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- [00:01]
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- [00:52]
Alan Chappelle
Welcome to the Monopoly Report. The Monopoly Report is dedicated to chronicling and analyzing the impact of antitrust and other regulations on on the global advertising economy. If you were new to the Monopoly Report, you can subscribe to our weekly newsletter at Monopoly Market tv. And you can check out all of the Monopoly report podcasts@monopolyreportpod.com I'm Alan Chappelle. Today my guest is Richard Kramer from Arete Research. Richard and I are going to talk about the various scenarios around Google's antitrust remedies. Well, let's get to it. Hey Richard, thanks for coming on the pod. How are you?
- [01:30]
Richard Kramer
I'm doing okay. It's a beautiful spring day in London.
- [01:33]
Alan Chappelle
Ah, fantastic. Similar in New York City. Just loving it. Love springtime. I'm sure the business folks on my pod know who you are, but maybe some of the regulatory people less so. So why don't you give just a minute on on your background and who you are so they know where you're coming from.
- [01:48]
Richard Kramer
My company, Arete Research that I founded back in 2000, just coming up to ITS or just past its 25th birthday. Our job is to help investors understand what they're investing in without conflicts of interest. So we're really trying to be the antidote to the sycophants and stenographers on Wall street. The guys who do congratulations on a great quarter and ask how should we think about we have a team of 40 plus people that go deep into all manner of technology. Semiconductors, software, telco, cable media. And I am not only the founder, but I do all the research on the Internet space broadly, spending a lot of time in digital advertising. Things near and dear to your heart.
- [02:28]
Alan Chappelle
Well, good. And I'm really looking forward to getting your perspective. So today we're talking about the Google DOJ ad tech antitrust trial. Boy, it's hard to keep track right now with all the antitrust trial going on. But so just over a week ago, Judge Brinkham issued a long awaited decision in the DOJ Google antitrust suit. And we'll know more about remedies phase, which probably won't start until later this summer, although I think we're going to get the proposals over the next week or two. So we'll at least have something more to comment on soon. I'm hearing we may not see a final decision on remedies until later this year. Meanwhile, we've got plenty of time to speculate on, you know, remedies for this case. And so separately, we've got the remedies trial underway in the Google search antitrust proceeding. And so one of the reasons I wanted to have you on, Richard, is to get a sense of how the various remedy scenarios are likely to play out. So first, what's your opinion on the various remedies being proposed in the search case? So let's walk through each. I mean, just high level, you've got, you know, modification of distribution agreements, you've got changes to the site indexing methods, requirement of Google to license practically all of its search data from the search index to its results to any competitor who wants it. And then the big one I think is divestment of Chrome. First, you know, is there anything else really being discussed? And then second, you know, what are your thoughts on how any of those scenarios are going to play out?
- [03:55]
Richard Kramer
So we wrote a piece last autumn about how we viewed the two cases together. And I've always had the view. I'll touch on each of those individual options in a moment. But I've always had the view that this would ultimately come to some sort of settlement. Now I don't think there are smoke filled rooms anymore with long conference tables of both sides represented by umpteen lawyers on each side. You might have been in those long smoke filled conference rooms back in the day. But when I look in the US and I see that the Sacklers are still billionaires and not in jail, I think, you know, there is really no conduct so egregious that you can't hammer out some sort of settlement. And I think what we're seeing right now in the laundry list you gave US is the DOJ's wish list or asks and that needs to be set against the practical realities of what's doable. And I think there, there are some real limitations on some of those options that have been proposed. I'll give you one simple example. I don't Think the DOJ wants to bring on a bunch of behavioral remedies in which they have to appoint a white shoe law firm to spend a lot of time monitoring the internal conduct of Google. I think that that's impractical. So you know when you start to look at some of those potential remedies, if they involve that behavioral modification that you're going to be overseeing for the next five years, I think they're non starters. And equally one other thing and then I'll stop and we can dig in on whichever your favorite of the options are. I think you have to look at the practical market implications of potentially making the problem that you were trying to solve even worse. So it's just a very quick thought on that. If you would make the Google search API available to anyone and let's not talk about what it costs Google to collect all that data and what they charge for API access, the number of companies that would have the cloud computing resource to process 5 trillion queries a day or a month or a year or whatever it is, are going to be the other big tech companies, the ones that you're trying to curtail as monopoly powers. So you don't want to try to solve one problem and turn around and create a larger problem, handing the keys from one set of monopoly providers to someone else to recreate an alternative monopoly. So I'll stop there and we can, we can go into the details of each of the individual cases. But I do expect this will ultimately come out in a settlement. The DOJ needs a win. If not, Google will take the extend and pretend delay and pray strategy of endless appeals. And there are likely, as you and I would probably both agree to be some sort of injunctions with the remedies so that they just can't ignore the thing altogether until the final appeal is exhausted.
