Is Google Facing a Split? The Potential Breakup of a Tech Giant
Google currently holds a massive 80% to 90% share of the search engine market, raising alarms for regulators and competitors about the risks of such control. The United States DOJ brought up an Anti-Trust case against Google over its “monopoly” in the search engine market and has had a semi-victory as the judge ruled that Google had engaged in anti-competitive practices that violated antitrust laws. Google on its part has appealed this decision and this legal battle is certain to drag on for some time.
At the forefront of this Anti-Trust is the exclusivity contracts that Google has with phone manufacturers(Apple, Samsung and others) which makes google the Default search-engine/ browser. Since most “non-Apple” phones directly use Android (a subsidiary of Google) or some version of their own UI on top of Android, Google is still the standard web browser. While users can choose other browsers, many stick with Google because of its better search results and ease of use.
Google and Apple have had exclusivity contracts dating back to 2002. In 2022, Google and Apple agreed to a whopping 20 Billion Dollar deal that included a revenue-sharing model of about 36% of all revenue being split with Apple. With this, Google seemed to have a hit a masterstroke bey being the default web browser for millions of iPhones worldwide and also in an amendment to the search deal, it was agreed that Apple “could not expand farther than what they were doing in Sept 2016.” and would not develop their own search engine.
Creating, developing, and maintaining a high-quality search engine relies heavily on user searches. This presents a classic "chicken and egg" problem: to improve a search engine, you need a large number of users conducting searches, but users tend to gravitate towards search engines that already provide the most accurate results.
Apple has the resources and expertise to develop its own search engine. However, it raises the question of whether this is a priority for Apple, as some may view it as a non-core business. While Apple has seen significant profits from its services division, creating a search engine is complex and does not guarantee revenue. By partnering with Google, Apple avoids the challenges of developing and monetizing a search engine while still receiving substantial payments from Google for being the default search engine on its devices.
Microsoft had offered Apple a more higher Revenue-sharing model(some sources stating 100%) with Bing , but Apple estimated that even with a lower percentage of the revenue model, they would earn more with Google and were unsatisfied with the results of a comparison test they had conducted between Google and Bing.
Now comes the critical question, What happens if Google is declared a monopoly?
Google could face a similar fate as Standard Oil, which was broken up into separate companies in 1911. Speculations suggest that Google's subsidiaries like Chrome, Android, Google Ads, and YouTube could be spun off as independent entities. This would “de-conglomerate” Google and potentially make the resulting companies more agile and efficient, with less bureaucracy. However, breaking up a large corporation is a complex process, and the subsequent companies may still find ways to collaborate informally, as seen with the Standard Oil spin-offs. The companies that were once part of Standard Oil now make up three of the seven largest oil companies in the west, known as the "Supermajors" or "Seven Sisters". These companies are ExxonMobil, Chevron, and ConocoPhillips.
Another example is that of the breakup of AT&T to develop the telecommunication industry in the US, this is seen as a successful breakup but later the subsequent companies did merge together namely SBC Communications and BellSouth under the original name.
Another more likely outcome is reaching a settlement with the DOJ, similar to how Microsoft reached a settlement in its own Anti-Trust case, United States of America v. Microsoft Corporation, 253 F.3d 34 (D.C. Cir. 2001), where it sharing its application programming interfaces (APIs)?with third-party companies, Allowing PC manufacturers more freedom?to install non-Microsoft software and establishing an independent ****oversight committee?to ensure compliance.
Will Google continue to dominate the browser market if it is no longer the default option?
Google Chrome remains the leading web browser on desktops, even when it is not set as the default. However, it is uncertain whether this dominance will carry over to mobile devices if Chrome is not the default browser.
The legal troubles seem to be piling on for Google, as a second case of Anti-Trust, this time for its dominance in the advertising domain.
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Sources:
Student @Bearys Institute of Technology | Electronics and Communication
6 个月Interesting