Google’s search and ads divisions face decisive year as antitrust challenges grow in US and UK

The news: The UK Competition and Markets Authority (CMA) launched its first investigation under enhanced digital market regulations, probing Google’s dominance in search and online advertising. The case could take as long as nine months, per Bloomberg.

The investigation will assess “Google’s position in search and search advertising services and how this impacts consumers and businesses including advertisers, news publishers, and rival search engines.”

Why it’s worth watching: Google’s UK antitrust investigation could run parallel with the US Department of Justice’s (DOJ) ongoing bid to break up the company by having it divest the Chrome browser.

Both cases dispute Google’s dominance of the search engine, browser, and digital advertising markets.

• The CMA’s approach is more proactive and preemptive by prescribing solutions like transparent data sharing, increased publisher control, and regulatory oversight.
• The DOJ’s approach is more punitive and reactive to Google’s bundling deals, default search agreements, and monopolistic practices with regards to digital advertising.

The CMA skews toward proposing remedies without court involvement while the DOJ is relying on court rulings to enforce changes to Google’s business practices.

Google has room to negotiate: The search giant accounts for more than 90% of all general search queries in the UK, and more than 200,000 advertisers in the country use the firm’s search advertising tools, according to the CMA.

• Its position as a major driver of ad profits gives Google leverage in negotiating with the CMA to avoid bans or fines.
• “We will continue to engage constructively with the CMA to ensure that new rules benefit all types of websites and still allow people in the UK to benefit from helpful and cutting-edge services,” a Google spokesperson told CNBC.

Our take: Responding to two concurrent and potentially existential regulatory threats could paralyze Google’s innovation and alter its search and advertising playbook. 

Google could opt to diversify its business model by focusing on non-search revenue streams like cloud computing and AI in the UK, effectively reducing dependence on its search and advertising dominance.

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