- [06:43]
Alan Chappelle
I would agree with that. I would build on, I think what your first point was. It's not even just that. I don't think anybody wants to set up some technical committee which has to be monitored. And heck, you can see what they've done with the, the UK CMA process with respect to the privacy sandbox. I said they have run circles around the CMA for what, for years now and almost embarrassingly. But one of the things that the DOJ is doing here, which is really smart in the remedies trial, is they are pointing, pointing to an analogous case in the EU where Microsoft made a request for data pursuant to the Digital Markets act in the eu and what they found is like a year later Microsoft got somewhere around 1 or 2% of the data that we requested and Google said, oh well, there's privacy and intellectual property and, and oh boy, it's just really, really hard to get that data, et cetera, a whole bunch of things that are at best questionable. But the Net Net is, you know, the, the idea that you're going to make Google data available to others, I think is a really difficult road to go down. So what I suspect the DOJ is doing is providing examples to, so as to say, look, you can do all those other behavioral remedies, but if you don't divest Chrome, this whole thing is a non starter and I think, I think that's where they're going with this. I'd love your thoughts.
- [08:07]
Richard Kramer
Yeah, I have a bit of a problem with that. And, and you know, a shout out to my good friend Brendan Eich, who is the CEO of the Brave and founder of the Brave browser. I can tell you from my long and tortured conversations with Brendan, having a standalone browser business model is a very, very tough goat, especially if you want to be less outwardly and repulsively creepy as the Perplexity CEO has suggested his browser might be. And maybe some portion of the population is comfortable with that, but maybe many others aren't and privacy regulators probably would, would watch what the Perplexity CEO says and just roll their eyes. I would love your thoughts on that. But my issue with the divestiture of Chrome is I don't necessarily see a very strong standalone business model for a browser per se. And exhibit A is, is Firefox, which is lurched from, you know, being effectively reliant on one source of, of subsidy from one large tech giant to becoming reliant on another source of subsidy from another tech giant and really done bugger all in terms of tech development with all that money that it's collected, other than prop up the Mozilla foundation. So I'm really struggling with a lot of the aspects of this case because there's a wish fulfillment element to them. Let's give you one very concrete example. You could suggest that all these other companies might wish to become major players in search based advertising, but you have an entire SEO world out there and an entire SME universe of tens of billions of millions of advertisers that are used to using AdSense and AdWords and keyword bidding and understand Google. And you can't just magic up a competitor which has that kind of reach and that kind of business system set up and to, to, to make use of all of that data. So I think there's some some wish fulfillment elements to the case that say oh well we snap our fingers, get Google to divest Chrome, someone else independent will buy it and create a massive scale competitor in collecting signal. And I think that's many steps or many, many moves on the chessboard down the road. Not really what the DOJ had in mind. I think it was kind of maybe an 11th hour amendment that thought this is a way we can really hurt Google and bring them to the table.
