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Every day this week, we and other close watchers of Google have been holding our breath, waiting for Judge Amit Mehta of the federal court in Washington to issue a ruling on how Google’s illegal search monopoly should be remedied. Options include a forced divestiture of its Chrome browser (where many Google searches originate), ending Google’s right to be the exclusive search engine on Apple’s Safari browser, or forcing Google to share its search data with rivals. (For more, see here).
Judge Mehta’s ruling will be a big deal—it was expected by the end of August, so maybe we’ll see it on Friday—as whatever he decides will add to existing pressure on Google’s giant search business coming from artificial intelligence chatbots like ChatGPT. But that case is, confusingly, not the only antitrust case the company is grappling with. The other one concerns its ad tech business—the far less sexy unit that brokers the sale of ads on independent websites.
In April, a judge in Virginia found that Google had a monopoly on handling the sale of ad space on publishers’ sites. The judge will oversee a hearing next month to decide how to remedy that monopoly—specifically, whether Google should divest the part of the unit that helps publishers sell ad space, Google Ad Manager. That unit is separate from the ad tech operations that help advertisers buy ads (yes, this gets really complicated, really fast).
Google isn’t sitting still waiting for the ruling. As we revealed today in this story, the Google staffers dealing with publishers have been pitching ad agencies directly, putting them in conflict with colleagues who usually deal with advertisers. In doing so, the publisher-side folks at Google seem to be preparing for the possibility that their unit will become independent and unable to rely on those colleagues to send them advertiser business. (Watch the reporter on the story, Cathy Perloff, discuss her reporting on The Information’s TITV today.)
What Cathy’s story also pointed out is that Google’s ad tech unit has fallen behind competitors in the technology. For instance, Google lags some ad-tech rivals when it comes to placing ads on streaming TV. You wouldn’t realize that from the Justice Department’s arguments in the ad tech antitrust case, which are rooted in an era a few years ago, before streaming became a big ad business. But it’s true, as we noted in this story as well.
One reason for Google’s lagging position in these markets could be that ad tech, in the overall context of Google’s business, is small. Google’s network segment, which is the ad tech unit, accounted for 8.7% of Google parent Alphabet’s revenue last year, although the real contribution is likely even smaller, as most of that revenue goes back to the publishers.
Search, in contrast, accounts for 57% of Alphabet’s revenue. Google makes so much money from search that many other lines of business may not get management’s attention or investment to grow—simply because the returns won’t move the needle for the company. Another example of that is Google TV, its smart TV business, which we reported in June was having its budget cut as Google prioritized YouTube. That story noted that staffers in the unit wondered why Google hadn’t invested more in Google TV over the years.
Forcing Google to spin off its ad tech unit—or Chrome, for that matter, in the search case—might be painful for the company, just because no one wants a court to force them to give something up. But in the end, if spin-offs free up businesses to pursue their own growth more aggressively, that may end up being the best thing for all concerned.
In Other News
• Microsoft on Thursday debuted two new large language models it developed over the past year to reduce its reliance on OpenAI’s AI in powering Copilot products.
• ByteDance, the Chinese owner of TikTok, is preparing to launch a new share buyback program for employees later this year that will value the company at more than $330 billion, Reuters reported.
• The Commodity Futures Trading Commission released a letter Thursday explaining how it might allow overseas crypto exchanges to legally accept U.S.-based customers.
Today on The Information’s TITV
Check out today's episode of TITV in which we debate what Nvidia's earnings tell us about the company, and break down our big Google AdTech scoop.
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