Google’s “victim of success” status is worth it | #firefox | #chrome | #microsoftedge | #hacking | #aihp

WASHINGTON, July 26 (Reuters Breakingviews) – For Google, it’s not so bad to be the successful one. The technology giant’s search business is resilient even in the face of economic wobbles that are hurting rivals. That’s partly due to the monopolistic characteristics of its business that make the $1.4 trillion parent Alphabet (GOOGL.O) more vulnerable in U.S. antitrust cases against it. But its valuation, and Microsoft’s (MSFT.O) history, show that it will be fine.

Google benefits because of the way it dominates the different facets of the online ad marketplace, running auctions that determine which and how promotions will be shown read more . On Tuesday, parent Alphabet said that revenue rose 13% in the second quarter, led by a jump in advertising related to its search business. Its cloud business helped too, notching up 36% to $6.3 billion.

A surge in travel, among other activities, has helped and contrasts with Snap (SNAP.N) and Twitter (TWTR.N), which last week missed analyst estimates with disappointing revenue from digital marketing. Still, the success could prompt more attention from the U.S. Justice Department, which sued Google in 2020 for alleged anti-competitive behavior in search and is preparing another lawsuit related to its online marketing business.

The Wall Street Journal recently reported that Alphabet offered to spin off that unit to preempt the government’s legal action. In theory, separating those businesses means that they won’t be sharing information, which could chip away at Google’s dominance.

But companies have weathered this sort of scrutiny before. In 1998, the DOJ accused Microsoft of monopolistic practices by bundling the Internet Explorer browser with its operating system. After several years of litigation, the company agreed to share its program interfaces with third parties as part of a settlement.

Microsoft’s stock meandered between roughly $20 to $30 a share from 2002 to 2013. By 2015, though, it started to get out of its slump, and shares rose fivefold to around $250 a share on Tuesday.

That suggests early innovators that cull market share can have longevity, even if they hit some bumps. Plus Alphabet’s multiple gives it a cushion. Its enterprise value is roughly five times historical sales, a slight discount to where it was in 2017. That’s higher than technology rivals that depend on less dependable brand advertising, like Meta Platforms (META.O), but half the multiple of Microsoft read more . Google may be a victim of its own success, but the success will outlast the victimhood.

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Alphabet had revenue of $69.7 billion in the second quarter of 2022, a 13% increase from the same period a year ago, the Google parent said on July 26. Analysts expected a top line of about $69.9 billion, according to Refinitiv.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

Editing by Lauren Silva Laughlin and Amanda Gomez

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