- [10:28]
Alan Chappelle
Well the one thing it does do is it really cuts into the distribution which is a key way that Google perpetuates its monopoly. I will agree with you by the way, regarding perplexity. I actually have a poll going in LinkedIn just this week about this where I'm trying to get some get some folks opinions. I think that there's a huge challenge within the browser market because you're right, there's no great way to monetize all respect to the Brave folks. You can't by default stop everybody else from using your browser to engage in digital advertising and it's all of its glories and then have a separate monetization strategy which enables you to share data in the context of digital advertising. There's now in the US at least anti preferencing measures that are going to make that a little bit more challenging.
- [11:18]
Richard Kramer
And we came up with lots of ideas. I think you can expect choice screens, you can expect some blocking, of paying Apple for defaults. I think there are some practical things you can do. But the other interesting thing that the doj seems not to have really thought through both in the Google case and the Apple case I think is if you go to the three dots up in the top right hand corner of Chrome and I use Brave so I don't use Chrome regularly. But you'll see that behind Chrome sits a veritable spider's web of other APIs for maps and YouTube and Gmail and Drive and many other Google services. And the idea that you can extract that one Silken thread, strong as it may be, we know Spiders webs are very huge tensile strength. You can extract that one web that says Chrome from all the other aspects of things it's connected to via APIs and signal collection, that it is happening outside of the Chrome browser and magically solve the search based advertising problem to me seems again wish fulfillment or naive or hopeful depending on how you want to put it. I don't think that there is the sort of the way to cut the gordian knot in one swift stroke.
- [12:33]
Alan Chappelle
So I think the one thing that you and I agree on is that this is a choose your adventure of bad options. I think where we might disagree is which one is the least bad, least worst. Yeah, and I, yeah, I'm in the, I am a little bit more in the like break the darn thing up into as many pieces as you possibly can and hope for the best. But I get that that brings its own set of challenges. I am just also of the mind that anything that requires Google to open itself up more or technical committees is a bit of a fool's errand too. And so, and by the way, like I'm 5149 that the browser divestment is the least bad option. I don't even know that we diverge that much.
- [13:15]
Richard Kramer
And one of the things, you know, several you've said spur these great sort of memories for me. You know, I probably for 10 years I've been saying open as a four letter word to big tech, like they want open nothing.
- [13:27]
Alan Chappelle
And one other thing we haven't touched on with respect to divestment is chromium. And I'm not even sure you need.
- [13:34]
Richard Kramer
A thousand or two thousand engineers to sustain this development and who's going to pay for that? And there's again, I absolutely cringe when I hear. What I think is, I don't want to be too strong about this, but I think the duckduckgos of the world are largely fraudulent. You know they're marketing shells for Bing, right. We know that behind them sits Bing or Eco Asia or these sort of these, these browser front ends and they're, they're talking about, oh well, we'd love to buy Chrome. Well yes, you know, I'd love to have all of downtown Manhattan real estate but you know, that doesn't mean I'm a suitable landlord for millions of tenants. You cannot simply. Or you have an investment banker testify the trial. Yeah, it'd be a very attractive property. Well, what do bankers always say? I feel like they haven't thought through all those unintended consequences. Not that I'm here to pump the tires of Google being found a monopolist in two separate cases, but I'm representing the view that I constantly communicate with investors and they ask me so what are the financial implications of this? And we can look at potential loss of query volume or we can look at alternative ways of collecting signal and try to decide the extent to which Google would still have a search based advertising business if it didn't have access to the Chrome browser. Now the first thing, if they lost Chrome, they would be asking for as well, hey, we're on the outside sitting in. So give us API access, let us see everything that happens in that browser. And you know, this, this obviously is something that would, would happen many years down the road, but it creates the reciprocity question of is someone who collects all that data in the browser going to share it with other parties?
- [15:10]
Alan Chappelle
Yeah, that's the bazillion dollar question right there. Because to date browsers are still in this transition period where they're still, they're kind of having their cake and eating it too, all of them. Where there's the oh, we need to protect users. And then, and then there's an asterisk to that statement that's been added over the years which is like, so we can monetize the heck out of them ourselves. And you can talk to me about like you know, well, privacy enhancing technologies that we're using and that's all fair enough, but at the end of the day you are still using a string of website visits which has its own publisher IP considerations and you're using that to monetize the user base. And you know, the idea that you get to do that and nobody else does, I just don't think is, well, it's just not how the digital media world has operated over these last, you know, 25 years or so.
