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CEO of Alphabet and Google Sundar Pichai in Warsaw, Poland on March 29, 2022.

Mateusz Wlodarczyk | Nurphoto | Getty Images

The Department of Justice’s latest challenge to Google’s tech empire is an ambitious swing at the company with the potential to rearrange the digital advertising market. But alongside the possibility of great reward comes significant risk in seeking to push the boundaries of antitrust law.

“DOJ is going big or going home here,” said Daniel Francis, who teaches antitrust at NYU School of Law and previously worked as deputy director of the Federal Trade Commission’s Bureau of Competition, where he worked on the agency’s monopoly case against Facebook.

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The DOJ’s antitrust chief Jonathan Kanter has indicated he’s comfortable with taking risks, often saying in public remarks that it’s important to bring cases that seek to challenge current conventions in antitrust law. He said he prefers more permanent remedies like breakups compared to promises to change behavior. That sentiment comes through in the DOJ’s request in its latest lawsuit for the court to force Google to spin off parts of its ad business.

Antitrust experts say the Justice Department paints a compelling story about the ways Google allegedly used acquisitions and exclusionary strategies to fend off rivals and maintain monopoly power in the digital advertising space. It’s one that, if the government gets its way, would break apart a business that’s generated more than $50 billion in revenue for Google in the last quarter, potentially opening up an entire market in which Google is currently one of the most important players.

But, they warn, the government will face significant challenges in proving its case in a court system that progressive antitrust enforcers and many lawmakers believe has taken on a myopic view of the scope of antitrust law, especially when it comes to digital markets.

“If they prove the violations they allege, they’re going to get a remedy that’s going to shake up the market,” said Doug Melamed, a scholar-in-residence at Stanford Law School who served at the Antitrust Division, including as acting assistant attorney general, from 1996-2001 during the landmark case against Microsoft. “But it’s not obvious they’re going to win this case.”

Challenges and strengths

Experts interviewed for this article said the DOJ will face the challenge of charting relatively underexplored areas of antitrust law in proving to the court that Google’s conduct violated the law and harmed competition without benefitting consumers. Though that’s a tall order, it could come with a huge upside if the agency succeeds, possibly expanding the scope of antitrust law for digital monopoly cases to come.

“All antitrust cases are an uphill battle for plaintiffs, thanks to 40 years of case law,” said Rebecca Haw Allensworth, an antitrust professor at Vanderbilt Law School. “This one’s no exception.”

But, Allensworth added, the government’s challenges may be different than those in many other antitrust cases.

“Usually the difficulty, especially in cases involving platforms, is market definition,” she said. In this case, the government argued the relevant market is publisher ad servers, ad exchanges, and advertiser ad networks — the three sides of the advertising stack Google has its hand in, which the DOJ said it’s leveraged to box out rivals. “And here, I think that that is relatively straightforward for the DOJ.”

“One way to look at the latest complaint is that it is the newest and most complete draft of a critique that antitrust agencies in the U.S. and abroad have been building against Google for over a decade,” William Kovacic, who served on the Federal Trade Commission from 2006 to 2011 and is now a professor at George Washington Law, said in an email.

Google, for its part, has said the latest DOJ lawsuit “tries to rewrite history at the expense of publishers, advertisers and internet users.” It claims the government is trying to “pick winners and losers” and that its products have expanded options for publishers and advertisers.

Compared to the DOJ’s earlier lawsuit, which argued Google maintained its monopoly over search services through exclusionary contracts with phone manufacturers, this one advances more nontraditional theories of harm, according to Francis, the NYU Law professor and former FTC official. That also makes it more likely that Google will move to dismiss the case to at least narrow the claims it may have to fight later on — a move it did not take in the earlier suit, he added.

“This case breaks much more new ground and it articulates theories, or it seems to articulate theories, that are right out on the border of what existing antitrust prohibits,” Francis said. “And we’re going to find out, when all is said and done, where the boundaries of digital monopolization really lie.”

High risk, high reward?

CEO of Alphabet and Google Sundar Pichai in Warsaw, Poland on March 29, 2022.

Mateusz Wlodarczyk | Nurphoto | Getty Images

DOJ took a gamble with this case. But if it wins, the rewards could match the risk.

“In terms of the potential impact of the remedy, this could be a bigger case than Microsoft,” said Melamed.

Still, Francis cautioned, a court could order a less disruptive remedy, like paying damages if it finds the government was harmed as an advertising purchaser, or simply requiring Google to stop the allegedly illegal conduct, even if it rules in the DOJ’s favor.

