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It’s the Perfect Time to Break Up Google’s Ad-Tech Monopoly
January 28, 2023

It’s the Perfect Time to Break Up Google’s Ad-Tech Monopoly

Reading Time: 4 minutes

Why It’s the Perfect Time to Bust Up Google’s Advertising Monopoly, DOJ Google lawsuit: Now’s the time for antitrust enforcement in online advertising.

It hasn’t been a great start to the year for Google. On Jan. 20, its parent company Alphabet announced approximately 12,000 layoffs, or 6 percent of the company’s workforce—its most extensive cuts to date. Four days later, on Jan. 24, the Department of Justice filed yet another lawsuit against Google, this time for allegedly engaging in anticompetitive practices in the digital ad technologies sector, in violation of the Sherman Antitrust Act. The DOJ’s case focuses on Google’s Ad Manager Suite, which includes the industry-dominant ad exchange that matches publishers who want to sell ads with marketers who want to place them.

There’s a big political question looming over this case: Amid historic inflation and threats of recession, is there enough popular sentiment to crack down on Big Tech platforms such as Google or Meta,  which generally offer consumer products and services at little or no monetary cost? Unsurprisingly, Google says no: ‘Antitrust cases shouldn’t penalize companies that offer popular, efficient services, particularly in difficult economic times,’ wrote Dan Taylor, the company’s VP of global ads, in a recent statement. The Chamber of Progress, a technology industry group of which Google is a member, also questioned the timing of the lawsuit, arguing that the ‘DOJ case seems pretty disconnected from economic reality,’ given recent layoffs.

It may seem contradictory, but an economic downturn is actually the perfect time to enforce antitrust laws in the ad-tech industry. First of all, Google is fine. It generated $54.5 billion in ad revenue from July through September 2022 alone, an increase of 2.5 percent from the same quarter in 2021. And 2021 was a banner year for the company: It amassed $209.5 billion in global advertising revenue—a significant uptick from around $36.4 billion in 2011, leading Google CEO Sundar Pichai to call 2021 ‘one of the strongest years we’ve ever had in the history of the company.’

The real casualties of any pending financial crisis will be the much smaller players that also depend on digital advertisements—newspapers, magazines, and local businesses—and that directly suffer from Google’s dominant position in the market. While Google more than quintupled its earnings in the past decade, U.S. publicly traded newspapers collectively decreased their annual advertising revenue from $49.4 billion in 2005 to an estimated $9.6 billion in 2020, illustrating this precarious relationship.

That’s the problem with monopoly: Newspapers and smaller businesses often have little choice but to use Google’s ad exchange, advertiser network, and publisher tools, which allows Google to pocket as much as 35 percent of funds that website publishers earn from digital advertisers. Excessive revenue cuts, such as these, siphon critical dollars away from news outlets like the Washington Post, CNN, Gannett, Vox, and Protocol, which have also undergone excruciating layoffs in recent months. Readers end up worse off, as publishers—facing diminishing advertising yields—may be more likely to resort to paywalls or have fewer resources to invest in content. And consumers are harmed too, because exorbitant marketing fees further balloon the prices of everyday products and services.

Google’s gatekeeper status poses direct costs to individuals, small businesses, advertisers, and news outlets, but there are the hidden costs as well—most notably, reduced innovation and unchecked data collection. Google’s monopolization has pushed nascent ad-tech competitors out of the market, which has likely shut down opportunities for startups and smaller platforms to improve marketing in creative ways. And concentration presents special risks in an industry that revels in massive data collection: Even if companies like Google do not charge users monetary fees for basic access to Search or Gmail, they face few competitive pressures to stop collecting extraneous, unnecessary personal data to micro-target advertisements.

Also, there is the fact that anticompetitive behavior is still anticompetitive no matter which direction the economy fluctuates. And the DOJ raises some valid points in its complaint. By acquiring DoubleClick (2008), AdX (2008), AdMeld (2011), and other nascent competitors, Google successfully established its dominance over three separate markets: publisher ad servers, ad exchanges, and advertiser ad networks. The company then cemented this market power through questionable tactics like prioritizing itself in transactions through its own ad exchange, which hindered website publishers and advertisers from considering Google’s much smaller ad-tech competitors. It also pressured news outlets to adopt an alternative webpage format, Accelerated Mobile Pages, to route traffic through Google’s servers.

The DOJ is seeking some serious penalties in its complaint, including a breakup of the Google Ad Manager suite. But past technology antitrust cases, like United States v. Microsoft, remind us that these suits are usually long and drawn out, and success is far from guaranteed. The DOJ began investigating Microsoft for antitrust concerns back in 1993, and then filed a lawsuit against the company in 1998. A federal district court ordered Microsoft to break up into two separate companies in 2000, but a federal appeals court reversed this decision in 2001. If the DOJ’s latest case against Google follows a similarly lengthy path, then there is little reason why temporary economic conditions should deter enforcers from pursuing longer-term action.

Google’s dominance in the ad-tech industry is not just a domestic phenomenon; it is also global. In 2020, the U.K. Competition and Market Authority reported that Google ‘has more than a 90% share of the £7.3 billion search advertising market in [the] UK,’ and a group of website and app publishers filed a class action lawsuit before the country’s Competition Appeal Tribunal. In 2021, an investigation by the Australian Competition and Consumer Commission concluded that the company had abused its dominant position in order to self-preference its ad-tech services. The EU initiated a similar investigation the same year, and France’s competition authority issued a €220 million fine against Google. In 2022, the EU also passed the Digital Markets Act, which prevents gatekeeper platforms from favoring their own products or services over their competitors’, potentially setting the stage for future litigation. The breadth and scope of these actions reflect the fact that consolidation in the ad-tech sector has been a long-term problem—and the DOJ’s latest lawsuit, now years in the making, is just in time.

Reference: https://slate.com/technology/2023/01/doj-google-antitrust-lawsuit-tech-layoffs-economy.html

Ref: slate

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