- [16:00]
Richard Kramer
So let me, let me throw out a couple crazy ideas we put out there. One is that I think there will be a new relationship forged. Much as the DOJ will despise this outcome between Apple and Google. So Apple has an interest to keep tens of billions of dollars flowing from Google to them and equally has clearly not covered itself in glory in terms of how it's developed, pursued and rolled out. Apple Intelligence TBD at the best of, you know, to be charitable and a, a massive screw up to be less charitable. And they need a backend model or set of models behind Siri. Google wants to have distribution for Gemini and its family of models. And as Apple said when it launched Apple intelligence with some ChatGPT tools embedded in writing emails, we will not have exclusive relationships. So I suspect that the prevention of or injunction that comes down in August that says Google shall not pay Apple for default position as a search provider in Safari will be translated into a commercial arrangement between Apple and Google for providing models or intelligence to power the next generation of Siri. The money will still flow in the same direction. Google will still get distribution for its models. And then if the feds want to throw up their hands and say you can't do this, they'll punch the chess clock and say, let's start the whole rodeo all over again.
- [17:32]
Alan Chappelle
Yeah, there's just too many scenarios here where we end up right back in the same place we were two years ago.
- [17:39]
Richard Kramer
Speaking of privacy sandbox, there we go. Since 2019 we have heard that Google is in the interests of all of the CPOs. You speak to those privacy zealots, they want to protect us all from the scourge of third party cookies and now they don't.
- [17:56]
Alan Chappelle
Well, one thing that I'm really surprised is just doesn't get any mention at all with respect to the sandbox and third party cookie deprecation. A lot of that was based on the idea that Chrome needs to compete with the other browsers. So but, but the problem with that argument is that if you look at market share over the last five years, it has not swayed at all. So if deprecating cookies was something that they needed to do to compete, well, that's sort of been blown up to smithereens. And so then you know, why are you doing it? And that's, well, I guess part of the problem. And then there's the separate thing that Google is so conflicted in their, their business that there were, there were business units within Google that have been telling their partners and customers that cookie deprecation was never ever, ever, ever going to happen. And they've been saying that for you know, three or four years.
- [18:46]
Richard Kramer
Yeah, look, I think there are multiple contexts for this. Obviously there's a European context in which Apple has just been dinged by the French competition authorities. Likely to happen as well by the German competition authorities for self preferencing. If you want to put it in other ways, you can call it other things. But the idea that they had an opt in to their own data collection of IDFAs for their own services, but a double consent required not to opt out of data collection for any third party services and that was clearly ruled upon in Europe. And having a consent prompt in the same markets under similar conditions for Google for privacy sandbox would have been very difficult in my view. It would have been a gift from the gods to the regulators and saying, well we've seen this movie before. You want to opt everyone else out, but potentially opt yourselves in. And we never got a very clear view of what would happen in the papi. Very, very smart people, much smarter than me that are deep in the weeds of ad tech always asked me you know, so what's the governance of this papi? And when will Google start charging for API access? And I thought that. Great question, you know, so is this they going to collect all this stuff for free and just donate it to out of the goodness of their own hearts? That's very ungoogle. A company that just reported $19 billion of free cash flow in the first quarter, a 34% record operating margin. They're not a charity.
- [20:13]
Alan Chappelle
I want to get to the ad tech trial remedies, but before we do, I just want to make one point. All of the companies who were like we need to get into the sandbox and we'll get first mover advantage and we really need to invest heavily in that. That was a naive and a poorly thought through business decision.
- [20:30]
Richard Kramer
I'll disagree.
- [20:32]
Alan Chappelle
Why?