Like all antitrust cases, this one is unlikely to be concluded anytime soon. Still, a key decision by the Justice Department could make it speedier than otherwise expected. The agency filed the case in the Eastern District of Virginia, which has gained a reputation as the “rocket docket” for its relatively efficient pace in moving cases along.

“What that signals to me is that, given the timeframe for antitrust litigation is notoriously slow, DOJ is doing everything that they can in their choice of venue to ensure that this litigation moves forward before technological and commercial changes make it obsolete,” Francis said.

He added that the judge who has been assigned the trial, Clinton appointee Leonie Brinkema, is regarded as smart and fair and has handled antitrust cases before, including one Francis litigated years ago.

“I could imagine that both sides will feel pretty good about having drawn Judge Brinkema as a fair, efficient and sophisticated judge who will move the case along in an expeditious way,” Francis said.

Still, there are hardly any judges who have experience with a case like this one, simply because there haven’t been that many digital monopolization cases decided in court.

 “So any judge who would be hearing this case is going to be confronting frontier issues of antitrust theory and principle,” Francis said.

Immediate impact

Outside of the courts, the case could have a more immediate impact in other ways.

“From the point of view of strategy, the case adds a major complication to Google’s defense by increasing the multiplicity and seriousness of public agency antitrust enforcement challenges,” said Kovacic, the former FTC commissioner. “The swarming of enforcement at home and abroad is forcing the company to defend itself in multiple fora in the US and in jurisdictions such as the EU and India.”

Regardless of outcomes, Kovacic said the sheer volume of lawsuits and regulation can create a distraction for top management and will likely lead Google to more carefully consider its actions.

“That can be a serious drag on company performance,” Kovacic wrote.

The suit could also lend credence to lawmakers’ efforts to legislate around digital ad markets. One proposal, the Competition and Transparency in Digital Advertising Act, would prohibit large companies like Google from owning more than one part of the digital advertising system, so it couldn’t own tools on both the buy and sell side as it currently does.

Importantly, the bill is sponsored by Sen. Mike Lee, R-Utah, the ranking member of the Senate Judiciary subcommittee on antitrust. Lee has remained skeptical of some other digital market antitrust reforms, but his leadership on this bill suggests there may be a broader group of Republicans willing to support this kind of measure.

“An antitrust lawsuit is good, but will take a long time and apply to only one company,” Lee tweeted following the DOJ’s announcement, saying he would soon reintroduce the measure. “We need to make sure competition works for everyone, and soon.”

Rep. Ken Buck, R-Colo., who has backed the House version of the bill, called the digital ad legislation “The most important bill we can move forward” in a recent interview with The Washington Post.

“This is clearly the blockbuster case so far from the DOJ antitrust division,” Francis said. “And I think it represents a flagship effort to establish new law on the borders of monopolization doctrine. And at the end of it — win, lose or draw — it’s really going to contribute to our understanding of what the Sherman Act actually prohibits in tech markets.”

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Oracle boosts its generative AI capabilities as cloud competition heats up

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Oracle boosts its generative AI capabilities as cloud competition heats up

US multinational computer technology company Oracle’s logo is pictured at the Mobile World Congress (MWC), the telecom industry’s biggest annual gathering, in Barcelona on February 27, 2024. The world’s biggest mobile phone fair throws open its doors in Barcelona with the sector looking to artificial intelligence to try and reverse declining sales. (Photo by PAU BARRENA / AFP) (Photo by PAU BARRENA/AFP via Getty Images)

Pau Barrena | Afp | Getty Images

U.S. cloud infrastructure provider Oracle is boosting its generative AI capabilities as cloud competition intensifies and more companies jump into AI.

The AI boom — fueled by the launch of chatbot ChatGPT in November 2022 — is driving an increase in demand for cloud computing services and data centers, as large amounts of data are required in AI model training and the cloud provides access to vast datasets.

Oracle has been introducing generative AI capabilities into its cloud infrastructure and applications to complement the traditional AI already embedded in them.

“The classic AI is very good in terms of detecting patterns or predicting numbers … but you cannot use large language models to predict numbers,” Rondy Ng, executive vice president of applications development at Oracle, told CNBC.

“So we combined the predictive numbering capability with the explained ability in words. So the two together become very powerful and you need both. In the past many years, the number prediction part is already very mature. As part of the product we continue to evolve that and it’s not going to stop. Generative AI is basically the talk of the town right now,” said Ng.

In March, Oracle announced additional generative AI features embedded across applications in finance, supply chain, human resources, sales, marketing, and service. The generative AI capabilities can perform tasks such as generating financial reports and drafting job ads, improving productivity and reducing business costs, Oracle said.

This comes after the firm announced the implementation of generative AI across its technology stack in January.

