Google has been considering spinning off parts of the businesses it owns that depend on ad sales into separate units that would be owned by parent company Alphabet. This plan is being developed to keep Google away from lawmakers and regulators who would love to do nothing more than point one of their big fat fingers at the firm and yell at the top of their lungs, “Monopolist.”
Google could own 29% of the global digital ad market this year
In 2022, eMarketer expects Google’s digital ad revenue to hit $174.81 billion worldwide for a 17.3% annual gain. This would give Google a 29.0% share of the worldwide digital ad market. With a 21.4% share, Facebook has the second-largest slice of the digital ad pie behind Google. The Meta unit has also been the subject of Congressional meetings focusing on antitrust matters.
Google’s advertisement related businesses showed strong growth during the first quarter of 2022
Google revealed strong first quarter ad revenue of $54.7 billion (including the figures for Search, YouTube, and the Google Network) compared to the $44.7 billion it collected during the year-ago quarter. That works out to a 22.4% increase for Google during the first three months of this year.
Google could face a lawsuit that would accuse it of being anticompetitive
The Justice Department has reportedly been working on a lawsuit that would charge Google with using anticompetitive business practices. The suit could be filed as soon as this summer. A Google spokesman pointed out that the “rigorous competition in ad technology” not only makes this sector of the ad industry more competitive, but it also offers publishers and advertisers more advertising options at a lower price.
The Wall Street Journal says that the advertising-focused parts of Google’s businesses, the units that the company might be turning over to its parent firm, could be valued at tens of billions of dollars. Currently, Alphabet has a market capitalization (stock price multiplied by the number of shares outstanding) of $1.53 trillion.
Besides being the number one player in digital ads, Google is forecast to enjoy a leading 59.4% share of the global search ad market. This could result in worldwide search ad revenue for Google of $142.30 billion this year. Google also has a nice-sized display ad business that eMarketer estimates will reach $32.51 billion in gross this year giving the company a 9.6% share of the spending on display ads worldwide.
Alphabet’s stock, found under the ticker symbol GOOG, is currently trading at $2,326.73 a share resulting in a 20% decline for the year to date. The shares are much closer at present to the 52-week low of $2,044.16 than the 52-week high of $3,042.00. If Google does decide to move some of its online digital ad business into Alphabet, the stock could move higher since some traders will see it as a way to unlock hidden value inside the company.