- [20:32]
Richard Kramer
So it forced companies to re examine the sustainability of their business model and forced companies to think through workarounds, alternatives, et cetera, that might be more sustainable. And I don't think in that sense for an ad tech industry that contains a multitude of miscreants and malappropriation or I'm thinking of all the M words, you know, malvertizing all this terrible, you know, there's a lot of terrible stuff hiding in ad tech. I call it obfuscatory arbitrage in many cases because people are just arbitraging but trying to hide the fact that they're arbitraging. I think it got a lot of companies to have a hard look at themselves and how sustainable their business. Now did every company generate value out of all that testing effort? Not, no. But I don't think it was entirely wasted.
- [21:27]
Alan Chappelle
Okay, that's a separate question. If your question is were companies wise to invest into alternative methodologies and privacy enhancing, I am right there with you. And actually would go the opposite argument where I think collectively we have not invested enough. The thing that I have a problem with is like assuming after everything we've seen Google do over the, particularly the last 10 years, assuming that the mechanism that they built was going to be something that you could build a sustainable business off of, was naive. I don't think there's any other way to see that.
- [22:02]
Richard Kramer
But I don't. You know, covering companies like Croteo, which did a lot of work in testing, I don't think they were building their business on the privacy sandbox being everywhere you can see they have pivoted broadly to retail media where privacy sandbox is neither here nor there. It's. It's using first party data that retailers you know, ably collect because they want to deliver to the Chappelle household the things that you ordered and they need your address and your, your credit card and your, they actually need your data.
- [22:33]
Alan Chappelle
Yeah, well and in fairness to Corneo, take a look at the Ipon web business and how much of that is dependent on Google for revenue. And so sometimes the answer here is that companies felt like they had a gun to their head and so they had to play the game. And so with that I feel a little bit better. But anyway, I'd love to turn a little bit to the Google Ad tech remedies. The things that are being talked about now is okay, divestiture of Adex and gaming. Now I have a problem with that because I don't think that that's enough. I think once you divest GAM and adx, then one of two things probably happens. Either Google figures out how to king make some other SSP or Google just starts pushing all of their demand into their owned and operated and then the whole open web is sort of starved. And so. But I'd love your thoughts.
- [23:28]
Richard Kramer
Okay, so let me take this to a higher level of abstraction and point out two or three very specific that I tell investors all the time. One, there has been 10 consecutive quarters actually, sorry I correct myself, 11 consecutive quarters now of declining absolute sales in Google's network business. So we are coming up on the third, three full years of Google already doing the last thing that you mentioned, which is shifting the giant PMAX dial towards owned and operated inventory and away from third party sources. Let's take that as a given. Second, and I think this is a very important thing from my perspective, maybe not so much for some of the wags that listen to TMR, but this affects about 3% of Google revenues and less than even less than half a percent of Google's profits. In the 2020 trial it was disclosed that, that the GAM and if you want to lump AdSense into it, I know Ari Paparo wants to lump that into it. Thank theoretically and I'm, I don't disagree with him. GAM and AdSense were about a third of the network business and they made, you know, a slightly above the 5% operating margin that the overall Google network business in the DOJ actuals that came out in that trial were, you know, they showed the real numbers, 5% margin for that business against at that point a 22.6% margin for overall Google which is now 34. So this business is the redheaded stepchild Times, times, many times Right. This is not the business which is growing sales. And I do not believe that a business inside a company like Google is allowed to decline in sales for 11 straight quarters by accident. And if this was somehow, you know, there, there are times where you have a very, very profitable business that's in structural decline. And we've seen this all over the, in the royalty world, you know, people are in runoff mode. They're not investing in a new technology, but they're milking it with the patents. You know this world very well. It can be incredibly profitable. In this case it's not. So it's neither a source of growth or profits. And I think this is just in a way kind of a nuisance case. Now I had the crazy idea and it is a crazy idea and I think even, even a few people on your side of the world have, have, have even thought, well it might be a great idea, but maybe it'll never happen that Google would spin out the entire network business as a public benefit corporation, as a B corp and say look, if we want to. And this, this might have made more sense in the previous administration, the current one. If we want to help publishers of all stripes, we'll spin out all this ad tech and let them provide all the programmatic pipes for something that more approximates cost than take rates. And there is no relationship between take rate and cost as far as we've been able to tell. Now I don't think Google is going to do that. I don't think that the time for that may have come and gone, but that was our intervention. To think what could Google do that would benefit all those long suffering publishers that feel hard done by, by ad tech.
