Shares in Alphabet (GOOGL) were higher today on reports that the tech giant won’t break up its advertising business in the wake of a huge European Union fine.
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Deadline Day
According to a report in Bloomberg, Alphabet’s Google unit will meet the European Union’s November deadline to propose changes to its advertising technology business following a $3.5 billion fine earlier this month. However, it won’t provide a full breakup of the business as previously requested by the EU and its rivals.
It is understood that the plan won’t include a sale of Google’s Ad Manager, the AdX exchange and DoubleClick for Publishers, despite European regulators previously flagging divestment as the only way to ensure fair competition.
The fine, raised by 60% for repeat violations, lifted Google’s EU antitrust bill to almost 10 billion euros ($11.75 billion) in a decade. However, the company has vowed to appeal the penalty after stating that the EU’s decision was wrong.
“It imposes an unjustified fine and requires changes that will hurt thousands of European businesses by making it harder for them to make money,” said Lee-Anne Mulholland, Google’s global head of regulatory affairs, when the fine was imposed.
Ad Favor
The European Commission’s investigation, which began in 2021, found that Google unfairly favored its own adtech services, particularly its ad exchange platform AdX. This self-preferencing allegedly allowed Google to charge higher fees and stifle competition from rival adtech providers and publishers.
As a result, Google has been ordered to stop these “self-preferencing practices” and “implement measures to cease its inherent conflicts of interest along the adtech supply chain.”
It is a significant action given the importance of the segment to overall group revenues, see below:
The company has 60 days to propose a solution to the Commission.
Regulators have warned that they may pursue stronger measures, such as potential divestitures of its adtech business, if Google’s proposed remedies are deemed insufficient.
Is GOOGL a Good Stock to Buy Now?
On TipRanks, GOOGL has a Strong Buy consensus based on 28 Buy and 9 Hold ratings. Its highest price target is $300. GOOGL stock’s consensus price target is $237.94, implying a 6.37% downside.
