As US regulators weigh options to break up Google LLC's dominance in search, experts say policymakers must consider how the marketplace is evolving rather than how it operated in the past.

In August, the US Department of Justice secured what many experts considered a key win against Google-parent Alphabet Inc. in federal court when Judge Amit Mehta ruled that Google operated as a monopolist in the search marketplace. The ruling centered on Google's distribution agreements with smartphone manufacturers, including Apple Inc. and wireless carriers such as AT&T Inc., Verizon Communications Inc. and T-Mobile US Inc. The agreements, valued at $26 billion in 2021, ensured Google was the default search engine on mobile devices.

The DOJ praised the US District Court for the District of Columbia's decision in United States v. Google, as did some competition policy experts, arguing it would help foster a more level playing field for online search engines and search engine advertising. However, critics said the decision failed to account for the volatility of consumer preferences and the changes happening in the search engine market.

"Search is being too narrowly defined in terms of a monolithic process of information acquisition," said James Czerniawski, senior policy analyst in technology and innovation at Americans for Prosperity, an advocacy group. "That's just not reflective of where the market is necessarily going when we're looking at how young users are using it."

Changing habits

For decades, Google has held a commanding lead over the global search market, tallying a more than 90% share in August across device types, according to web traffic analysis website StatCounter.

However, younger users are increasingly turning to social media over traditional search for both information and shopping. A survey this year from Forbes Advisor and Talker Research found a 25% reduction in Google usage by Generation Z respondents across various topics as compared to Generation X respondents. Younger users are instead turning to Beijing ByteDance Telecommunications Co. Ltd.'s TikTok Inc., Meta Platforms Inc.'s Instagram LLC and Google's own YouTube LLC.

The decline is especially apparent in key topics such as gift ideas, hair and makeup, and well-being and fitness. While 86% of Gen X respondents use Google to search for gift ideas, only 28% of Gen Z respondents do the same. The divide was similarly wide in the hair and makeup category with 82% of Gen X respondents using Google versus just 25% of Gen Z respondents.

"There's a significant movement toward using social media platforms for more than just social interactions; platforms such as TikTok and Facebook Marketplace have become vital search and shopping tools," Forbes Advisor wrote.

In terms of brand name searches — a key metric for advertisers — Forbes Advisor found that while 94% of baby boomers search for brands on Google, only 64% of Gen Z use Google for those searches.

Businesses that depend on search engine optimization for e-commerce and brand awareness will need to closely track this, as they could find their web traffic taking a significant hit, Czerniawski said.

AI evolution

Beyond demographics, AI is also expected to impact the search marketplace, said Zeno Mercer, senior research analyst at VettaFi.

"Search is going to get more multimodal and more understanding," Mercer said. "Whether Google owns that or not, the scope of searches is about to expand a lot."

Deep-pocketed AI players and well-funded startups are all eyeing the search market. Microsoft Corp.'s Bing, the second-most used search platform with almost 3% of the market, has added an AI chatbot, Copilot. Meanwhile, OpenAI has announced plans for a search engine called SearchGPT. Funding for AI search startups has skyrocketed in 2024, according to an analysis from S&P Global Market Intelligence.

Need for regulation

Just because the search marketplace is evolving, does not mean that regulators will or should hesitate to regulate Big Tech more broadly, or Google in particular. The Federal Trade Commission under Lina Khan and the DOJ's Antitrust Division have both pursued a strategy of increased regulatory scrutiny in recent years.

"The big takeaway for me is that you're seeing a paradigm shift of increased scrutiny," Czerniawski said.

In addition to the DOJ's suit targeting the search marketplace, the department has also sued Google over allegations that it illegally monopolized the marketplace for buying and selling online ads. US District Judge Leonie Brinkema began hearing opening arguments in the case on Sept. 9, and the case's trial is expected to last four weeks. Meanwhile, the FTC in August filed an amicus brief in an ongoing antitrust case focused on the Google Play app store. The case was initially brought by online video game maker Epic Games Inc.

"I think it makes sense for the DOJ to vigorously pursue antitrust, especially in the tech space," said Margaret Daun, a talk show host and general counsel and former chief corporation counsel for Milwaukee County, Wis.

As so many online services are free, relying on ad support and user data, Daun said the market has divorced what consumers pay for these products from the actual cost. Thus, regulation is needed for safeguards.

"The price of the good isn't reflecting all of the full panoply of plus and minus," Daun said. "When that is divorced and you've created a monopoly, that is really dangerous."

Others note that it is not just Google that has used its existing dominance to further grow its clout in the marketplace. Apple continues to keep its ecosystem walled off, though iPhone users can select Google's Chrome browser as their default browser over Apple's native Safari.

"I can't even make Google Maps my default map provider when I open up certain links," said Mercer of VettaFi. "That feels like a very closed ecosystem."

Even in this environment of increased regulatory scrutiny, most Wall Street analysts expect the major tech giants to weather the coming headwinds.

"We view the regulatory landscape for tech as gaining some momentum over the next year, although the impacts to the business models of the tech stalwarts we believe to be relatively insulated for now," Wedbush Securities analysts wrote. "The Street will continue to view this as a background risk for the tech sector as it all plays out in the court system."