- [26:49]
Alan Chappelle
Yeah. So I agree with you that it was probably an interesting idea in the previous administration. Just politically it's very difficult to see a Republican administration be willing to spin something off in that way.
- [27:04]
Richard Kramer
I get that. And the time we put it out there we thought okay, we want to do a proper thought experiment like what would be the best outcome for the industry and that would be to decouple itself from this conflicted potential for discriminatory behavior ad tech stack that sits inside Google's much larger O and O business. Now I think the really evil genius reason why Google might want to do this, it could then direct that third party network business to short all of ad tech and wipe out listed ad tech and leave it as a very low margin take rate business that would suit Google's needs just fine.
- [27:47]
Alan Chappelle
Yeah, and I think that's, that's sort of the, the, the fear. You know, I've heard people talk about things like applying like a must carry type of a rule into, into this where you know, they're required to spend on its open ad network business and continue that. I, you know, the problem is, is like I, like in a college lecture setting I kind of get that. But just having watched Google over the last two decades, it's just hard to see how, you know, even if you added some kind of transparency requirement, I'm skeptical that that ultimately would get us where we want to be. The one thing I think I agree with you though is like I think that the DOJ is going to propose something on the buy side ad tech stack which like anybody listening to this is going to say, well wait a minute, wait a minute. Yeah, that has nothing to do with the case. But I would actually pull from the search case where you can make an argument that Chrome divestment is not directly affiliated with what they were talking about in that case either. But if you're really trying to get at the perpetuation of the monopoly, you have to include a Chrome divestment.
- [28:50]
Richard Kramer
So, so I would again on the buy side I would say Google is already in the position where it can clone DV360 for partners where it has a direct commercial relationship. Let's think a Pinterest for example, where most of the senior management from Pinterest is ex Google and they have brought in Google as one of their third party ad tech partners and it makes a lot of sense for them in markets where they don't have a direct sales force to have Google bring demand to the platform. And what Pinterest really needs is higher auction density. So all of that makes a lot of sense. And I think, you know, one of your dear friends, Mr. Paparo obviously thought, had the idea that you know, a bidder is a pretty simple piece of technology and doesn't need to be overly complicated. And if you're buying a lot of PMPs or private marketplaces, you know, you don't need all this extra decisioning. And, and it, we've, we don't need 20% take rates in that business. We can do it at much cheaper rates. And Google would clone that business to, to have its own low cost bidder that it could work with third parties that it has direct relationships with and leave all that messy long tail of open web publishers to somebody else to buy on. So I think they're quite happy to get rid of it. Now I've always thought that publishers had this Sort of omerta, code of silence. They didn't want to speak out against Google because it was their principal source of revenues. And you obviously saw a few of them break ranks in the ad tech trial and be willing to stand up and say, well, this is how difficult it is having one major source of revenue if you're a Gannett or a Daily Mail or others. But in the end, it's partly their own fault that they abrogated their responsibility to develop their own sales and marketing in Salesforce and allowed Google to take that role. Now that we're in that position, I don't think it's going to be some sort of bonanza for publishers when you refashion how the buy and sell side of ad tech work by removing Google's direct control over gaming and or potentially DV360. And with ADX being an adjunct to GAM.
- [30:58]
Alan Chappelle
Well, yeah, I think there, there's hope that if you can knock down what, the 35 to 40% markup, that that's, that's, you know, being added and you say you can cut that in half. And look, I, I don't know even if that's practical, but, but if you're able to do something like that, then, you know, publishers feel like, okay, well now we've, you know, now because, because, because up to this point it feels like publishers are watching more and more ad revenue go through into digital and they're getting less and less. And so maybe if you cut into the margin, it'll at least help.
