Google-investment-london-658×370.jpg” alt=”google-investment-london” width=”658″ height=”370″ /> Google has expanded into countries such as the UK (pictured), but will strict antitrust laws lead it to look more to developing markets? (Photo by Tolga Akmen/AFP via Getty Images)

Google’s future is balanced between opposing forces: on the one hand a continuing global shift towards digitisation, and on the other a growing tide of Big Tech scepticism, culminating in a US government antitrust lawsuit filed on 20 October.

In addition, the economic fallout from the Covid-19 crisis has further complicated the company’s overseas investment plans, signalled by its withdrawal from a significant office space expansion deal in Dublin and Toronto’s waterfront smart city project.

From its inception in 1998, as a search optimisation start-up spun out of California’s prestigious Stanford University, co-founders Larry Page and Sergey Brin had a clear vision: “Google is not a conventional company. We do not intend to be one.” But with revenues totalling $161.9bn, and with 118,899 employees, in 2019, the company’s sheer size and global influence make it hard to argue that it has not become part of the establishment.

Where is Google in the Alphabet?

In October 2015, Page and Brin restructured Google and its associated business under a holding company called Alphabet. Broadly speaking, Google LLC includes the company’s cash-rich businesses, including search and advertising, leaving the two founders to pursue more entrepreneurial endeavours under the Alphabet umbrella.

Google headquarters have room to grow

Headquartered in Mountain View, California, Alphabet owns and leases approximately 100,000m² of building space on the Google campus, with approximately 24ha of undeveloped land to accommodate “anticipated” future growth.

According to Investment Monitor’s own research gathered from GlobalData and supplemented by Google’s office location website, the company has a total of 116 global locations, including office space, research and development (R&D) sites, headquarters and subsidiaries, and 21 data centres.

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In September 2020 Google abandoned plans to rent 19,000m² of office space in Dublin, which would have accommodated about 2,000 workers. Dublin has been Google’s European headquarters since 2003 and is Google’s largest HQ outside the US, employing more than 8,000 staff. Pulling out of the deal is seen as a significant bellwether of the impact the Covid-19 crisis will have on the company’s future investments overseas.

Google gobbles up smaller companies

Alphabet’s international revenues accounted for approximately 54% of its total revenues in 2019, and the company has said it plans to “continue to grow internationally” and “continue to invest in acquisitions”.

Alphabet’s first big acquisition after its initial public offering in 2004 was buying YouTube for $1.65bn in 2006. The increasing volume of acquisitions since has allowed the company to grow without the R&D spend it would have otherwise needed to improve its products and services. According to CB Insights and Crunchbase, the company averaged 1.6 acquisitions per month from 2012 to 2017, acquiring 118 companies in total. In comparison, Microsoft made 66 acquisitions in the same period and Apple made 62.

A large proportion of Alphabet’s emerging technologies are brought into the fold through acquisitions, which it says “remain an important part of our strategy and use of capital”. In 2019, Google spent 16.1% ($26bn) of its total revenue on R&D, compared with 15.7% ($21.4bn) in 2018, slightly up from 15% in 2017 and 15.5% in 2016, though it did increase its R&D headcount by 24% between 2017 and 2018.

Will antitrust lawsuits force Google to restructure?

This acquisition growth strategy has come up against significant challenges. On 20 October the US government filed a lawsuit against Google for its market dominance in search and advertising as well as mobile operating systems, with its Android system used on 74.6% of the world’s mobile phones in July 2020, according to Statista.

The lawsuit may result in recommendations that Google sell off its Chrome browser business, currently the most used browser in the world. It has been reported that a group of Alphabet shareholders had urged a strategic restructuring of the company before regulators could force breaking up the behemoth. The board rejected the proposal.

Aside from the Department of Justice’s lawsuit, a special congressional committee reviewing the need for tighter competition laws in light of Big Tech’s dominance reported “abuses of monopoly power” in findings released in October. Recommendations included tougher restrictions on the acquisition of smaller companies.

Google has acquired about 230 companies in the past 20 years, with the rate of acquisition accelerating with the company’s market dominance, according to antitrust expert and head of the Department of Economics and Public Policy at London’s Imperial College Business School, Professor Tommaso Valletti. “None have been blocked, and almost all of them were not even vetted. Currently, enforcers are too timid. So, in the short term I think the company will continue with business as usual,” he says.

The company’s antitrust woes are not limited to the US. The European Commission has fined Google:

• $2.7bn in 2017 for favouring its own products and services in its search results
• $5.1bn in 2018 for unfairly promoting its Android operating system on phones
• $1.77bn in 2019 for blocking adverts from rival search engines.

Will Google look to emerging economies due to a tide of Big Tech scepticism in the West?

Antitrust investigations in the US and Europe are not the impetus for Google moving into emerging markets, according to Dr Jonathan Liebenau, associate professor of technology management at the London School of Economics. “The perception that emerging economies have less stringent regulatory frameworks is not necessarily the case. There may be a lack of capacity for monitoring and regulating market structures to mitigate monopoly practices or data privacy infringements, but no country allows such practices,” says Liebenau.

On the question of whether Google will look to emerging economies for acquisition potential, Liebenau sees emerging technology acquisition being solely driven by analytics and not part of a geographical strategy. “The question of whether a start-up in Nairobi or Lagos becomes a likely target for Google has much less to do with any kind of Africa strategy, and is more about the fact that these companies are now visible to Google and to those of us who know about technology products and patents in particular areas and their potential utility,” he says.

Alphabet is not only facing charges of monopolistic behaviour, but also a public backlash around data privacy. In May 2020 Google abandoned plans to build a smart city on Toronto’s waterfront, citing pressures of the global pandemic, after much public concern around data privacy. Valletti says Google was trying to privatise a public space without proper engagement of stakeholders and data transparency. He points to a similar project in Barcelona, conducted very differently, where authorities first consulted with all stakeholders and provided a publicly accessible data set repository.

From smart cities to search optimisation, Alphabet’s portfolio of investments is a broad church that includes Waymo’s self-driving cars, Deep Mind’s artificial intelligence research, Calico’s anti-ageing life sciences, and Loon, which brings the internet to rural areas via high-altitude balloons. With a consistently growing income stream from Google’s lucrative search and advertising businesses, Alphabet is likely to continue to pursue these high-risk, high-reward ‘moonshots’, thereby remaining somewhat true to the founders’ wish of remaining ‘unconventional’.