The US Department of Justice is bracing for a potential antitrust lawsuit against Google’s advertising business, and a new report from The Wall Street Journal describes a “concession” Google is offering in response to the investigation. Google could spin off some of its advertising business and transfer it to Google’s parent company, Alphabet.
The meat of the WSJ report says, “As part of a bid, Google has offered to spin off part of its business that auctions and places ads on websites and apps into a separate company under the umbrella of Alphabet, some people said. This entity could potentially be valued at tens of billions of dollars, depending on the assets it contained.
The goal of “splitting” the ads division isn’t necessarily to separate the entire ads division from Google, but to weaken Google’s end-to-end ownership of the advertising business. Currently, the company acts as a broker and auctioneer for advertisements, which is a problem for the Department of Justice. Google creates tools that cover both the “buy” and “sell” sides of the web advertising world, which naturally drives advertisers using Google’s buying tools to publishers selling ad space. with Google’s auction system. Most online systems work the same way. Amazon has an interface where sellers of Amazon products sell to buyers of Amazon products, Uber has a system for drivers and passengers, but the rules are different when you’re a monopoly, as opposed to just “very big”.
The solution proposed here would see the “sell” side of Google Ads move to Alphabet and the “buy” side stay with Google. The idea, presumably, is that this move would open the door slightly for Google to talk to non-Google ad systems, but it’s unclear if Google/Alphabet would be given a mandate to open up.
Is there a difference between “Google” and “Alphabet”?
In response to the report, a Google spokesperson told the Wall Street Journal: “We have engaged constructively with regulators to address their concerns. As we have said before, we have no intention of selling or exiting this business. The spokesperson added, “Strong competition in ad technology has made online ads more relevant, lowered costs, and expanded options for publishers and advertisers. »
Absent some sort of mandate to open up the ads business, it’s unclear what real changes would be created by moving some of Google’s advertising business from Google to Google’s parent company. Perhaps casual observers would assume that an Alphabet spin-off sounds like some sort of change, but most experienced Google observers, including your author, would be hard-pressed to point to any real difference between “Google” and “Alphabet”. In this situation, the head of ads would stop reporting to Google CEO Sundar Pichai and start reporting to Alphabet CEO. Sundar Pichai. Google and Alphabet also have the same CFO and ticker symbol, and no Google or Alphabet company would be a standalone business without Google’s pile of ad revenue to throw away. Alphabet’s corporate executives get the coveted title of “CEO,” but they still have to meet Alphabet’s requirements. financial requirements and the CEO of Alphabet/Google.
Presenting an Alphabet spin-off as some sort of split would certainly not fit the way Alphabet has operated in the past. Independent Alphabet companies often work together as a single unit. This is often seen with Deepmind technology in “Google” branded products, with Google Fiber’s continued use of the “Google” brand, and with Alphabet’s “CapitalG” venture capital firm releasing everything right away and said, “As part of Alphabet, we have privileged access to Google’s knowledge and expertise. Google would have a lot of work to do to explain what the separation of the alphabet means beyond trivialities in a flowchart.