As media reports keep arriving about the DOJ's antitrust probe of Alphabet/Google, it looks more and more as if Google's search content practices and strategy will get some attention from regulators.
If this part of the DOJ's probe results in major changes to what content Google shows within search results, it might have only a moderate, direct impact on Google's search ad business, which is believed to remain by far Google's biggest profit source. The larger risk, though, could be the potential for such changes to affect how frequently consumers turn to Google Search to get the information and content that they're looking for -- particularly on smartphones.
On Monday, The Wall Street Journal reported that a long list of Google critics, in fields ranging from news to travel to online shopping, are "readying documents and data in anticipation of meetings with the Justice Department." The paper also notes that in addition to companies that have publicly criticized Google in the past, such as Yelp (YELP) , TripAdvisor (TRIP) and News Corp (NWSA) , firms that haven't yet issued public criticism "stand ready to provide information to U.S. authorities about practices they view as potentially anticompetitive."
The story comes three weeks after the WSJ and others reported that the DOJ is prepping an antitrust probe of Google that would cover both Google Search and other businesses. At the time, the DOJ indicated that Google's ad sales on third-party sites and apps would also be an area of interest.
Google has been dealing with complaints for years from firms such as Yelp, TripAdvisor and News Corp. over the integration of content from services such as Google Maps, Google Travel and Google News within search results. The company has long argued that integrating content from such services benefits consumers, but critics have deemed it an abuse of a near-monopoly search position.
In addition to complaints from rivals, Google has dealt with multiple EU probes related to its search content bundling. In 2017, the EU fined Google $2.7 billion over the integration of Google Shopping ads within search results, after which Google agreed to let rival comparison shopping engines bid for ad space alongside Google Shopping. And in March, Google announced that it's testing European search results pages that would prominently display shopping, travel and other results from third-party sites near the top of a page.
If the DOJ's Google probe ultimately results in the company integrating less of its own content within search results and/or giving rival services more prominent placement, it might have some impact on Google's ad sales in areas such as travel and local business ads. This depends on how much such changes result in consumers clicking more on links to third-party sites and apps, as opposed to staying on Google to get what they need. But it's worth keeping in mind that Google's ad sales in these areas don't just stem from services such as Google Maps and Hotel Search. Rather, a large portion comes from text search ads that would remain in place.
And in other areas such as news and shopping services, the direct revenue impact of changes to Google's content bundling policies is likely to be minimal. Google News isn't monetized via ads, and from the looks of things, the Google Shopping changes that were made to appease EU regulators had little impact on Google's shopping ad revenue, since rival comparison shopping engines still have to bid for search ad space.
The bigger concern, arguably, is that in an app-dominated mobile landscape, smartphone users might be less prone to treating Google Search as a core utility if Maps, News, Travel and various other services aren't as tightly integrated with Google Search. Just as so many Amazon.com (AMZN) shoppers go directly to Amazon's app instead of searching for products via Google, a greater number of consumers could choose to directly launch third-party news, travel and commerce apps rather than relying on Google Search.
As its search-related announcements at recent Google I/O conferences make clear, maintaining Google Search's utility status in the eyes of smartphone users -- both by supporting more types of content within search results pages, and by integrating it with various Google and third-party apps -- remains a company priority.
And while it's much too early to speculate how much of an impact any search content changes sought by the DOJ would have on this utility status, it's definitely an area for investors to pay close attention to, given how much of an impact Google's search ad business still has on Alphabet's top and bottom lines.