- [31:32]
Richard Kramer
But that's reshuffling the deck chairs on the Titanic. Because if you look at the trade desk and Magnite and the brand safety guys and add all that in, it's actually cheaper to go all in on Google. The margin stacking for the trade desk on the open Web and working with an index or a Pubmatic or a Magnite or all those others, and you add in all the brand safety guys and the reporting guys, you're not getting any better outcome. And certainly it's no more transparent. I don't think any ad tech intermediary truly wants or embraces transparency. And that goes from the biggest of the big techs all the way down to the smallest.
- [32:08]
Alan Chappelle
Yeah, I think that's a fair point. So I want to shift to one last area before I let you go. You started today saying that you think there's going to be some kind of a settlement. And for what it's worth, I think that there's a decent chance that sometime late summer there's a window with everything going on where, like if there's going to be a settlement in the near term, that seems like as good a time as any. But in order to get there, you've got, I mean, just off the top of my head, you've got Canada, you've got the European Commission, you've got, well, the separate state antitrust case. You get a whole bunch of balls in the air. Now, how does one juggle all of this, all of those considerations? Or you just think DOJ is going to lead, everybody's going to follow or get the hell out of the way?
- [32:57]
Richard Kramer
That's a great question. You had a wonderful early precursor test case with the A triple C in Australia, where it was we were going to bring these companies to heal and take them to the mat and show them what's what until Rupert Murdoch signed a $250 million deal. And that was all fine. Right. You know, when I look at it from a investor point of view, I am able to notice that there is, I think There was a $427 million increase in GNA this first quarter on last year attributed to legal and other matters. So, you know, Google may be spending a billion to $2 billion in overheads right now on fighting all these cases around the world. And it's a nuisance and it's a pain in the butt. And when I've talked to my friend Damian Jared, and here in Europe, he's always had the view that at some point it just becomes too painful for them to play whack a mole with regulators around the world and try to opt for some sort of global settlement. I think given the provenance of where Google sits and its largest business, largest market by far. And I want to be careful with my words because I have my UK and my European passport as well as my US one, I think it will largely be taken as a global settlement with maybe Europe as an exception. And I would imagine they want to craft the contours of that sort of settlement so that it doesn't become a full employment program downstream for lawyers that want to pick apart bits of it. And I think it ultimately, I'm a little surprised that Google hasn't been willing to do this, but I take it it's probably comes from the culture of a. Of its chief legal officer who told people back in 2008 to destroy all chat records and so forth was bit beyond the pale. But you know, at some point you would want to imagine that Google would just like to move on from all this because their senior executives don't want to waste time being summoned for depositions and constant updates from the legal team and have to think about that. And it's not being brought to the attention of investors partly because of the way Google carefully manicures communications. You know, they never let me ask a question on their conference calls, unlike some other big tech companies. And there were on the last first quarter conference call, not a single question about antitrust or privacy sandbox. It's as if it didn't. Wasn't happening. Nothing to see here move right along. And I attribute that to the famous quotation from Upton Sinclair, never expect a man to understand something when his job depends on not understanding it.
- [35:31]
Alan Chappelle
I think that Google has been pushing or offering to divest its network business for years now. But the, the, the thing that needs to happen in order for them to, to get there is, I mean, this is kind of an obvious statement, but, but I don't think it gets mentioned enough. Like it has to be painful enough that the alternative of just delaying for the next five to seven years has got to be worse for Google. And there's only really two things in the back of my mind that make it worse for Google. Number one is if the DOJ decides to like, start really thinking about, you know, jail sentences for senior Google officials, which, which look, anything is possible, but we don't really, you know, for better or worse, if you didn't, if the Sackler family is still out enjoying most of their money, then I think that is probably off the table. So the second thing is, you know, does all of this controversy and distraction keep Google from winning the AI race? And that I think is the one. Yep. And that's the one that I think that might get them to the table to maybe give up some things that they don't want to give up.
