Thursday, November 21, 2024

How Do You Break Up a Company Like Google?

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Photo-Illustration: Intelligencer

“Google is a monopolist, and it has acted as one to maintain its monopoly,” read the federal district-court ruling earlier this month. Specifically, it monopolizes “general search services and general search text ads.” This advantage has allowed it to earn “monopoly profits” — Google’s net income was about $74 billion in 2023 — primarily from search. This sort of thing is pretty rare in the industry. In the 1970s, it was AT&T, and it was about phones. In the 1990s, it was Microsoft, and it was about PCs. In 2024, from a pool of likely candidates — cell phones? E-commerce? — it’s search.

Google is planning to appeal the ruling, of course. In the meantime, an emboldened DOJ is considering what comes next. There are significant but narrow possibilities, like barring Google from paying companies like Apple to be made the default search provider on iPhones and other devices, or requiring the company to share or license search data. Then there’s the big one, according to Bloomberg:

A bid to break up Alphabet Inc.’s Google is one of the options being considered by the Justice Department after a landmark court ruling found that the company monopolized the online search market, according to people with knowledge of the deliberations.

This is what the government did with AT&T and couldn’t quite pull off in the case of Microsoft. Breaking up a national telecom company was complicated but fairly intuitive — you’re basically drawing a map. The plan to break up Microsoft was to separate its operating-system business from everything else, including Office, which, again, is pretty easy to grasp. Microsoft’s main products were interconnected but plausibly separate and profitable ventures that sold related but different things.

Google is a bit weirder. It’s best known for products that it gives away for free and it makes most of its money selling ads to businesses that want to reach those free users. The enormous income it generates from ads sold against its search engine subsidized investments in (and purchases of) a huge range of other products. Some of these brands, including YouTube and Maps, share a basic free-to-use ad-supported business model with Search. Others, like Google Cloud, are different sorts of businesses entirely and exist to sell services to enterprise clients. Chrome, the most popular web browser in the world, makes money for Google by funneling people into Search. Android, the most popular smartphone operating system in the world, makes money for Google through its Play app store, where it takes a cut of app and digital-service sales, but also, again, by sending users to products like Search. Much of the Google empire, with its dozens of distinct products and brands, is supported and held together by a massive digital-advertising operation. How do you pull something like that apart?

The leading possibilities, according to Bloomberg, are separating Android (Google was separately and successfully sued in California court over its app-store policies) and spinning off Chrome. Cleaving off Chrome and prohibiting Google from paying to be the default search engine in third-party browsers would be interesting. Chrome’s biggest independent competitor, Firefox, is developed by the Mozilla Foundation, which draws most of its income from such an arrangement with Google. Edge, Microsoft’s web browser, is now based on Chromium, the same open-source browser project on which Chrome is built, and which is funded and maintained primarily by Google. Apple’s browser, Safari, might stand to benefit from a chaotic collapse in the browser ecosystem, except that part of its value to its parent company — and, again, core to the antitrust case — is that Google pays it $20 billion a year to be the default search engine. Similarly, Android is free software based on an open-source project primarily maintained and funded by Google and used by almost every major smartphone manufacturer in the world except Apple. Detach it from Google and unlink it from Google Search, and the project would need an entirely new business model. The last option — the chaotic dark horse— is ordering the separation of Google’s ad business from everything else.

Some critics take Google’s tangled business as evidence that a breakup would be overkill, needlessly destructive, or counterproductive. They might have a point. But it cuts the other way, too — the fact that separating and spinning off Chrome could plausibly lead to the collapse of the entire browser marketplace as we know it is a pretty strong argument for Google’s superlative power and influence. Likewise, the practical case against breaking out Chrome doubles as an argument that the continued existence of the most-used smartphone operating system on the planet is contingent on Google’s advertising business, and that the company’s massive secondary platforms are effectively just features of Search. Google’s users think of its many products, some of which are dominant in their markets, as distinct and important. Isn’t it strange that most of them couldn’t stand alone as businesses or that they haven’t at least had to try?

Whether Google gets broken up or more gently regulated is also a matter of electoral politics, albeit a strange one. On one hand, the Justice Department, as led by Biden appointee Merrick Garland, has been pursuing this case aggressively for years and prevailed; on the other, the Department’s initial lawsuit against Google was filed in October 2020 with the public support of Trump appointee William Barr, who publicly embraced his president’s personal vendettas against Google, which didn’t have much to do with search monopoly at all. The plan to break up Microsoft didn’t survive the transition from the Clinton to the Bush administration, but tech antitrust has since been repoliticized in ideologically complicated ways. Some big Democratic donors with connections to the tech industry are pressing the Harris campaign to take a softer stance on antitrust issues. An appeal could take years, leaving Google’s fate — even if remedies are decided by the end of 2024 — up to the Supreme Court of, say, 2027.

In the meantime, Google has a chance to challenge or prove the premise of the court’s ruling in less desirable ways: by either buying its way to further dominance in the era of AI or by spending and flailing so wildly in the face of new threats to its search business that we find out it wasn’t as dominant as it seemed.

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