News of $2.7 billion Google fine punishes Alphabet stock
Alphabet, the parent company of Google, felt the sting after the announcement that Google is to receive a $2.7 billion dollar fine as a result of the company manipulating shopping search results.
Fine Larger Than Anticipated
The fine is higher than the $1 billion that was initially advertised and has left stockholders worried. The subsequent sale of stock led to a drop in the value of Alphabet by 1.1%, which equates to a loss in value of $8.5 billion. The dominant search engine was punished for manipulating search results in order to promote more of its own products, and thus restrict the appearance of rival price comparison sites.
Alphabet Live Chart (5 Minute Interval)
Bad News Yet To Come
However, this fine is not the end of things – it’s expected that the EU will carry out deeper investigations. In the future, Google will need to change how it displays comparative shopping results on searches performed within the EU. It’s unclear exactly how much this affects total revenue by, but around one-third of Google’s total revenue – a hefty $30 billion – comes from the EU. Early estimates suggest the effect could be 1.5% lower revenues and 2.6% lower operating income.
Effect On Other Companies
As a result, tech-heavy Nasdaq saw its total value fall by 0.4%, though this is not entirely due to Alphabet – Facebook also saw its value drop by 1%. Reports believe this drop is as a result of other EU-based technology firms witnessing a change in the way they are forced to operate. Not all companies were hit, however: Amazon remained clear of any damage, due to the announcement made just a few days prior by commissioner Margrethe Vestager who said that Amazon is not seen as a direct competitor to Google.
The future is not entirely clear and it looks as if Google will be hitting back with an appeal against the ruling. While noticeable, a 1% fall in value has not dampened the spirits of many long-term Google investors, who still see an incredibly bright future following this hurdle in Google’s strategic plans.