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January 25, 2023

Join Axios' Eugene Scott and Alexi McCammond Feb. 1 at 8am ET in Washington, D.C., for a News Shapers event featuring policymakers from both sides of the aisle offering an inside perspective on the agenda for the 118th Congress.

  • Guests include Rep. Nanette Barragán (D-Calif.), Rep. James E. Clyburn (D-S.C.), Sen. Thom Tillis (R-N.C.), and Rep. Nancy Mace (R-S.C.). Register here to attend in person.

🔍 Situational awareness: EU regulators are preparing an antitrust probe into Microsoft over its video and messaging service Teams, Politico reports.

Today's Login is 1,242 words, a 5-minute read.

1 big thing: Suit threatens Google ad empire

Illustration of a giant Google logo next to a small person pulling a slingshot aiming at the logo.

Illustration: Aïda Amer/Axios

The U.S. government's latest legal assault on Big Tech asks a court to make Google sell off a chunk of its massive, phenomenally profitable digital advertising business, Axios' Ashley Gold and Sara Fischer report.

Why it matters: The Department of Justice's new suit against Google, filed Tuesday, brings to a crescendo an antitrust campaign against tech's most powerful giants that has consumed both Washington and Silicon Valley for half a decade — and is likely to take just as long for courts to resolve.

Yes, but: There's no guarantee that this latest case, even if the DOJ wins it all, would end or even limit the company's dominance of the online ad industry.

By the numbers: The part of Google's ad machine that DOJ wants to see spun out involve the company's "network" ad business, which sells ads on others' inventory. That category accounts for roughly 12% of parent company Alphabet's overall revenue.

  • Having to spin out key pieces of the company's ad-tech structure would be difficult and would certainly hurt revenue and growth potential. But it doesn't constitute "breaking up" Google, as some have described the government's goal.
  • Just as importantly, the case — like every large, complex antitrust trial — is likely to take years in court, and in that time Google could find ways to bolster its ad business to protect itself from a damaging divestiture.

Catch up quick: Google acquired ad tech pioneer DoubleClick in 2007 for $3.1 billion, and over the years DoubleClick's services became Google Ad Manager, which is what the government now wants Google to divest.

  • The DOJ alleges that the acquisition and Google's subsequent behavior brought the company overwhelming power in the online ad market that it used to illegally shut out competitors and worsen experiences for advertisers and users.

What they're saying: "Google has engaged in exclusionary conduct that has severely weakened, if not destroyed, competition in the ad tech industry," Attorney General Merrick Garland told reporters today.

  • "First, Google controls the technology used by nearly every major website publisher to offer advertising space for sale. Second, Google controls the leading tool used by advertisers to buy that advertising space. And third, Google controls the largest ad exchange that matches publishers and advertisers together each time that ad space is sold," Garland said.
  • "As a result of this scheme, website creators earn less and advertisers pay more."
  • The suit seeks to make Google sell off its Ad Manager suite. It also seeks unspecified monetary damages and an injunction preventing Google from continuing to engage in the alleged anticompetitive practices.

The other side: Google argues the DOJ's suit "attempts to pick winners and losers in the highly competitive advertising technology sector."

  • Google's ad programs "help publishers make money to fund their websites, apps and videos — which helps Internet users access a wide range of free content," Dan Taylor, Google's vice president of global ads, wrote in a blog post.
  • "We will vigorously contest attempts to break tools that are working for publishers, advertisers, and people across America."

Between the lines: The case is more compelling than some other Google antitrust cases because of all the money tied up in digital advertising, and that makes it "more of a straightforward antitrust case, more central to marketplace competition," Charles "Rick" Rule, a former DOJ official and chair of antitrust law firm Rule Garza Howley, told Axios.

  • "This case is a little different historically from a lot of monopolization cases because the DOJ is going into it with an idea of what kind of remedy it wants," Rule said.

