Google proposes moving ad business to Alphabet to keep regulators at bay | Hacker News Reader

Google proposes moving ad business to Alphabet to keep regulators at bay

arstechnica.com

105 pointspseudolus58 comments

I'm genuinely shocked at the lack of quality discussion here. Did anyone actually try reading the article? The concept here is not to obfuscate things but rather to de-couple Google's search engine and Google's Adwords products.

Most opinion in this thread is "lol alphabet is google" which is apparent to everyone. Of course they are functionally the same entity, but someone whose job depends on it has proposed this as a solution. Are we really to assume that they just woke up and decided to turn their brain off? There's clearly going to be some actual change that attempts to satisfy regulators here.

We can look at history and possibly speculate how this looks, and we can also identify a few things.

1. Google is a search engine

2. Google the company sells AdWords as a product to advertisers.

3. Google benefits tremendously from owning both of these things.

Here's my take: Google wants to decouple their search and ads teams, move ads to a separate entity that works as an advertising marketplace, generate revenue there. Search will now sell its advertising space, likely in a way that can also be taxed, to the highest bidder rather than itself.

I also predict that google will want to pressure other platforms, which will enable them to break into other markets. META is the second largest advertiser online, but they do all of their advertising on two platforms, Instagram and Facebook. If google can push for the forced decoupling, then it will likely also apply to META. They can then swing their AdsWords product on top of FB/IG and start to eat back some of the traffic that they have been losing in recent years[1]. It's a bit of a gamble, but Google is betting on their AdWords software to be stronger, and a lot of the history would agree.

Also, now that I think about it, this has pretty big implications for user data sharing cross platform. Now you have to formalize the way that personal information is exchanged for the purpose of advertising.

[1] https://www.statista.com/statistics/242549/digital-ad-market...

> [...] but rather to de-couple Google's search engine and Google's Adwords products.

I don't think this is what this is about. From what I understand, this is specifically about Google Ad Exchange (which is for display ads not on Google properties).

The problem that a lot of people have is that Google both runs the auction for many ad networks, and puts bids in the auction as part of Google Display Network. The accusations are that Google's Ad Exchange favors Google Display Network.

The proposal is about spinning the Ad Exchange as another Alphabet company.

Because we have seen decades of organizations lying and bullshitting, they have no credibility whatsoever. There is already a lawsuit against them for rigging auctions[1], and a DoJ antitrust case [2] against them.

As long as both continue to be owned by the same parent organization, there is no trusting that they will not collude when the stakes are high enough.

[1] https://www.benzinga.com/government/20/12/18828093/google-fa...'

[2] https://www.benzinga.com/analyst-ratings/analyst-color/20/10...

Heck there is even a lawsuit of independent companies colluding to suppress wages in 2014 that [3]. One of these companies was.. Google. Even after they lost the case, the average payout was around $3800 for a class made up mostly of software engineers.

[3] https://www.seattletimes.com/business/judge-rejects-3245m-se...

We get it, but many think that this is an attempt to appear to decouple the search engine and the Adwords projects. People on both sides of the divide will be partly compensated with stock in the parent company, so everyone's financial incentives will still be to maximize profit for Google plus Alphabet/AdWords. So the "independent" company may still favor Google products.

But I suppose putting AdWords in a separate division might make it easier for antitrust regulators (US, EU or both) to pressure the company into a true spinoff (into a truly independent company).

Did you read the article? This isn’t about not maximizing alphabets profits. The issue is with how the current add exchange favors Google’s web products despite not all ads being ran on google. This solution moves the ad exchange to its own business entity which would decouple it from .com

Both enities will be under common owenership. Does the search business share data with the ads business. If yes, I fail to see how this levels the playing field.

Please explain.

Google wants to make concessions before they have even been sued. DOJ has yet to file a complaint. This is a defendant with "limitless" resources to defend itself against meritless claims. To me, this suggests culpability.

Corporations have so much more slack than people. If got caught serially robbing banks I don’t think the justice department would accept my personal 5 point plan to cut down on heists.

I think people are understandable my skeptical that a megacorp with a known history of anticompetitive behavior will propose a solution that is effective at stopping its only monopoly.

It's very rare for corporations to do things as clearly illegal as robbing banks would be. Instead, this sort of dispute with regulators is typically around borderline activities. Since the final word on what is allowed or not in any given situation belongs to the regulator, it's common for companies to propose various solutions to see if a regulator would find them sufficient.

(Disclosure: I used to work for Google, in the part that this is talking about separating)

Yeah, a Chinese wall like that worked pretty wall for journalism back when it was a profitable endeavor. Google certainly is.

> Are we really to assume that they just woke up and decided to turn their brain off? There's clearly going to be some actual change that attempts to satisfy regulators here.

Though I don't claim to fully understand what the genuine legal ramifications would be (partly because the proposal, as described in the Ars article, is quite vague), saying that the only reasons someone would propose this would be if it's Totally Obviously Fine or if they need their heads examining seems quite naïve.

