Enlarge / Let’s see, you’ve landed on my “Google Ads” page, and with three houses… that’s $1,400.
Ron Amadeo / Hasbro
The US Department of Justice is preparing for a possible antitrust lawsuit against Google’s advertising business, and a new Wall Street Journal report outlines an “admission” Google is proposing in response to the investigation. Google could split up some of its advertising business and move it to Google’s parent company, Alphabet.
The gist of the WSJ report reads: “As part of a bid, Google has proposed splitting off parts of its business, which auctions and places ads on websites and apps, into a separate company under the Alphabet umbrella, some people said. This unit could potentially be valued at tens of billions of dollars depending on the assets within it.”
The goal of “breaking up” 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 ads business. Currently, the company acts as a broker and auctioneer for ads — which the DOJ has a problem with. Google makes tools that cover both the “buy” and “sell” sides of the web advertising world, which naturally pushes advertisers using Google’s buying tools to publishers who sell ad space using Google’s auction system. Most online systems work similarly. Amazon has an interface where Amazon product sellers sell to Amazon product buyers, Uber has a driver and rider system, but the rules are different when you have a monopoly as opposed to just “very big”.
The solution proposed here is for the “sell” side to move from Google Ads to Alphabet, while the “buy” side stays with Google. The idea is presumably that this move would open the door for Google to talk to ad systems other than Google’s, but it’s not clear if Google/Alphabet would be given a mandate to open up.
advertisement
Is there a difference between “Google” and “Alphabet”?
In response to the report, a Google spokesperson told The Wall Street Journal: “We have worked constructively with regulators to address their concerns. As we have said, we have no plans to sell or exit this business.” The spokesperson added, “Rigid competition in ad technology has made online ads more relevant, lowered fees and expanded options for publishers and advertisers. “
In the absence of a mandate to open up the ads business, it is not clear what actual changes would result from moving part of Google’s ads business from Google to Google’s parent company. Perhaps casual observers would assume that an Alphabet spinoff would sound like some kind of change, but most seasoned Google observers, including your author, would have trouble pointing out any real-world difference between “Google” and “Alphabet.” In this situation, the ad manager would stop reporting to Google CEO Sundar Pichai and instead report to Alphabet CEO Sundar Pichai. Google and Alphabet also share the same CFO and stock symbol, and no Google or Alphabet company would be a self-sustaining business without Google’s pile of ad revenue to throw around. Alphabet company executives earn the coveted title of CEO, but still face the financial demands of Alphabet and the Alphabet/Google CEO.
Setting up an Alphabet spinoff as some sort of split certainly wouldn’t be consistent with how Alphabet has operated in the past. Independent Alphabet companies often work together as a single entity. We see it often with deepmind technology in Google-branded products, Google Fiber’s continued use of the Google brand, and Alphabet’s venture capital firm CapitalG saying bluntly, “As part of Alphabet, we have have special access to Google’s insights and expertise.” Google would have a lot of work to do to explain what the alphabet separation means beyond the trivia in an org chart.