Technology

This Is What Google Looks Like Broken Into Pieces

Douglas A. McIntyre

Published: June 3, 2019 8:07 am

Last Updated: January 30, 2020 8:07 pm

Press reports have started to surface that the U.S. Department of Justice may investigate Google under antitrust laws. Most of the conversation has centered around whether Google has a monopoly in the search engine business and the advertising it produces for parent Alphabet Inc. (NASDAQ: GOOGL) in the United States. Alphabet includes several other operations, and Google itself operates both in the United States and overseas. Several of Alphabet’s large divisions could operate independently. As the government reviews how it might blunt Google’s influence, these divisions offer a glimpse of what Alphabet would look like broken into standalone companies.

There are precedents for breaking up American companies to solve antitrust problems. Among the most notable is Standard Oil split-up in 1911, which the U.S. Supreme Court supported. Another well-known case is the AT&T breakup in 1982. Microsoft nearly faced the same fate in 2001, but it settled with the government.

Google’s search business has come to dominate the entire online ad industry in the United States. More recently, Facebook and Amazon have become rivals, but Google’s market share is still in first place.

One way to weaken Google is to deprive it of its huge overseas business, which has operations throughout Europe, much of Latin America, Africa, Australia and Southeast Asia. A spin-out would deprive the Alphabet of some of its cash flow, which would make the technology that Google continues to advance more expensive for a smaller entity. This would break the search engine part of Alphabet into two companies, the first part of any dismemberment.

Google’s third large business is YouTube, the biggest video site in the world by far. After Google’s search operations, YouTube is Alphabet’s largest division based on revenue. The company would lose yet another platform against which huge amounts of advertising are sold, and that would further dilute Google’s spot in the U.S. advertising ecosystem.

Google’s fourth large and powerful business is Android, which is the operating system for over 80% of smartphones in the United States.

One advantage Android gives Alphabet is that the operating system is loaded with Google search and Google’s Chrome browser. One of Chrome’s competitors, Firefox, is a part of an independent open source operation called Mozilla.

What would be left with Alphabet along with the U.S. part of Google search? Most of the smaller divisions. These would include, among other things, Waymo, the self-driving car division, and Maps, Gmail and other businesses much less powerful and less visible to the public.

Google clearly faces a threat of the sort that dismantled AT&T and nearly Microsoft. These battles often go through the federal courts and take years to resolve. However, a roadmap for the endgame probably already is in place and involves what would be four “new companies.”