The flaw/problem with splitting the "ad engine" is that it won't survive on its own. By ad engine, I'll assume you mean AdWords and Adsense combined. I'll call

The flaw/problem with splitting the "ad engine" is that it won't survive on its own. By ad engine, I'll assume you mean AdWords and Adsense combined. I'll call them Google Ads. Businesses that rely on ads to survive (Maps, Docs, Android), and those that generate ad income (Search, YouTube) would be bogged down by admin and legal issues if they were unbundled. Imagine Google Ads having to pay YouTube X per month for ads. Does YT get the same rate as everyone? What if some external advertiser comes in and offers YT lower rates? What stops YT from taking that offer? ABC can force transfer pricing between the two, but it's easier to make it notional instead of money flowing through separate companies. Similar, Google makes money from Android through Play Store. Where does Play store live? In Android Inc? What about books, magazines, music? If Android gets ownership of them, why should they bother making apps for web and other platforms? In a business where you have a lot of inter-dependencies between units, it's often better to keep those units together.