Tech News Summary:
- Both the US Department of Justice (DOJ) and the European Commission are seeking to break up Google’s ad-tech business due to concerns about its dominance in the digital advertising industry.
- Despite the legal problems, GOOGL shares closed higher on June 12, and analysts maintain a bullish outlook due to the potential growth opportunities in artificial intelligence (AI).
- GOOGL shares have a Strong Buy consensus rating from top Wall Street analysts, with a 12-month average price target of $131.58, implying 6.42% upside potential from current levels.
Alphabet Inc. (GOOGL) is facing significant pressure on both sides of the Atlantic to break up its ad-tech business, Google. The contentious call to split the tech giant’s advertising technology enterprise is gaining momentum among investors, regulators, and industry insiders.
In recent years, concerns about Google’s monopoly on the digital advertising market have grown louder. The company’s dominance has led to allegations of anti-competitive behavior and unfair practices such as preferential treatment of its own advertising platforms and data usage for targeted ads.
In response to these concerns, advocates of the split argue that a separate ad-tech entity could help level the playing field and encourage competition in the industry. With a separate entity, Google could no longer prioritize its own services, which would benefit smaller competitors.
Proposals for such a split have been presented to Alphabet’s board by various activist investors, including Dan Loeb of Third Point LLC. Similarly, in the UK, the Digital Markets Unit has launched a consultation on the possibility of breaking up companies like Google that hold a dominant position in the digital advertising industry.
While the idea of dividing Google has gained support, it has also faced significant opposition. Some argue that divesting the ad-tech business could harm Google’s overall performance and that such a move would be impractical from a technical standpoint.
Alphabet CEO Sundar Pichai has previously defended Google’s market position, stating that the company operates in a highly competitive environment and that users have a wide range of choices when it comes to online advertising.
The debate over a separate ad-tech entity for Google is likely to continue. Still, with increasing regulatory scrutiny and mounting pressure from investors, the tech giant may ultimately need to consider some changes to its current structure.