Tech On Me: The potential winners and losers of a Google break-up

In early August, a US judge ruled in favour of the Department of Justice (DoJ) that Google acted illegally to crush its competitors and uphold a monopoly on online search and related advertising.

Noting that Google has an "89.2% share of the market for general search services," the judge concluded that "Google is a monopolist, and it has acted as one to maintain its monopoly”.

As an antitrust remedy, the DoJ said it was considering breaking up Google's businesses in order to put an end to its online search monopoly. 

In a filing, the DoJ said it was “considering behavioural and structural remedies that would prevent Google from using products such as Chrome, Play, and Android to advantage Google search”. The DoJ also proposed restricting or prohibiting default agreements and "other revenue-sharing arrangements related to search and search-related products”. These include Google's search position arrangements with Apple's iPhone and Samsung devices, which cost Google billions of dollars in annual payouts. 

While there is a second antitrust trial against Google that accuses the tech giant of illegally monopolising advertising technology markets, it's the search case that is thought to have more meat in terms of how it could impact the business.

The government is asking the judge for four different types of remedies to Google’s anticompetitive power in search engines. However, at present, the judge has not yet made a decision on these remedies, and it's likely that Google will appeal any ruling, potentially prolonging the process for several years.

But if enforced, the ruling may force Google to revise its agreements with device manufacturers and carriers, potentially allowing other search engines to gain market share. A Google break-up would undoubtedly transform the tech landscape, and as with any major market shift, there would be winners and losers.

WINNERS

Microsoft: Should Google's default search agreements be limited or banned, Microsoft’s Bing would likely see significant gains, as it already has 80% of the search market share on Microsoft Edge. Regardless of the final outcome, the ruling will likely be beneficial to Microsoft anyway, allowing industry players to reconsider their default search engine choices. This situation may also apply additional pressure on Alphabet (Google's parent company) to allocate more resources to defend or revamp its core search business, potentially at the expense of its enterprise-focused products that compete with Microsoft.

AI search engines: The rise of AI-driven search engines could challenge Google's dominance. The recent antitrust ruling may act as an accelerator for these newcomers, such as Perplexity and SearchGPT, to gain traction among users. While Google has already entered the AI search arena with its AI Overviews, emerging AI-native engines must either enhance their offerings or carve out niche markets to succeed, as seen with the SearchGPT prototype. These new entrants have the potential to disrupt Google's business model, which heavily relies on clicks and advertising revenue. User dissatisfaction regarding the overwhelming number of ads on Google further amplifies this opportunity. Currently, both ChatGPT and Perplexity are exploring subscription-based business models, though it remains uncertain how these will evolve moving forward.

Startups: The common belief is that the recent verdict will create a more equitable environment for search-engine startups. With several promising new players emerging in the search market, such as Perplexity, there is potential for increased activity as concerns about Google's dominance rise. The market's attractiveness is drawing interest from both entrepreneurs and venture capitalists. Additionally, there's a growing expectation that Google will increase its acquisition efforts to integrate new technologies, which could justify significant investments of billions into the sector.

LOSERS

Alphabet: The judge's ruling is certainly not favourable for Google's parent company, Alphabet. While the market may have already accounted for this outcome, it represents yet another vulnerability in their core business model. Historical shifts in technology can rapidly undermine a business segment; examples include Apple in the 1990s, Microsoft in the 2000s, and Intel today. However, this does not spell disaster—Apple and Microsoft serve as examples of resilience. Given Google's deep understanding of disruption theory, it would be unwise to dismiss their potential for adaptation.

Apple: In 2022, Google reportedly paid Apple approximately US$20 billion to maintain its status as the default search engine on iOS devices. So if Google is forced to revise its agreements with carriers and device manufacturers, Apple could stand to lose billions. According to the Associated Press, Apple opted against developing its own search engine following a 2018 analysis that projected a loss of over $12 billion in revenue within the first five years if it cut ties with Google. In addition, any decline in Google's dominance in the search market could force Alphabet to rethink its mobile strategy, which might subsequently exert more pressure on Apple's primary revenue streams.

SEO industry: Google's recent decision to prioritise AI-generated responses in search results has already caused significant disruption for numerous marketing SaaS companies and agencies. The mere suggestion that Google's dominance might be challenged could further destabilise those who attempt to manipulate its algorithms for their clients.

Looking ahead:

At least for now, Google is well-positioned to maintain its dominance in search advertising for the foreseeable future. While some smaller shifts may occur due to antitrust rulings or advancements in AI search technologies, a significant change in the competitive landscape or a notable increase in market share for rivals is unlikely in the short term.

Despite the emergence of AI-driven search platforms like SearchGPT and Perplexity, Google’s robust infrastructure, strong brand loyalty, and popular product offerings create substantial barriers for new competitors. 

As AI search becomes more prevalent, Google is likely to capitalise on this trend by monetising AI-generated results through paid advertisements and shopping listings, further strengthening its leadership in the search advertising sector.

Therefore, marketers should continue to optimise their strategies for Google, as it remains the primary platform for search advertising. Major changes are expected only after a final resolution of Google's ongoing legal challenges, which could take years to unfold.