First of all, we've seen plenty of instances of fairly high-profile companies trying to get around regulations in ways that are (effectively) laughed out of the room by regulators.

We've also seem similar instances where we the tech-savvy (and largely non-lawyer) public would laugh them out of the room, but the regulators took them 100% seriously and didn't question their (to us) obvious deception at all.

Given how vague the article is, this could even be an attempt to float this idea through the press to see how people and the DoJ react before making the proposal formally.

I think in short, the problem is that decoupling anything from Google by putting it under Alphabet doesn't pass the sniff test, but if you're looking at things from a super pedantic perspective, you could think it might fly to a court.

You have too much faith in companies that set up elaborate offshore entities in tax havens just to escape paying any taxes in the countries they actually operate out of.

Ever wonder why all these honest and upstanding companies seem to have their HQs in Ireland of all places?

You say that like it is a bad thing?

They follow the law. If you find fault with the law fix it.

If you don't like tax deductions, don't begrudge people for taking them. Remove them.

Yes sure, I'll use my billions I saved from crooked tax law to lobby for less crooked tax law. That's how it works right?

do you take deductions on your personal tax filings or voluntarily deny them?

Thats quite a straw man. There's a pretty big difference between using a benefit as intended and taking advantages of loopholes in tax law by creating multiple shell entities around the globe. You can argue they have a duty to shareholders to optimize profits, but let's not pretend it's the same thing as paying your taxes as the law intended.

As a US citizen you can't declare your income was earned in Ireland and avoid or reduce paying US federal income tax. You can't avoid US federal income tax even if you lived in Ireland and worked for an Irish company for that year.

You can renounce your citizenship which is essentially the same thing.

You can't just renounce it. It's a quite expensive process. And naturally, once you have, you no longer receive any of the benefits of US citizenship. Whereas the companies in question get to avoid taxes while retaining the benefits of being located in the US.

>Whereas the companies in question get to avoid taxes while retaining the benefits of being located in the US.

My understanding is that they are treated like any other global company located outside the US that is doing business within the US.

It seems as arbitrary as the US policy of taxing expats living and working in foreign countries just because they were born on US soil.

It is much more practical to tax both individuals and corporations when and where they make their money opposed to where they originated.

Of course to do so would likely require a shift from corporate taxes to more sales and capital gains taxes, which is a good idea in its own right.

They're not doing business with another company in any meaningful sense. There's multiple companies set up with the same owners so they can pretend the one in the lower tax region makes all of the revenue, often through IP licenses that look like expenses to the entity in the higher tax region. It's financial engineering that doesn't reflect where value is actually being created or revenue captured.

I'm not a CPA, but my understanding is as a US citizen, your closest analog would be setting up an irrevocable trust. But, then you no longer have control of those assets. Owners of these shell corporations are able to effectively control their assets. Naturally, if they were legitimately doing business with a 3rd party company, they'd have no say over what that other company can do with their revenue. That's a key difference between what's a normal business operation and what's a shell game for tax avoidance.

I still don't see how you would separate legitimate use of the law from illegitimate if both cases follow the letter of the law. In the case of the double Irish, it's largely irrelevant because the US law was fixed under Trump, as was the Irish law. Even before, us owners of alphabet had to pay capital gains on any realized tax so there was way for an individual to profit.

I imagine we will have trouble finding common ground given that I think corporate taxation is a bad way to collect revenue to begin with.

> Did anyone actually try reading the article? The concept here is not to obfuscate things but rather to de-couple Google's search engine and Google's Adwords products.

But the entire latter half of the article is dedicated to explaining how the proposed change is superficial and doesn't address the regulator's concerns. It asks, "Is there a difference between 'Google' and 'Alphabet?'" and the article's conclusion is basically a no.

yes, because no Alphabet employee will ever talk to a Googs employee where one happens to work in ads and the other in search. Those conversations will never happen to discuss things that could work for the betterment of either/both.

do you really think that Alphabet would do anything to lower their profits by making ads less viable and search less ad driven?

Are you proposing they change "Google Chrome" to "Alphabet Chrome"?

Add this topic to the ever growing list of topics that are just blind faith nonsense every time they come up. See also:

- Apple

- Elon Musk

- Electron

- React

- Intelligence agencies

- Cryptocurrency

- Literally anything outside of tech where you just have a huge swath of people confidently expressing what they consider to be fundamental truths without actually understanding the basics of the topic.

Am I missing something here? Ars Technica article from OP is dated 7/8/2022 but the referenced source is from February 2020

> The US Justice Department is gearing up for a possible antitrust lawsuit against Google's ad business, and a new report from The Wall Street Journal [1] outlines a "concession" Google is proposing in response to the investigation. Google might split up some of its ad business and move it to Google's parent company, Alphabet.

Even the archive link [2] shows this is from over two years ago from when archives were taken

[1] https://www.wsj.com/articles/justice-department-ramps-up-goo... [2] https://archive.ph/L9NwY

Ars accidently linked the wrong WSJ article. They meant to link today's https://www.wsj.com/articles/google-offers-concessions-to-fe...

