Analysts say countermeasures proposed by the U.S. Department of Justice to break Google's search dominance could weaken its main profit engine and hamper the development of artificial intelligence, even though the final results could take years.
The Justice Department said Tuesday it may ask a judge to force Google to divest parts of its businesses such as its Chrome browser and Android operating system, which the Alphabet-owned company used to maintain an illegal monopoly on Internet search.
This is just one of many potential amendments prosecutors are considering.
Banning Google from collecting sensitive user data, requiring it to share search results and indexes with competitors, allowing websites to opt out of having their content used to train AI products, and having Google report to a “court-appointed technical committee” also come into play in the table.
Alphabet investors, who have seen several antitrust actions this year, including Monday's ruling ordering Google to open an app store, moved shares 1.5% lower to $161.86 at Wednesday's close following the Justice Department news.
These countermeasures strike at the heart of the internet empire that has made Google synonymous with search and could reduce its revenues while giving its rivals more room to expand.
“The Department of Justice has reverse-engineered Google's recipe for success and is going to dismantle it,” said Gil Luria, managing director and senior software analyst at DA Davidson.
“The proposed privacy and data collection remedies would give Google a choice: either make all the data it collects available or stop collecting it altogether. Since it is likely to choose the former option, it could strengthen competitors and possibly create new competition,” Luria said.
Analysts have warned that AI countermeasures could disrupt Google's business when it is already under pressure from startups such as ChatGPT maker OpenAI and AI search engine operator Perplexity.
According to research company eMarketer, Google's share of the US search advertising market will fall below 50% by 2025 for the first time in over a decade.
“The last thing Google needs right now in the broader AI battle is to fight with one hand tied behind its back by regulators,” said Bernstein analyst Mark Shmulik.
Other companies that could benefit from these countermeasures include search engines like DuckDuckGo and Microsoft Bing, as well as AI rivals like Meta Platforms and Amazon.
“The framework understands that no single measure can dismantle Google's illegal monopoly. A range of behavioral and structural measures will be needed to free the market,” said Kamyl Bazbaz, senior vice president of public affairs at DuckDuckGo.
“Drug SPAGHETTI”
But some industry observers and analysts said it was unclear whether the remedies, which are the largest U.S. antitrust effort since the 1999 case against Microsoft, will be implemented.
“The Department of Justice is throwing drug spaghetti at the wall,” said Adam Kovacevich, CEO and founder of Chamber of Progress, a trade group representing technology companies.
“It may make headlines, but legally it's not a good start. “The Department of Justice rejects measures that go far beyond a judge's ruling, and history teaches us that broad measures will not survive an appeals process,” Kovacevich said.
But Russ Mold, chief investment officer at AJ Bell, said the risk had long been known.
“Investors don't seem to believe there will be a forced split,” he said.
