, Google’s parent company. This is somewhat related to Google’s repeated failures in global antitrust cases.
However, in the long run, these antitrust cases will not have much impact on Alphabet’s long-term competitiveness.
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