“We believe Oracle is seeing a renaissance of growth with its AI strategy. [It is] well positioned to be a major beneficiary of the AI revolution,” said Dan Ives, managing director of Wedbush Securities, in emailed comments to CNBC on Wednesday.

“The data Oracle sits on and installed base gives Ellison & co. a major advantage to monetize the software layer of AI,” said Ives, referring to Oracle’s chairman and chief technology officer Larry Ellison.

As firms talked up the generative AI story last year, technology providers have to be one step ahead of the cycle, research firm Gartner said in a report on April 17. “They are bringing GenAI capabilities to existing products and services, as well as to use cases being identified by their enterprise clients.”

JPMorgan has said generative AI and AI could drive incremental IT spending and growth across the software landscape. “Many software vendors, including Oracle, have cited benefits from ongoing investments by businesses into AI technologies,” JPMorgan analysts said in a note on March 12.

Oracle might see an increase in revenue and positive impact on its shares if the company manages to capture a larger-than-expected share of the spending into AI, the U.S. investment bank said. Oracle’s shares have spiked 23.74% in the last 12 months, according to FactSet data.

“Generative AI services [are] basically a huge advantage comparing with our competition. The competition needs to work with different companies and cloud providers for that infrastructure and those kinds of services. We actually take everything into an integrated stack, and we consume that,” Ng told CNBC.

AI growth

Oracle has lagged behind rivals like Amazon, Microsoft and Google in cloud infrastructure service market share, according to Synergy Research Group, which ranked Oracle as the sixth-largest service provider, alongside IBM, globally.

While Oracle was late to cloud infrastructure, the AI boom has increased demand for the company’s AI technology. Ellison had in 2018 dismissed cloud computing as “complete gibberish.”

“Oracle did follow the hyperscalers. [I think] that’s not a competitive concern, say for the rest of 2024 and in the foreseeable future. We’re at the very beginning stage of this whole new generative AI journey,” said Ron Westfall, research director at Futurum Group.

CEO Safra Catz said in March the company added several “large new cloud infrastructure” contracts during the fiscal third quarter. Cloud revenue rose 25% year over year to $5.1 billion, Oracle said.

“Interesting to us is management commentary suggesting its Oracle Cloud Infrastructure backlog is significant and AI isn’t yet really driving revenue, which is expected to be more meaningful in FY25,” said Deutsche Bank analysts on Mar. 12.

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Ellison said in March that a Salt Lake City data center that Oracle is building can fit eight Boeing 747 airplanes nose-to-tail.

Laying out future market opportunities, Ellison said he sees more national and state government applications being run on platforms like Oracle Cloud Infrastructure, and added that the firm is negotiating sovereign regions with a number of countries.

“Another area [where Oracle] is ahead of the curve, although everybody’s jumping on it, is in terms of offering sovereign AI cloud – a cloud that operates exclusively within a country,” said Westfall.

“More and more countries are going to say when it comes to gen AI, we want all that information, all that data stored within the country.”

In April, Oracle said it would invest more than $8 billion in Japan over the next 10 years to grow cloud computing and AI infrastructure.

Oracle and Nvidia in March announced they will be partnering up to deliver sovereign AI solutions to customers around the world.

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How working for Big Tech lost ‘dream job’ status

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How working for Big Tech lost 'dream job' status

Despite blockbuster earnings from giants such as Alphabet and Microsoft, layoffs continue to ripple through the tech industry.

Layoffs.fyi, a platform monitoring job cuts in the tech sector, recorded more than 263,000 job losses in 2023 alone. As of April, there have been more than 75,000 job losses in the industry so far in 2024.

“So instead of rewarding the growth that we saw [tech companies] all pursue years ago, they’re now rewarding profit,” said Jeff Shulman, professor at the University of Washington’s Foster School of Business. “And so the layoffs have continued. People have become used to them. Regrettably and sadly, it seems that the layoffs are going to be the new normal.”

Even though mass tech layoffs continue, the labor market still seems strong. The U.S. economy added 303,000 jobs in March, well above the Dow Jones estimate for a rise of 200,000, with the unemployment rate edged lower to 3.8%.

According to Handshake, a popular free job posting site for college students and graduates, the tech layoffs have prompted new workers to seek other opportunities. The share of job applications from tech majors submitted to internet and software companies dropped by more than 30% between November 2021 and September 2023.

“Part of the reason why this is happening is because stability is such a major factor in students’ decisions around what types of jobs they apply to and what types of jobs they accept,” said Christine Cruzverga, chief education strategy officer at Handshake. “They’re looking at the headlines in the news and they’re paying attention to all of the layoffs that are happening in Big Tech, and that makes them feel unstable.”