As part of one offer, Google has proposed splitting parts of its business that auctions and places ads on websites and apps into a separate company under the Alphabet umbrella

aha! Thank you for figuring this out and taking the time to reply

Indeed, I can't seem to find the crucial part from Ars in the WSJ article, namely the : "As part of one offer, Google has proposed splitting parts of its business that auctions and places ads on websites and apps into a separate company under the Alphabet umbrella, some of the people said. That entity could potentially be valued at tens of billions of dollars, depending on what assets it contained."

somehow I think they'll be able to see through that one

and yet they can't do anything about it. that's the gambit

countries are literally writing legislation to explicitly target google

they are more than capable of modifying it to come up with whatever corporate laundering they can invent

And what will be google 's business?

They would split the exchange side of their ad business from platform side, which is Google.

That's the whole reason they are being sued because they run both sides of the ad marketplace.

Google's business would be the same. Sell ad space.

To add to that, the exchange is specifically for the display network, so websites and app that aren't Google properties.

This part of Google, while still worth a couple billions in revenue, is an increasingly smaller part of the whole.

But if google makes this change, it will likely follow that other (more self-referential) companies might also follow.

Funnelling customers to Alphabet's advertisers.

I was going to say, isn't 90 percent(ish) of Google's revenue advertising and 80 percent(ish) of that search advertising? What is Google's business if not to sell ads?

Collecting and selling user data is a business.

License some kind of IP to Alphabet for a rate that happens to be exactly what their operating expenses are?

there are at least two if not 3 or more ad divisions at google

1) ads on search results

2) visual ads (banner ads), used to be double-click

3) ads on Android apps

personally I want the search ads. If I search for plummer or doctor or even database or jeans or apple pie, I want to see ads

I don't think search and ads based on the query should be decoupled. That will be arguably worse for me, not better

banner ads and mobile ads can die in a fire

Why do you want to see ads in your search results? Wouldn't you rather see results based on quality rather than who can pay the most?

First off, Google already tries to do show quality and the clearly mark the ads so you can skip them and go to non-ads

Second, even a search engine that doesn't take ads does not know that the content it's scanning aren't ads. So you'll still see the ads, it will just be more hidden. 9 out of 10 product review sites are all effectively paid ads AFAICT.

Third, when I search for a product I want to know what's available. Companies tell you what's available via ads. Maybe it's because I'm old but before the internet we all used to buy and subscribe to magazines. We did it not just for the articles but also for the ads, to see what was available. BYTE (https://archive.org/details/byte-magazine) , Compute! (https://archive.org/details/compute-magazine), Creative Computing (https://archive.org/details/creativecomputing), Wired (https://archive.org/details/eu_Wired-1995-12_OCR), PC Magazine (https://archive.org/details/pc_magazine). They were all full of ads and we bought them partly for the ads. Same with gaming magazines.

I don't have a problem with ads, I only have a problem with tracking. Showing an add based on my immediate search or based on the content of the page the ad is one doesn't bother me. (although intrusive ads do bother me)

>Second, even a search engine that doesn't take ads does not know that the content it's scanning aren't ads. So you'll still see the ads, it will just be more hidden. 9 out of 10 product review sites are all effectively paid ads AFAICT.

Promoted products or promoted content needs to be disclosed, at least in the US.

>Third, when I search for a product I want to know what's available. Companies tell you what's available via ads. Maybe it's because I'm old but before the internet we all used to buy and subscribe to magazines. We did it not just for the articles but also for the ads, to see what was available.

I think you are looking for a search engine for ads if you would like to find out what are the newest promoted products and services from companies. Such search engine would actually be useful because of the aforementioned reason.

Would you be fine to pay for a search engine that does that, then? Without a direct payment or ads, that search wouldn’t be possible.

Imagine how many people primarily use Desktop YouTube and have been watching since 2006, but have always had an ad blocker and have never seen a single video ad. There’s probably actual hundreds of millions there that have been ‘lost’ over the decade. It’s basically profiteering with the only difference being that Google doesn’t care because allowing ad-blockers increases their market dominance.

Some x-googler's started a paid search engine

https://neeva.com/

They're hoping you'll pay $50 a year

There should be some sort of rules that consider subsidiaries to be part of the parent company for regulatory purposes.

There are. There are also rules about how subsidiaries can and can't cooperate, self-deal, and collude under various circumstances.

So have a completely separate company and then make a deal with that company to find them and give them office space in Google's office and give them access to their intranet.

Absolutely. This doesn't seem like it would be any real change.

more info at the WSJ https://www.wsj.com/articles/justice-department-ramps-up-goo...

https://archive.ph/L9NwY

Will they keep the data siloed?

Depending on the "bet" (alphabet company) there can be little to zero separation between them and Google (full access to internal systems, etc) or it can be run as a fully separate company with no special access. This will depend on the details.

I mean, what will regulators think if Google Search and Alphabet share user data, but not responsibilities?

do they really think we are that stupid?

Us? No. But regulators probably...

Reply on news.ycombinator.com