Google hit with monopoly lawsuit over its advertising technology – AdNews

Google is once again embroiled in legal action in the United States, accused of running a monopoly over its advertising technology.

The action comes a month after the US Department of Justice (DOJ) found that Google was a monopolist in the search engine space.

The latest lawsuit, first filed by the DOJ and a coalition of states in January 2023 and beginning its trial this week, alleges that Google “has corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers, and brokers, to facilitate digital advertising”.

“Having inserted itself into all aspects of the digital advertising marketplace, Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” the DOJ said in its filing.

Figures from Statista show that in 2023, Google’s ad revenue amounted to over $US237 billion, with the company generating that figure through its Google Ads platform, which enables advertisers to display ads, product listings and service offerings across Google’s extensive ad network (properties, partner sites, and apps) to web users.

For the June quarter of this year, Google’s advertising revenue hit $64.6 billion.

The DOJ said that Google not only “abuses its monopoly power to disadvantage website publishers and advertisers who dare to use competing ad tech products in a search for higher quality, or lower cost, matches… [but also] uses its dominion over digital advertising technology to funnel more transactions to its own ad tech products where it extracts inflated fees to line its own pockets at the expense of the advertisers and publishers it purportedly serves.”

“The harm is clear: website creators earn less, and advertisers pay more, than they would in a market where unfettered competitive pressure could discipline prices and lead to more innovative ad tech tools that would ultimately result in higher quality and lower cost transactions for market participants,” the 140-page filing said.

“This conduct hurts all of us because, as publishers make less money from advertisements, fewer publishers are able to offer internet content without subscriptions, paywalls, or alternative forms of monetisation.”

In a blog post, Google hit back, saying the four key points it would be making to defend against the DoJ’s charge are: there are hundreds of ad tech competitors, including many big players; ad buyers and sellers mix and match Google’s tools with those of its rivals; the company’s ad tech fees are lower than reported industry averages; and the government’s case could make it harder for small businesses to grow and hurt the quality of ads people see.

The tech giant said the DOJ’s “narrow view” of the ad tech market doesn’t reflect reality.

“We are one of hundreds of companies who actively compete to enable the placement of ads across the internet. Media companies like Comcast and Disney, retailers like Walmart and Target, and specialised ad tech companies like Criteo, Index Exchange and the Trade Desk all invest in building their online ads services,” said Google.

“Ad buyers and sellers have a huge range of choices among ad tech providers, and they exercise those choices daily. The average advertiser uses three platforms to buy ads — and can choose from hundreds of options. And the average large publisher uses six platforms to sell ads — and can choose from over 80 options.

“Publishers selling ad space keep about 70% of the revenue when using our products, and for some types of advertising, they keep even more. Making it harder for businesses to access the integrated products and services they need could raise fees for advertisers and lower returns for publishers. Nobody wins in that scenario.”

The DOJ alleged that on average, Google keeps at least thirty cents – “and sometimes far more” – of each advertising dollar flowing from advertisers to website publishers through Google’s ad tech tools.

“Google’s own internal documents concede that Google would earn far less in a competitive market,” the DOJ said.

Forrester’s senior analyst Mo Allibhai said a trial loss for Google means its supply side platform (SSP) and publisher ad server would no longer live within the family of Google’s parent company Alphabet.

“This introduces several new variables – primarily, who will purchase or finance the new entity (or entities)?” he said.

“Absent Alphabet’s financial largesse, Google’s SSP may be ‘too big to survive’. Given current capital constraints and lending conditions, there is a possibility that no buyer will come forward. Google may be forced to consider the largest product sunset in the history of software – shuttering a product generating billions in revenue – or pawn the venture off to banks or private equity.”

Allibhai said if Google wins, however, the status quo holds – at least until a judge decides the fate of its search monopoly sometime next year.

“The DOJ could appeal a loss, but staff turnover at agencies and a new administration with different priorities may alter its momentum,” he said. 

“The trial itself will likely slow Google efforts to ‘streamline’ search and programmatic offerings, and change how the company approaches auction mechanics for buyers vs. sellers. This could include Google giving more third-party, accredited vendors access to its proprietary signals and metrics, and/or more collaboration with vendors (e.g., DSPs, video sellers, etc.) that compete with Google’s non-SSP lines of business.”

Allibhai said whatever the outcome, advertisers are unlikely to be affected, but similar to the search trial, Google’s buying tools will likely suffer some unwanted publicity as its inner mechanisms and team deliberations come to light in the form of trial evidence.

“For publishers, their relationship with Google and other big tech companies gets even more complex and fraught,” he said.

“With Google search serving as their primary driver of traffic and Google’s SSP as a major revenue-sharing partner, publishers are taking a closer look at how age-old practices (like scraping website content to determine search relevance) might power cutting edge technologies like AI-generated summaries.

“Many publishers find that a more proactive and strategic approach to their Google partnerships yields more favourable results.”

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