DOJ breakup of Google won't impact investors: Brent Thill

On August 5, a US district court judge ruled in favor of the US Department of Justice (DOJ) in an antitrust case against Alphabet's Google (GOOG, GOOGL), ruling "the court thus concludes that Google has monopolized the market for general search text advertising."

A report from Bloomberg claims that DOJ officials will proceed with further action against Google and seek to break up the tech giant.

Jefferies senior analyst Brent Thill joins Morning Brief to give insight into the potential case against Google, what it means for the company and investors, and the broader market at large.

Thill begins by affirming: "Ultimately, we don't believe a full breakup would happen. Even if it did, it would be good for shareholders because the sum of the parts is greater than the whole."

Thill argues a split wouldn't necessarily matter as competition in the advertising space is heating up against Google: "Meta (META) is just having incredible engagement, incredible AI progress. And we think that they're having a big impact. All the advertisers we speak with are spending more on Meta than they are with Google... Secondarily to your point in search, in the last six months, I've used Perplexity more than I've used Google search.

"Third, if you think about the way we engage when you turn your TV on... Amazon (AMZN) is pushing with Prime, they're pushing more videos. They're going after advertiser budgets that Google is going after," Thill tells Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Nicholas Jacobino

Video transcript

Shares of alphabet off just about 2% on news that the, that the justice department is considering breaking up the company.

That's according to report out from Bloomberg on August 5th, a federal judge ruled that Google is monopolizing the search and advertising markets.

Now it's up to the doj to decide if it will proceed with a breakup plan.

The potential units reportedly on the table for Google to divest include its Android operating system, Google's Chrome browser and its tech advertising sales platform.

So what does this mean for the stock going forward?

We want to bring in Brent, Phil.

He's a senior analyst at Jeffries and Brent.

When you take a look at the stocks reaction, maybe Wall Street is a bit concerned about this.

But what do you think?

Yeah, I think there's obviously uh minor concern, but ultimately, uh we don't believe a full breakup would happen even if it did, it would be good for shareholders because the sum of the parts uh is greater than the whole.

So if you think about ultimately looking at each of the businesses applying different multiples, we actually could see a situation where um they effectively could, could drive a drive even more value if you, even if it was broken up.

So, uh you know, for shareholders, I don't think it's gonna have a dramatic impact.

Uh We clearly have to work through a lot of details.

Obviously, Google is gonna, gonna fight this and come back uh with hopefully a remedy that would eliminate that.

Uh But in the case of a breakup and we've done this across Big Cap Tech.

Uh you break up Amazon, you break up Google, you break up meta in many situations.

Uh for investors, it's a, it's a better outcome because uh effectively, many parts of the businesses are not being uh effectively put the light on each, each of your businesses.

And if you look at the multiples, you put across each of these segments of the business.

Um Again, we yield upside uh in our, in our overall price target even in that situation.

Yeah, so I don't think that spinning off a browser or spinning off an Android operating system is going to have a dramatic impact on, on, on the company.

Um So when you showed that screen earlier, you know, those are the things that aren't really going to have a big impact.

You know, I think the bigger impact right now is um the advertising market is becoming more fragmented.

Um There are new competitors, there are new uh new market share gainers.

If you look at meta, what meta is gaining uh on Google and Social.

Every advertiser uh and the government can do this is go poll all the top advertisers that spend, are you spending more money on Google or Meta?

A lot of advertisers are spending more on meta?

So I, I would argue, I, again, I don't know every detail of this, but I would, I, I believe again in our work that there are a lot more competitors than perhaps are being alluded to and the environment is changing rapidly.

So I think Google will come back and say, um you know, we, we think our markets changing.

Uh We obviously don't believe uh we're doing, we're trying to do the right thing for consumers.

And if there's elements of the, of that you don't agree with, I think they'll change their behavior.

But um again, so I, I think there's still a lower likelihood of this happening.

If it happens, it's good for investors if it doesn't happen.

Um you know, the stocks still cheap and they're still in a really good spot uh in terms of their overall uh position with A I and what's happening with their media properties.

Brent, when you mentioned the, the fragmentation that's happening as well within digital advertising.

Uh What would you largely attribute that to?

Is it, is it the way that people search?

Is it the changing way that people are, they're finding content that entertains them for longer periods of time and thus allowing for more time spent on one platform versus another.

Maybe it's just because, you know, people are creating more reels and, and that's just one company uh that has that feature.

Yeah, I mean, in meta, I think, you know, meta is just having incredible engagement, incredible A I uh progress and we think that they're having a big impact.

All the advertisers we speak with are spending more on me than they are with Google.

Um, secondarily to your point and search in the last six months.

I've used perplexity more than I've used Google search.

Uh Third, if you think about, you know, the way we engage when you turn your TV on or you turn your computer on.

Right.

Amazon is pushing with prime, they're pushing more videos.

They're, they're going after advertiser budgets that they are giving that, that Google is going after.

So as friends of mine in the industry have said, if you work in the Amazon advertising market, it, it's like shooting fish in a barrel.

I mean, it's, it's easy to sell because the value prop is so big when Amazon is leaning in on daily content and sports and all the other things they're gonna do.

They don't want you watching one show on Amazon Prime, they want you there every single day.

Well, advertisers like that, they're gonna spend more money.

Um So, you know, they're gonna compete against youtube and youtube TV on, on ad campaigns.

So I, again, I I think that the environment is changing rapidly.

Uh I believe, you know, like Google has added a lot of value uh to our lives.

I don't think it's all bad.

If you look at what's happening here in California with the fires, you can go and say fire map in California and understand where the fires are all the details.

Whereas emergency help, I mean, so the government likes to point the finger at all the bad things they do.

But there's so many good things that they're doing that just get lost.

And again, we're all impacted living in California with what's happening with these fires.

So, that's a service that I've used, um, on a, on a daily basis to understand, you know, how are my friends and family doing near these fires?