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.



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