- [36:37]
Richard Kramer
Yeah. And again, you, you know, you need a culture change of, of you may need leadership changes. You may need to move on from a, from some of the legal staff that they have that have been very pugnacious in terms of how they handle themselves at the trial. It's also, you know, I have my five reasons that I've had since I told them to Scott Galloway when he was writing the big tech breakup story back in 2019. The five reasons why you don't break up Big tech. They're the national champions of the U.S. they're huge federal taxpayers. Would you like a data center in your district, Mr. Congressman? Right. You know, would you like US to spend 50 billion on R&D? And 75 billion on capex this year. Yes we would. They are immense companies in terms of collecting revenue from other countries and remitting it back to the us. So think of them in terms of the services deficit that Europe has with the US and finally, who's going to fight the Chinese on AI? And they wave that flag whenever they can. So there's all these reasons. Oh, I forgot my favorite first one, which is unless you think Snowden was a total fantasist that Google and Meta and these companies are entirely working hand in glove with the NSA and the CIA because the NSA and CIA, if they were really smart, would have invented Facebook and Google. But since they didn't, they just figured out a way to get backdoor co optation of them. And I think the Wiz acquisition in our view is Google positioning itself to become a defense contractor to the U.S. u.S. Government, much like Palantir or others and saying, well you do want our help with all this high end stuff and we do have the largest data center estate outside of the nsa. So aren't these useful assets for us against the Chinese?
- [38:20]
Alan Chappelle
Yeah, I think that's ultimately going to be the argument. Well, let's, let's leave it there. This has been a fantastic discussion, Richard. I really, really appreciate you, you coming on and sharing your thoughts to hear.
- [38:31]
Richard Kramer
What your audience thinks of some of our crazier ideas. I think there would have been a time for the network B Corp. But I think sadly we agree in this administration it's a lot less likely than it might have been under the last one.
- [38:42]
Alan Chappelle
Well, just one more thought and I'm going to write about this this week is like, I actually think it would be helpful for our industry if the folks at Google would apologize. I know that sounds like a crazy idea and it's never going to happen, but I still think that they should. And more to the point, I actually think that folks within our industry should be pushing them to apologize.
- [39:04]
Richard Kramer
Yeah, I, look I, I'm dealing with, with stock prices and earnings and, and you know, companies have warnings and, and it's always about did the executives know, what did they know, when did they know that sort of thing. There's, there's always a bunch of ambulance chasing lawyers that go after the, the companies where they have profit warnings and the stock falls. You know, I, I can tell you from speaking to plenty of managements, they, they never have perfect information. That said it's business and these companies are going to try to take any advantage they can get their hands on and Google has been a brilliant business in terms of reaching $2 trillion of market value, in terms of leveraging every advantage, reaching a $350 billion P&L last year, generating over $100 billion of net profit. It's an incredibly successful business, and I think they're not about to apologize for that. I think you can hold your breath for a very long time and they won't take any notice.
- [40:01]
Alan Chappelle
Fair point. And there's only so much of my own time I want to spend trying to be Gandhi, but nonetheless, I'm going to throw that out there and we'll see what the rest of the market says.
- [40:13]
Richard Kramer
I'm not holding my breath. I missed the apology on the conference call. I missed any discussion whatsoever that this company was engaged in two antitrust trials at the doj. So even acknowledging that, for a start, would be would be interesting to see it in the prepared remarks.
- [40:27]
Alan Chappelle
Well, Richard, thank you so much for the conversation. This has been a lot of fun.
- [40:30]
Richard Kramer
My pleasure.
- [40:33]
Alan Chappelle
That was a great conversation. We've got a bunch of other fantastic guests coming up on the Monopoly Report podcast over the next few weeks. Please subscribe to the show@monopolyreportpod.com or on Spotify, Apple, YouTube, or wherever you listen to your podcasts. And thanks for listening.
- [40:53]
Podcast Host
Thank you for listening to the marketexture podcast. New episodes come out every Friday and an insightful vendor interview is published each Monday. You can subscribe to our library of hundreds of executive interviews at marketecture tv. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Marketing. And if if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtechgod.com.