Mass layoffs have eroded the shine of the tech industry, which is why workers are questioning whether getting a job in the tech industry should still be regarded as a “dream job.”

“For the people who are chasing … a tech dream job, I think keep your options open and be realistic,” said Eric Tolotti, senior partner engineer at Snowflake, who got laid off from Microsoft in 2023. “Don’t just focus on one company and feel like you have to get into that one company because it’s the dream.”

Watch the video to learn about tech workers’ sentiments, considerations for aspiring Big Tech employees, and more.

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Digital ad market is finally on the mend, bouncing back from the ‘dark days’ of 2022

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Digital ad market is finally on the mend, bouncing back from the 'dark days' of 2022

A view of Google Headquarters in Mountain View, California, United States on March 23, 2024. 

Tayfun Coskun | Anadolu | Getty Images

Advertising is so back.

After a brutal 2022, when brands reeled in spending to cope with inflation, and a 2023 defined by layoffs and cost cuts, the top digital advertising companies have started growing again at a healthy clip.

Meta, Snap and Google all reported first-quarter results this week, with revenue growth that exceeded analysts estimates and at rates not seen in at least two years. Their financials were primarily driven by improvements across their ad businesses.

The companies entered earnings season in a favorable position in that their numbers would be comparable to historically weak periods. But investors and analysts were cautious in their expectations, given the political and economic instability in various markets across the globe and the ongoing challenges posed by high consumer prices.

Meta, which was the first in the group to report results, put some fears to rest on Wednesday, showing a 27% jump in first-quarter revenue to $36.5 billion. For the Facebook parent, it was the strongest rate of expansion since 2021.

“When Meta was in its dark days two years ago, the company knew what they had to do to get back on track,” analysts at Bernstein wrote in a note after the earnings report. “To their credit, Meta defended the core.”

That dark era was defined by the combination of macroeconomic challenges and Apple’s iOS privacy change, which made it harder for social media companies to target users with ads. Meta lost two-thirds of its value in 2022 and was forced to dramatically cut headcount.

A smartphone is displaying Facebook with the Meta icon visible in the background.

Jonathan Raa | Nurphoto | Getty Images

Meta responded by rebuilding its ad system, with the help of hefty investments in artificial intelligence, so it could deliver value to brands despite the roadblock imposed by Apple. The stock almost tripled in 2023.

While the company’s first-quarter results beat estimates across the board, the shares tanked on Thursday after CEO Mark Zuckerberg focused his post-earnings commentary on the many ways Meta is spending money in areas outside of advertising, notably the metaverse.

“We’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it,” Zuckerberg said on the earnings call late Wednesday.

The Bernstein analysts, who recommend buying the shares, said Meta’s ad revenues were led by strength in online commerce, gaming, entertainment and media, and that China-based ad demand “remained strong.” Meta has benefited from a surge in spending from Chinese discount retailers like Temu and Shein.

“Without sounding overly religious, you either believe in Zuck or you don’t, and we do,” the analysts wrote.

‘Incrementally positive’

Alphabet followed on Thursday, reporting ad revenue for the first quarter of $61.66 billion, up 13% from the year prior, with YouTube ad revenue jumping 21% to $8.09 billion. The company as a whole grew 15%, a rate last seen in 2022, and the stock shot up 10% on Friday, the sharpest rally since 2015.

During the quarterly call with investors, Alphabet finance chief Ruth Porat said the company is “very pleased” with the momentum of its ad businesses.

Analysts at Citi wrote in a note on Friday that the broader advertising environment is “clearly strengthening,” pointing to accelerating growth within Google Search and YouTube.

“We emerge from Q1 results incrementally positive on shares of Alphabet,” the analysts wrote, maintaining their buy recommendation.

Snap shares rocketed 28% on Friday after the company reported a 21% increase in revenue to $1.19 billion, the strongest growth in two years. In each of Snap’s past six quarters, sales either grew in single digits or declined.

The company said it’s seeing accelerating demand for its ad platform and benefiting from an improved operating environment, according to its investor letter.

Deutsche Bank analysts wrote in a report on Friday that Snap delivered a “much-needed” beat, and that its ad stack is back on track. The analysts, who have a buy rating on the stock, said investors appear “most encouraged by the ad platform investments, which are showing increasing promise.”

Despite the rally, Snap shares are still down 14% for the year.

Investors will get a clearer picture of the digital ad market next week, with Pinterest reporting on Tuesday alongside Amazon, which has emerged as a giant in online ads. Reddit will follow on May 7, reporting earnings for the first time since the social media company’s initial public offering in March.

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