Google investors shrug off EU Fine and look to future competition with rivals such as Amazon, Microsoft
Analysts largely downplayed any short-term impact on Google primarily because the ruling doesn’t bar the company from getting its services on devices
Europe’s record US$5 billion fine against Alphabet’s Google, levied on Wednesday, marks the biggest regulatory attack yet on technology giants. But investors and analysts largely shrugged off the ruling’s potential to immediately dent Google’s business.
The real damage will hinge on how aggressively Europe cracks down on Google’s lucrative agreements with smartphone makers and carriers going forward – and how quickly Google rivals like Amazon.com and Microsoft Corp pounce. Amazon and Samsung Electronics, a Google partner, have already started pushing into web search with their voice-activated products.
As expected, the European Commission declared Google’s conduct with its Android mobile operating system anti-competitive and ordered the company to cease its behaviour, suggesting it change its contracts with phone makers. That targets Android’s greatest asset for Google: The way it distributes its lucrative services, such as search, its web browser and its app store, to more than a billion devices. The European ruling took direct aim at those three services.
Google gives Android mobile software for free to handset makers but coerces them to pre-install Google’s apps if they want the Play app store, which offers more than a million programs. The search giant also pays smartphone manufacturers, telecommunications carriers and other browser makers to run Google’s search engine and collect user data, deals the company does not disclose. Thanks to those agreements, Google has captured almost US$50 billion in yearly mobile advertising market sales, or a third of the global market, according to research firm eMarketer.
The European Union has left it up to Google to decide how it changes the way it puts search and web-browser apps on Android mobile devices. “I have made no suggestions as to how Google should solve this,” said EU antitrust chief Margrethe Vestager. When questioned by Bloomberg Television, she said “the obvious minimum” is that the “contractual restrictions disappear".
Analysts largely downplayed any short-term impact on Google primarily because the ruling does not bar the company from getting its services on devices – for instance, because of consumer interest. “The consumer is likely to just simply download the apps for Google’s services if and when they get new Android phones – much as they already do when they get new iPhones,” Credit Suisse analyst Stephen Ju wrote in a note after the ruling, adding that the firm expects “minimal impact".