As Google faces the Department of Justice (DOJ) over antitrust concerns, the outcome of the battle could reshape the technology landscape and impact the company’s future.
Analysts at JMP Securities, Mizuho and Barclays have considered the possible scenarios and their implications:
Analysts at JMP Securities expect the DOJ to impose remedies, such as requiring OEMs and browsers to present a default search engine selection screen.
They explain that this would likely benefit Google, as the superior search quality could help the company maintain a significant market share despite increased competition.
“We assume that OEMs and browsers will have to present a list of default choices,” JMP Securities analysts noted, noting that this approach would be the most likely outcome.
While this could hurt Google, the company maintains its bullish stance, citing the company’s strong position in AI and YouTube. However, analysts warn that if regulators ban Google from bidding on standard search placements, it could dramatically change market dynamics, benefiting competitors like Microsoft but potentially hurting Apple and other partners that rely on Google’s sharing agreements income.
Analysts at Mizuho, on the other hand, see a Google breakup as unlikely due to the high legal threshold set by historical precedents such as the 1982 breakup of AT&T.
“The hurdle to a breakup is quite high,” Mizuho analysts said, emphasizing that Google’s dominance in search does not equate to the vertical control we see in the case of AT&T.
Instead, analysts expect a solution similar to previous cases, such as a Search Engine Choice Screen, which could maintain Google’s market position.
Analysts at Barclays outline a spectrum of possible consequences, from minimal to significant. They warn that remedies could reduce Alphabet’s (NASDAQ:) gross profit by as much as 41%, depending on the extent of structural or behavioral changes.
Analysts suggest the most damaging consequences could include divestitures of key assets like Chrome or Android, or severe restrictions on search and ad revenue models.
While the exact resolution remains uncertain, the investment banks emphasize that the DOJ’s actions could lead to significant adjustments, with potential long-term impacts on profitability and market strategy.