Google's parent company Alphabet (GOOGL) is navigating a complex landscape of strategic partnership and regulatory scrutiny. On one front, the tech giant has entered a strategic collaboration with South Korea's Kakao Corp to advance on-device artificial intelligence (AI) and extended reality (XR) device capabilities. Concurrently, the European Commission is probing potential anti-competitive practices in Google's search ad auctions, raising fresh regulatory concerns.
The partnership with Kakao, announced on February 12, 2026, focuses on developing on-device AI services. This includes integration with Google's XR devices, such as AI glasses, to enable hands-free messaging and proactive AI features. A key component is enhancing Kakao's Kanana chatbot, which debuted within the KakaoTalk app, for more efficient on-device processing on Android devices. The collaboration aims to enhance user privacy and responsiveness by keeping AI interactions local to the device, reducing reliance on cloud-based services.
Kakao is pursuing a dual-AI strategy, maintaining a non-exclusive partnership. While collaborating with Google for on-device innovations, Kakao continues to work with OpenAI to power consumer-facing services like ChatGPT integrations within KakaoTalk. This approach positions Kakao as a regional AI hub. The partnership also opens possibilities for Google Cloud involvement, with Kakao expressing interest in utilizing Google Cloud's Tensor Processing Units (TPUs) for AI infrastructure to reduce costs and accelerate model training.
Investors reacted cautiously to the AI partnership news. Google's stock experienced a modest decline in mid-day trading on February 12 as markets weighed potential costs, competition, and the timing of tangible revenue impact from the deal.
Simultaneously, Google faces escalating regulatory pressure in Europe. A February 9 letter from the European Commission, seen by Reuters, highlighted concerns that Google's search ad auction practices may be artificially inflating clearing prices—the final amounts advertisers pay. While not a formal investigation, the correspondence marks an early stage of scrutiny with a response deadline of March 2, 2026.
Google has defended its auction practices, arguing that its search ad platform enables small businesses to compete and maintains a free and open web. The company emphasized that ad prices are determined through real-time auctions based on competition and ad quality.
This EU scrutiny adds to a growing list of global antitrust challenges. In the U.S., Google has faced court rulings finding it abused its monopoly in internet search, with the company signaling it will appeal. The U.S. Justice Department has also accused Google of manipulating online auctions to favor its own services. Analysts warn that potential changes to Google's ad systems could have far-reaching effects on advertisers and website publishers, including media companies that rely on search traffic for revenue.
