Analyst Firm Describes Google's Future Post-September Trial

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Analyst Firm Describes Google's Future Post-September Trial

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An analyst group at Wedbush Securities led by Scott Devitt published a research note Thursday that describes what they believe to be the impact on Google after its second antitrust trial that starts next week.

The analysts believe the “overall risk to the business is limited based on the company's recent financial disclosures related" to its advertising-technology products.

The U.S. Department of Justice in 2023 filed a lawsuit against Google's parent company Alphabet. The DOJ sued Google, alleging that it engaged in “anticompetitive, exclusionary, and unlawful conduct to eliminate or severely diminish any threat to its dominance over digital advertising technologies.”

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The collection of advertising-technology products and services such as AdMob, AdSense, Google Ad Manager, Google Display Network Ads, DV360, and CM360 generated $20 billion of gross revenue and a bit more than $1 billion of operating profit in 2020, Wedbush analysts wrote.

The amount represents 11.0% of consolidated gross revenue and about 2.6% of consolidated operating profit for Alphabet.

“Based on our estimates and the growth rate of the reported Network segment, we think those products account for less than 8% of gross revenue today and under 2% of consolidated operating profit,” analysts wrote.

Not all believe any type of breakup will have a minimal impact on the advertising industry, but any change will take time to roll out, and agencies and advertisers will require time to adjust.

Google argues that advertisers and publishers are not locked into a string of technology that it either created or acquired to serve ads, making it difficult for other companies to participate.

Technology is interchangeable and interoperable -- enabling the highest bid for any placement to win, as explained in an earlier article published in August. For many years, Google also reinvested its profit back into the business, as so many others have done and continue to do.

Identifying ad inventory on a publisher site and serving an ad means the supply chain must mix and match a variety of ads with publisher sites billions of times daily each time a transaction is triggered and performed.

While the upcoming trial focuses on Google’s advertising-technology stack -- specifically Ad Manager, the platform that helps publishers and advertisers manage, buy and sell advertising on publisher sites -- the previous trial that ended last month focused on Google's distribution agreements. 

Those agreements set Google's search engine as the default placement across major browser developers, mobile device manufacturers, and wireless carriers.

Wedbush's report explains how those involved were required to submit a proposed schedule for proceedings regarding remedies by September 4, and then appear for a status conference on September 6.

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September 5, 2024 at 11:28AM