Google is considering spinning off the part of its business that deals with auctions and advertising on websites and apps into a separate entity under Alphabet.
Sources close to the company told the Wall Street Journal. According to them, it is a sign that legal and regulatory pressure on the tech giant is reaching its peak.
The new entity could be valued in the tens of billions of dollars. It will all depend on what assets Google will remove from its control and incorporate into the entity.
It is difficult to know whether the proposal would be an effective measure to avoid a lawsuit. Antitrust representatives have made it clear that they are interested in fundamental changes in the way Google conducts its advertising business, rather than formal structural changes.
The U.S. Department of Justice is investigating whether Google has abused its role as a digital advertising intermediary.
Antitrust observers have long predicted a second lawsuit against the company. Two years ago, the suit was filed against Google's dominance in online search. Now similar complaints have been filed against the tech giant in advertising for doing business at the expense of fair competition.
Following the investigation, Google is awaiting a judge's decision on a motion to dismiss, on the grounds that the lawsuit is "riddled with inaccuracies and unenforceable."
The company says it is "constructively engaging with regulators" and confirms that it "has no plans to sell or exit this business." However, we can see that some of the new solutions Google has begun to examine closely.
Market experts believe that any move by Google to restructure parts of its ad tech business could shake up the digital advertising industry.
According to eMarketer, advertisers expect to spend more than $600 billion on digital advertising worldwide this year, with Google playing a key role in driving those sales.
Last year, Google generated $31.7 billion in revenue from brokering advertising on other websites and apps, accounting for about 12 percent of Alphabet's total revenue.
