“Where should we go for dinner?” is probably a hot Google search question. Yelp is not happy about that.On Aug. 28 Yelp filed a lawsuit against the search giant, alleging that Google used its dominance to gain an unfair advantage in local search services. The lawsuit came after a federal judge declared Google an illegal monopoly in the same month.“When a consumer conducts a Google search with local intent, Google manipulates its results to promote its own local search offerings above those of its rivals, regardless of the comparative poorer quality of its own properties,” said Yelp CEO Jeremy Stoppelman in a news release, “This anticompetitive conduct siphons traffic and advertising revenue from vertical search services.”This isn't the first time Yelp has accused Google of unfair practices. In 2011, Stoppelman testified in Washington, alleging that Google was taking Yelp's content without giving proper credit, Business Insider reported.Related: Top value fund manager says Google-parent Alphabet is deep-value stockThe stories between Yelp and Alphabet's Google date back longer. In 2009, Google proposed to acquire Yelp for $550 million, but Yelp rejected Google's offer.August was a tough month for Google. On Aug. 14 Bloomberg reported that the U.S. Justice Department was considering breaking up Google, with the potential divestment targets being the Android operating system and Google's web browser, Chrome. Officials are also mulling whether to require the sale of AdWords, the platform Google uses to sell text advertisements, the news service reported.Macquarie described the potential split as the "trial of the century," highlighting it as a significant event in online advertising that "gets surprisingly little attention." The investment firm sees potential gains for ad-tech companies if Alphabet loses this court battle.The DoJ trial against Google's ad tech is scheduled to start on Sept. 9.
Alphabet’s search segment remains the largest revenue contributor.NurPhoto/Getty Images
Alphabet relies largely on search revenueAlphabet (GOOGL) released a solid second-quarter earnings report in July. Revenue was $84.74 billion, up 14% from a year earlier and topping the $84.19 billion expected by analysts. Earnings of $1.89 a share were also higher than the $1.84 per share forecast. The revenue growth was driven by the company’s search and cloud segments, which were up 14% and 29% year over year, respectively. The cloud segment reached more than $10 billion in quarterly revenue and $1 billion in operating profit for the first time. YouTube’s ad sales of $8.66 billion fell short of the $8.93 billion anticipated by analysts.Alphabet’s search segment remains the largest revenue contributor, generating $48.5 billion, which represents 57% of total revenue as of the end of Q2. The DoJ trial could lead to a major setback if the search engine were separated from the company.Alphabet also said it is accelerating AI advancements, building AI models across Google Research and Google DeepMind. “We are innovating at every layer of the AI stack,” Chief Executive Sundar Pichai said.But Justice Department attorneys have raised concerns that Google’s dominance in search gives it an edge in developing AI technology. The government may also consider preventing Google from requiring websites to permit their content to be used for AI products, according to Bloomberg.Related: Alphabet earnings up next with Google parent's AI costs in focusAnalyst rethinks Alphabet stock price target before DoJ trialMorgan Stanley lowered Alphabet's price target to $190 from $205 and kept an overweight rating. The investment firm's analyst identifies three main issues the DoJ and judge aim to address: competitive intensity, data scale advantages, and anticompetitive pricing. Morgan Stanley also expects long-term uncertainty to keep Alphabet's stock valuation lower.TheStreet Pro’s technical analyst, Bruce Kamich, discussed Alphabet stock in mid-August, citing worries that “traders are voting with their feet and selling.”More Wall Street Analysts:Analysts reboot Grand Theft Auto maker's stock price targetAmerican Express stock analyst flags concerning shift in consumer behaviorAnalyst resets Nvidia stock price target before earnings“GOOGL has corrected in the past six weeks but I don't get the feeling that the selloff is over,” Kamich said.David Miller, chief investment officer at Catalyst Funds, expressed a positive outlook on Google's market dominance."I don't have a strong reason for not owning more [Google shares]. It's a company that's going to keep growing, with exceptional margins and a near-monopoly status. It's trading at around 21 times forward earnings,” Miller said. “Looking ahead 10 years, I’ll likely regret not having a larger position because they could easily continue dominating.”Related: Veteran fund manager sees world of pain coming for stocks
