As Google’s trial over alleged monopolistic practices in advertising technology approaches its conclusion, experts suggest that the financial repercussions for the tech giant, known primarily for its search engine, are likely to be minimal. The U.S. Department of Justice (DOJ) and a coalition of states are accusing Google of illegally monopolizing the technology used by publishers and advertisers to buy and sell digital ads. Google rested its case last Friday, with closing arguments scheduled for November 25, and a ruling expected in the following months.
This trial follows a recent U.S. court ruling in August, which found that Google had illegally cornered the online search market. Proposed remedies for that case could emerge as early as December, although Google intends to appeal the decision.
On September 15, investment firm Evercore ISI lowered its price target for Alphabet’s stock from $225 to $200, citing potential uncertainty around remedies from the search case, which could include breaking up various segments of Google’s business, such as its Android operating system. Analysts note that the implications of the advertising trial are far less severe compared to those of the search case, with Scott Devitt from Wedbush stating, “The search case is the one that has the meat in terms of how much it could affect the business. This case is more headline.”
Advertising constitutes over 75% of Google’s $307.4 billion revenue in 2023, yet the DOJ’s allegations specifically target Google Network, the division that handles the auction system for digital ad space. This segment generated $31.4 billion in revenue last year, down from $32.8 billion the previous year, with predictions of continued revenue decline.
Mark Shmulik, an analyst at Bernstein, remarked, “As an investor, you buy Google stock because you believe in the search business. The network business is there, but for the last several quarters, it’s been declining in revenue contribution. It feels like the old internet.”
In its defense, Google has argued that the DOJ’s market definition does not adequately consider competition from ads on streaming platforms and apps. The DOJ is seeking, at a minimum, the divestiture of Google Ad Manager, a critical component of the Network division.
Even if Google loses the trial, legal experts like Erik Hovenkamp from Cornell Law School anticipate that the company may not have to divest all aspects of its advertising business, suggesting a potential revenue drop of less than 10%.
If the DOJ prevails, it could significantly affect how advertisers and publishers navigate ad tech platforms. Nikolas Guggenberger, a law professor at the University of Houston, highlighted the interconnected nature of Google’s ad business and how a ruling against Google could facilitate competition by making it easier for users to switch platforms.
Critics warn that the case might have broader implications for monopolistic practices in the tech industry. Sacha Haworth, executive director of The Tech Oversight Project, emphasized that a ruling in favor of the DOJ could set a precedent for holding tech giants accountable for illegal behavior.
While it’s uncertain how the outcome will unfold, Guggenberger noted that the potential impact on long-term profits could vary widely, saying, “I can see a world in which long-term profits barely take a hit, and I can see a world in which it upends the whole advertisement stack.”
