From: allin
The U.S. Department of Justice (DOJ) is considering a breakup of Google, a significant development in the technology industry. This follows a ruling that Google held an illegal monopoly in the search and advertising markets [00:05:31].
Background of the Antitrust Case
The case against Google was initiated by Trump’s DOJ in 2020 [00:05:41]. Initially, a “small O” outcome (a consent decree, similar to what Microsoft experienced in 2000 with Internet Explorer) was considered more likely than a “Big O” (breakup) [00:05:46]. However, Bloomberg recently reported that the DOJ is indeed considering a breakup, with Android OS, Google Chrome, and AdWords identified as the most probable targets [00:06:01]. This marks the first time the government has attempted to break up a monopoly in 20 years, since the failed attempt to dismantle Microsoft [00:06:11].
Beyond search and advertising, Google’s main business pillars include:
- Cloud: $40 billion in revenue, growing at 30% [00:06:26].
- YouTube: $34 billion in revenue, growing at 15%, with 2.7 billion monthly active users [00:06:30].
- Waymo: Operating 50,000 paid trips per week, totaling 2.5 million annually [00:06:50].
- Android: Revenue undisclosed [00:07:00].
- G Suite [00:07:02].
Arguments Against a Breakup
David Friedberg, a former Googler, questions how breaking up these entities would improve consumer pricing or competition [00:07:25]. He highlights that Android, while defaulting to Google search, is an open-source operating system with many manufacturers using their own forks [00:07:50]. Friedberg suggests the current “anti-success” sentiment, where large, successful companies are automatically deemed monopolies, is misguided [00:10:04].
Additionally, large companies often drive significant innovation due to their scale and cash flow, exemplified by Bell Labs’ inventions (transistor, information theory) [00:24:27]. Google itself has invested billions in Waymo, which inspired a generation of autonomous driving [00:25:38]. Meta’s open-sourcing of Llama models is another example of large-scale innovation that would be difficult for smaller, less profitable companies [00:25:56].
Arguments For a Breakup and Potential Outcomes
Chamath Palihapitiya initially considered a breakup a “single-digit probability” [00:11:09], but now sees a “massive bipartisan” support against Google [00:11:28]. This bipartisan support stems from different perspectives: Republicans often focus on freedom of speech and concerns about censorship, while Democrats lean towards the “anti-successful” vein [00:11:39].
Drawing on the historical precedent of AT&T’s breakup in the 1970s and 80s, where the company proposed its own split when facing a loss, it’s suggested Google might proactively initiate a breakup [00:12:22]. This would allow Google to define the terms, potentially creating more shareholder value as the sum of the parts could be greater than the current whole [00:13:08]. David Sacks agrees that Google should get ahead of the curve and partition the company economically [00:13:42]. This could unlock value and force leaner, more efficient operations by reducing places for unproductive employees to hide [00:14:05].
Possible standalone businesses that could be spun out:
- YouTube: This is seen as a strong candidate for a spin-out, potentially attracting new investors [00:08:21]. While YouTube shares infrastructure with other Google services (Cloud, advertising), it could become a customer of these existing Google divisions [00:09:06].
- Waymo: Described as a “perfect standalone business” [00:18:50].
- Android: While not originally designed as a business on its own, it was developed to prevent other companies (like Microsoft) from capturing the operating system or browser layer and diverting search traffic away from Google [00:15:06]. Android’s revenue, primarily from default search deals, is estimated around $30 billion per year, suggesting it could be a viable independent business [00:19:49]. However, spinning it out and forcing it to auction its search default could be “massively damaging” to Google’s core search business [00:19:16].
- Chrome: Similar to Android, Chrome was created to prevent other browsers from blocking access to Google search [00:17:21]. Chrome itself is not considered a viable standalone business [00:19:55].
Impact on Management and Innovation
While some fear a breakup could distract management and lead to a “lost decade” similar to Microsoft’s experience [00:30:31], Chamath believes reactions to such events are more sophisticated now, and core employees can be shielded [00:22:01].
“The breaking up of Google is great for competition and for startups but let’s not forget Google is an incredible company that has created enormous amounts of good. They have done way more good than bad, way more, like three, four, five orders of magnitude more good than bad. And to break a company like that, I think would be a really bad outcome from a competitive dynamics perspective.” [00:23:03]
Despite the potential for a breakup to foster competition for startups, critics argue that giant companies like Google and Meta, by “flooding” new categories with capital, can overwhelm and “steal” from smaller startups, making the market less dynamic [00:27:07].
A significant “wild card” in the future of search competition is Apple, which reportedly considered a search project under Steve Jobs and is now rumored to be looking at it again, potentially launching its own search engine to compete directly with Google [00:20:51]. This move could fundamentally reshape the search market.
Broader Implications on Capitalism
The discussion around Google’s antitrust case and potential breakups extends to broader themes of capitalism and government intervention. Joseph Schumpeter’s concept of “creative destruction” in capitalism, where old companies fade and are replaced by new startups, is highlighted as the basis for prosperity and innovation [01:31:00].
Conversely, the political process is seen as resistant to change, often seeking to control markets with top-down mandates and creating bureaucracies that never go away [01:31:45]. The prevailing sentiment among some is that government has become too large and expensive, threatening the engine of creative destruction [01:32:20]. The argument that competition, not government control, allows for more capable and often cheaper solutions to emerge, is exemplified by the contrast between Boeing’s struggling Starliner project and SpaceX’s more efficient Crew Dragon development [01:29:55].
Ultimately, the future of Google’s monopoly ruling and potential consequences remains to be seen, with ongoing negotiations between the company and the DOJ [00:27:58].