Be smart: The new DOJ suit closely resembles a lawsuit brought by state attorneys general led by Texas Attorney General Ken Paxton in 2020. That gives Google something of a head start on a defense that it has been preparing for two years.

2. Microsoft quarterly sales show slow growth

Microsoft CEO Satya Nadella

Microsoft CEO Satya Nadella. Photo: SeongJoon Cho/Bloomberg via Getty Images

Microsoft on Tuesday reported its slowest quarter of sales growth in six years as the company deals with a cooling economy and a slowing PC market.

  • Quarterly revenue of $52.7 billion came in slightly below Wall Street estimates, though its adjusted per-share earnings slightly topped expectations.

Between the lines: Its earnings report comes less than a week after Microsoft said it was cutting 10,000 employees, or less than 5% of its staff.

  • Microsoft also recently announced it is investing billions more in OpenAI to incorporate that company's generative AI products like ChatGPT and Dall-E into various Microsoft products.

By the numbers:

  • Server product and cloud revenue was up 20%, with Azure and other cloud services up 31%.
  • Commercial sales of Office were up 7%, while the consumer side of Office was down 2%.
  • Windows revenue from PC makers as well as Microsoft's own Surface devices were both down 39%.
  • Revenue from search and advertising, as well as LinkedIn, were both up 10%.
  • Xbox content and services revenue was down 12%. Xbox hardware was down 13%.

What to watch: Microsoft forecast more tough times for the PC business, both its own Surface business as well as sales of Windows to computer makers.

3. Cybersecurity hiring endures amid layoffs

Illustration of a lone keyboard key with a briefcase icon on it.

Illustration: Aïda Amer/Axios

New data shows demand for cybersecurity workers kept steady in recent months as the broader tech industry suffered from a wave of layoffs, Axios' Sam Sabin reports.

Why it matters: Cybersecurity job openings present a bright spot in an otherwise grim hiring outlook for tech.

By the numbers: The total number of employed cybersecurity workers in 2022 remained relatively unchanged from previous estimates at around 1.1 million, according to new data from the National Initiative for Cybersecurity Education at the National Institute of Standards and Technology, trade group CompTIA and data firm Lightcast.

  • At the same time, employers posted 755,743 cyber job openings throughout all of 2022 — down roughly 2% from the 769,736 posted between October 2021 and September 2022, the last time these groups compiled such data.
  • Public-sector cybersecurity demand grew 25% throughout 2022 with 45,708 job postings, the report says. Private-sector demand grew roughly 21% to about 710,000 listings.

The big picture: Will Markow, vice president of applied research at Lightcast, told Axios that although demand for new cyber hires didn't skyrocket, it "definitely still remains as strong as it has ever been."

  • The two most in-demand roles remain cybersecurity engineers and cybersecurity analysts, Markow said, adding that there is also strong demand for penetration testers and network security architects.

Zoom out: Employers have been struggling for years to fill open cybersecurity roles.

  • In 2022, there were 68 cybersecurity workers for every 100 open roles, according to the new data. The U.S. needs nearly 530,000 additional cybersecurity workers to bridge the gap.

Yes, but: Cybersecurity layoffs happen, too. Last week, TechCrunch reported that Sophos plans to lay off 450 employees, or roughly 10% of its workforce.

Sign up for Axios' cybersecurity newsletter Codebook here.

4. Take note

On Tap

  • IBM reports earnings after the markets close.

Trading Places

  • Roblox has hired Tian Lim as vice president of product for its creator group. Lim joins Roblox after five years at Google.

ICYMI

  • PagerDuty is cutting 7% of staff. (CRN)
  • Tech layoffs are having an outsized impact on company diversity, equity and inclusion efforts, according to new data from Textio. (Bloomberg)

5. After you Login

This cat-themed calendar from the Portland District of the Army Corps of Engineers is worth a peek. Also note to the haters: The bad Photoshop is part of what makes it great.

Thanks to Scott Rosenberg and Peter Allen Clark for editing and Bryan McBournie for copy editing this newsletter.