Wall Street analysts are increasingly warning about a possible break-up of Google as the tech giant seeks to flee two federal antitrust lawsuits that could devastate its business model.
The Justice Department is seeking to force a sale of Google's digital advertising business in an antitrust lawsuit that began in Virginia federal court last week. Separately, a federal judge is set to consider a possible breakup of the company after ruling last month that the company ran an illegal monopoly on the online search market.
A final decision in either case is likely to take years, The Wall Street Journal Some analysts have suggested they expect negative results for Google.
“It's hard to imagine Google escaping the fight unscathed,” said Bernstein analyst Mark Shmulik. Mark Mahaney of Evercore ISI said the company is “more cautious on Google shares” in a period of “great uncertainty” in the near term.
The digital advertising lawsuit, in which the Justice Department alleges that Google embezzles more than a third of every dollar spent on its ad platform, will be “a difficult case for Google to win,” according to a Sept. 9 memo from KeyBanc Capital's Justin Patterson cited by The Wall Street Journal.
Patterson estimates that if Google is forced to sell its ad tech business, it could reduce its projected profits by 1% to 2% in 2025.
The Washington Post has reached out to Google for comment.
Google's shares have fallen about 14% since the company's current fiscal quarter began on July 1. By comparison, shares of Microsoft and Amazon, the other two big tech companies facing antitrust investigations, have each fallen about 4% over the same period.
In the ad tech lawsuit, the Justice Department argues that Google must at least sell its Ad Manager marketplace.
Federal investigators have alleged that Google operates a “trinity monopoly” in digital advertising through its control over Ad Manager, which connects advertisers with online publishers, and other products used on the buying and selling side of most ad transactions.
The court heard incriminating testimony last week, including details of internal documents in which Google executives boasted in 2009 that the company's goal was to “outsmart” digital advertising rivals.
In the online search case, Justice Amit Mehta said earlier this month that he plans to decide on penalties for Google by August 2025.
Justice Department lawyers are expected to pressure Mehta to order Google to sell assets that have helped power its search dominance, including its Android operating system and Chrome web browser.
Other options include blocking Google from paying billions of dollars to partners such as Apple and AT&T to make its search engine the default on most smartphones.
Mehta ruled that the payments were anti-competitive and stifled competition against Google's search engine.
