Thematic Spotlight: Google Play Gets Put in Time Out

Google has received a slap on the wrist and has been ordered to overhaul its mobile app business as a result of Epic Games’ antitrust lawsuit against the tech giant. A US judge ruled that Google must offer Android phone users alternatives to its Google Play store to download apps and pay for transactions within them.1

The market appeared to have prepared for this result which followed suit to the US Department of Justice’s (DOJ) antitrust ruling from August. After the announcement, stocks in Google’s parent company Alphabet, dropped around 90 basis points, but still performed well compared to other major companies like Amazon and Tesla.

Regulatory Compliance Outlook

In line with the DOJ’s assessment, the most probable result of this regulatory scrutiny is an increase in compliance costs and enhanced regulatory oversight rather than a significant breakup of Google’s core business units, such as Android or Chrome. This suggests that while there may be shifts in how the company operates, a drastic restructuring is unlikely.2

Long-Term Implications for Google

In the long run, the ruling could have a gradual effect on Google Play’s revenues and profit margins. Similar to potential impacts from AI and data-sharing restrictions outlined in the DOJ case, these changes may influence Google’s search and advertising revenues. However, major structural changes, such as divestiture of key assets, seem unlikely.3

Practical Considerations

Realistically, Google will need to comply with new regulations by permitting third-party app stores and alternative payment systems. Nevertheless, the anticipated impact on overall revenue is expected to be minimal. The convenience of Google Play and Google Pay means most users are likely to continue using these services despite the regulatory changes. While compliance costs may rise, they are expected to remain manageable, allowing Google to maintain its dominant market position without significant disruption to its business operations.4

Access Google with FANG.

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Forecasts are not guaranteed and undue reliance should not be placed on them. This information is based on views held by Global X as at 08/10/2024. Investing involves risk, including the possible loss of principal. Diversification does not ensure a profit nor guarantee against a loss.

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This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information is not intended to be individual or personalised investment or tax advice and should not be used for trading purposes. Please consult a financial advisor or tax professional for more information regarding your investment and/or tax situation.