The U.S. Department of Justice’s sights are set on Google. After the courts ruled that Google’s online search engine is an illegal monopoly, a breakup may follow suit. It would be a radical turn of events, unprecedented in the modern era. What impact would a Google breakup have?
AT&T was the last company forced to split up by U.S. authorities in 1982. It took eight years of legal combat to get to that point. Microsoft narrowly escaped a similar fate in 2001, having already been ordered by the courts in 2000 to separate its Windows division from the rest of its offerings. After an appeal, Microsoft was allowed to remain whole after all. There has been much speculation about how the two “Baby Bills,” the nickname for the duo of Microsoft successors that never were, had operated. Now it appears be Google’s turn. With the recent ruling on the illegal monopoly of Google’s online search engine, Google may yet follow in the footsteps of AT&T and, if one was to read a bit further back in the history books, to Standard Oil all the way back in 1911.
Google’s dominance is a stumbling block on multiple fronts
Bloomberg sources reveal just how advanced the U.S. antitrust plans are. There are multiple options on the table, including variants kinder to Google in which the company would merely need to become more interoperable with its competitors. Still, CEO Sundar Pichai and his colleagues must be fearing a far worse fate: a forced sale of AdWords, the platform that delivers text ads to search queries, and a ban on contracts to power Google’s search engine and other services such as the Play Store and Gmail. These are all possible avenues for the DOJ to travel down.
In short, this is a multi-faceted story in which Google’s dominance is slightly different depending on the specific area we’re talking about. Consider the fact that the company monopolizes search, has a big lead in online advertising, but is actually a challenger rather than an incumbent when it comes to the public cloud. Many projects have also ended up in the well-known Google Graveyard, including such flops as the Stadia game streaming service, Google Podcasts, the ill-fated Google+ social media platform and payment offering Tez. Google’s resume has proven one thing above all else: if it doesn’t make an impact in a specific field of play, it will pull the rug out from under it without a second thought. What remains is a collection of success stories in which Google has claimed an influential or dominant position.
Clearly, an army of lawyers will protect the lion’s share of Google’s business by any legal means possible if a breakup is genuinely the DOJ’s goal. Oftentimes, court decisions on Big Tech dominance end in compromise, as was true of Microsoft’s bundling of Teams within Office. This results into a dilution of the existing market power, but with the overwhelming majority of said power remaining untouched nonetheless. If it does ever get as far as a Google breakup, the intended targets are primarily the company’s search engine and its text ads offering. However, Bloomberg also reports the entire Android ecosystem as a potential forced divestment for Google. Any of the options mentioned would shatter the current market paradigm.
Unraveling the Web
Importantly, while Google has numerous services, it coordinates them as one organization. Android would not be what it is if Google services had not filled every common use-case for a smartphone: a maps service (Maps), a mail offering (Gmail), a web browser (Chrome), you name it. On Android, these options are always pre-installed and simply build on the aforementioned apps existing success. In fact, a company like Samsung, which often makes its own stand-ins for Google services, still always includes sizable folder of Google services. These are not easily removed. Google also has a firm foothold on the only Android rival of note: Apple’s iOS, which, thanks to a mutually beneficial deal on iPhones, also makes Google Search the default search engine on its hardware.
Like Apple, by the way, Google is fighting an entirely different battle, especially with the European Commission, over its dominance on Android via the Play Store. Sideloading, or installing apps outside this app store, has always been possible, but Google has been forced to allow more and more competition to ensure its Play Store power is checked. Once again, Samsung serves as a textbook example: its own Samsung Store also offers and updates apps, but the South Korean company still struck an $8 billion deal with Google to make the latter’s apps the default choice and the Play Store is an essential offering for any of Samsung’s mobile customers. Samsung owes this $8B amount to the fact that about half of Google’s Play Store sales are made on the Korean giant’s phones. For other Android players, such a contract is bound to be considerably less lucrative.
While companies outside of Google have come to an agreement with the tech giant, this state of affairs would go out the window as soon as Google’s split were to be announced. It all depends on where the Justice Department’s carve-up happens, if indeed it does. If all or most of the ad business is separated from the rest of Google, the nature of its business fundamentally changes. Take one look at the company’s revenue breakdown and it is clear why this is so. In 2023, Google had a revenue of $305.63 billion. Of that, $237.85 billion, or 77.8 percent of the total annual revenue, came from advertising. This is a sum of ad income within Search, YouTube, Google apps like Maps and advertising on other sites belonging to the Google Network.
Countless websites are completely dependent on these ads. While many sites have other revenue streams alongside this, even in those cases, Google’s influence is constantly felt. Thanks to the prominence of Google News feeds and its search dominance, all media conglomerates have to play the SEO game to succeed. No one can ignore Google in that regard, not to mention AI.
AI blockade
The DOJ has another potential solution in store: curbing Google’s AI march. According to Microsoft, Google is the only one able to fight the AI battle on its own, while Redmond was forced to turn to OpenAI to shape its own Copilot offering. A similar reliance can be seen at Apple for its upcoming Apple Intelligence; it had also reportedly shopped at Google for its Gemini AI suite but ended up partnering with OpenAI. On Android, at least, Google is planning to roll out Gemini extensively, as we described in detail this week.
Continue reading: Google Gemini for Android: redundant or a matter of getting used to?
Google was an early adopter when it comes to AI, is brimming with expertise (thanks in part to its earlier 2014 acquisition of Deepmind) and already offers a large suite of GenAI solutions such as the Vertex AI platform on GCP, the Gemini chatbot and tools on smartphones like Circle to Search. However good or bad, when it comes to AI, Google already has a lot to offer and a lot of power. For example, it effectively forces websites to participate in AI Overviews, which creates summaries and aggregations for search results, if they want to be findable within the search engine.
A less radical move by the Department of Justice would be to put a stop to that kind of practice. That would hint at a broader approach that may be the most likely: curtailing the benefits Google derives from its own dominance rather than trying to get rid of said dominance altogether by legal means. Restricting AI Overviews, forcing interoperability of ads for other search engines and preventing contracts to promote Google services are all similar steps that are somewhat easier to stomach for the tech giant. They’d limit Google’s power without shaking up the entire digital ecosystem in the process.
The other possibility, however, really is the radical breakup suggested earlier. Should the U.S. Justice Department venture down that road, it will take a long, long time before we’ve reached the end of it. A trial with Google’s breakup as the plaintiff’s objective could well last a decade, as was almost true of United States v. AT&T. Its outcome would cause shockwaves through the online ecosystem, the global ad business and anyone’s digital lives. It could even commence an assault on Big Tech that would also target, and eventually split up, the likes of Amazon and Microsoft. After all, Standard Oil was not the only corporate victim of Theodore Roosevelt’s administration: its trustbusting campaign hit 44 companies before it was done.
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