New Information Showed Just How Much Alphabet Will Pay For Dominance

New Information Showed Just How Much Alphabet Will Pay For Dominance
Paul Allison, CFA

4 months ago2 mins

Mentioned in story

What’s going on here?

A tantalizing tidbit might’ve strengthened the Department Of Justice’s (DOJ) anti-competitive-behavior case against Alphabet.

What does this mean?

Imagine picking up a smartphone to check emails, buy a winter coat, or find a pavlova recipe, and the browser opens on – gasp – Bing. That’s a jumpscare most horror films would envy. But it’s no wonder the world is used to the same six primary-colored letters instead. Google’s long been known to pay billions to secure the default position on different web browsers, but the dirty details were a closely guarded secret – until this week. A witness just let it slip that Google-parent Alphabet funnels 36% of the money it makes from search advertising straight into Apple's pockets, a successful bid for Safari dominance. That wasn’t the best statement the witness could’ve made while defending the tech giant against anti-competitive charges: the DOJ reckons the roughly $20 billion exchange is enough to price out competitors, strengthening the case against Big Tech.

Apple, Google, Alphabet, and Microsoft revenue
Source: Statista

Why should I care?

Zooming in: Firms who deal together stay together.

The DOJ is firmly focused on Alphabet, but Apple has plenty to lose here too. That $20 billion check, assuming the numbers are right, makes up about 30% of Apple’s service business revenue. That’s not a division Apple can sweep under the rug: investors keep a keen eye on the profitable services business, believing it’ll dictate the firm’s future. So if a third of its takings are called into question, investors may take their own suspicions out on Apple’s stock price.

The bigger picture: You can’t handle the truth.

Big Tech knows its way around a courtroom. Many a government hearing has contested the companies’ right to wield so much power, but each case has bounced like water off a duck’s back. The DOJ believes it can nail them this time, but if history’s any guide, Alphabet will probably retain its reign. Bad luck, Bing.

Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG