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Marketers on high alert with DOJ ‘out for Google’s blood,’ experts say

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By Kendra Barnett | Senior Reporter

January 25, 2023 | 12 min read

Google’s ad business is under the gun, thanks to a new antitrust lawsuit brought by the DOJ and a handful of US states. The development has some experts saying that Google's days of marketplace dominance are limited.

Google logo in a neon sign

Google is under fire for allegedly abusing its dominance in the digital advertising marketplace / Mitchell Luo

The US Department of Justice (DOJ) alongside eight states brought a new lawsuit against Google, accusing the tech titan of illegally operating a monopoly of the technology backing the digital advertising economy.

The lawsuit 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.”

The DOJ and other plaintiffs hope to break up Google’s adtech business so as to decrease its marketplace dominance. (Last year, Google owned nearly 29% of the total US digital advertising market, per data from Insider Intelligence).

It’s the second time that the Justice Department has levied an antitrust suit against the company in just over two years – and it’s the fifth major US case that’s taken aim at Google’s business model and practices. The decision adds to growing scrutiny of the tech company and its competitors among government officials and consumers.

In the case that Google’s advertising business is divested, it’s likely that the entire digital advertising ecosystem – a market worth $278.6bn in the US alone – will see a major paradigm shift. Some policy and advertising leaders think that such an outcome would be for the best, and would benefit advertisers, Google’s competitors and consumers alike. Others, however, take a far less optimistic stance.

What will happen if Google’s ad business is broken up?

Many experts see the new lawsuit as a promising step in the right direction, and one that could potentially lead to the divestiture of Google’s ad business and invite greater competition into the market.

It’s certainly the position held by Caitlin Chin, a fellow at the Center for Strategic and International Studies, where her research focuses on technology regulation. “The numbers are clear: Google has a dominant position in the adtech industry and is in the position to divert revenue from website publishers, including newspapers and small businesses, as well as advertisers and marketers,” she tells The Drum.

“A more competitive industry could usher in more opportunities for small companies and startups to innovate in adtech, potentially creating systems that are more efficient or privacy-protective. In general, greater competition leads to both more innovation and a wider distribution of its benefits.”

It’s not just competitors who would reap the benefits. “From the DOJ’s perspective, a divestiture of Google’s ad business will create positive benefits for advertisers, website publishers and consumers alike: advertisers will experience lower prices, publishers will earn more revenue and become less reliant on subscriptions or paywalls, and will also be able to invest in additional content that consumers can enjoy. I am inclined to agree with [this] assessment,” says Chin.

Despite many ad industry insiders agreeing with the DOJ’s fundamental argument, some anticipate logistical challenges arising from the dilution of Google’s power. “Short term, everyone loses. Advertising gets harder. Google’s [adtech] stack was that good, and it was cheap, scalable and performant,” says Shiv Gupta, managing partner at digital marketing education firm U of Digital.

Still, in the longer term, a dissolution of Google’s ad business is likely to benefit the digital advertising ecosystem by supporting “more competition, more startups, better pricing, better products and more investment," Gupta says. “It would be a boon for the ad industry.”

Many are in agreement that in the long term, a broken-up Google will benefit marketers. “Adtech companies will have more freedom to have a dialogue around innovations that put marketers and consumers first [and will] have more room to develop products to accomplish those ends,” says Matt Sotebeer, chief strategy officer at Digital Remedy, an adtech platform that specializes in streaming ad performance. “Marketers will benefit from a much more competitive industry with lower costs and more innovative products. Decoupling the ad server from the exchange will open up the supply chain for more competition.”

Of course, not everyone shares the same positive outlook. Josh Withrow, a fellow of tech and innovation policy at the R Street Institute, a free markets-focused think tank based in Washington, D.C., argues that breaking up Google’s ad business will only reduce the seamlessness and efficiency of the current digital advertising ecosystem. “A vertically integrated system like Google’s adtech stack generally creates efficiencies that lower costs. Forcing costs higher on Google’s platform by breaking it up may benefit its competitors, but it’s difficult to see how this advances consumer welfare,” he says.

“By seeking to break up Google's ad stack wholesale, the DOJ is making the mistake of substituting a hypothetically better alternate history of digital ad markets for the generally well-functioning, competitive one that exists now. That shouldn’t be the role of antitrust enforcement.” In essence, Withrow’s point is: why try to fix what’s not broken?

But will the DOJ win the case?

Of course, for now, nothing is a sure bet, as the outcome of the lawsuit is not yet clear. And predictions vary wildly.

Withrow, whose research at the R Street Institute largely focuses on regulation and antitrust efforts in the tech sector, is confident that Google won’t take a real tumble any time soon. “The DOJ is filing this case just as the biggest story in digital marketing has become how quickly rivals like Amazon, Netflix and TikTok are eating into Google’s ad market share.”

In essence, he argues, Google isn’t eating up more of the marketplace right now – it’s losing share. And he’s right: reports from earlier this month indicate that, for the first time in almost a decade, Google and Meta are no longer capturing the majority of digital ad spending in the US. For this reason, Withrow says, “The government’s overarching argument that Google wields monopoly power in the digital ad industry ought to be a hard sell in court.”

Despite Google’s already-diminishing stance in the market, the public discourse surrounding digital advertising – and the data brokering economy more broadly – is reaching a fever pitch. With consumers and policymakers demanding increasingly stringent data privacy protections, the digital advertising sector as a whole is under the gun – which has some experts predicting real consequences coming down the pipeline.

“Google is likely going to have to pay this time,” says U of Digital’s Gupta. “There is far too much negative public sentiment against big tech and targeted ads – with Google being a symbol for both – for it to go unpunished.” He suggests that Google’s prior efforts to appease government concerns – which included shifting some of its adtech stack to its parent company Alphabet and opening up YouTube’s ad ecosystem to third-party sellers, haven’t satiated officials. “I eventually expect some kind of more meaningful divestiture,” says Gupta. “The DOJ is out for blood.”

Others agree that Google’s days of dominance in the digital ad market are limited. “It's not a matter of if but when Google will be split up,” says Digital Remedy’s Sotebeer.

Unlike Gupta, however, Sotebeer believes the US government may not have to drive the nail in the coffin, as he says the lawsuit could “be designed to push Google to divide on its own.” He suggests the tech company might be pushed to “restructure through its own design rather than by force” – a move that could be accelerated by a recession. As such, he says, the new DOJ lawsuit may prove more symbolic than anything.

In any case, the DOJ has a long journey ahead of it, predicts the Center for Strategic and International Studies’ Chin. “The DOJ has laid out a compelling case … but will realistically face a long and challenging path to its desired outcome. In the United States, antitrust enforcers face very high burdens of proof to demonstrate noncompetitive harm, and courts have generally been reluctant to ‘overenforce’ competition cases,” she says.

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Even if the DOJ achieves its goal of requiring Google to break up its ad business, there’s no guarantee that the decision will stick. Chin recalls United States v. Microsoft, which, following a DOJ antitrust investigation, culminated in a 1998 court ruling that required the tech company to divide into two separate companies. Despite the damning decision, a federal appeals court reversed the decision just two years later.

However, even if the DOJ’s case against Google fails to result in the divestiture of its ad business, the company “still has many reasons to be worried,” says Chin. Chief among them are the fact that the Biden administration’s top antitrust officials have indicated that they’re “willing to push the boundaries of traditional antitrust jurisprudence to challenge anti-competitive practices in the technology industry,” Chin notes. Plus, a handful of notable antitrust bills were introduced in the previous Congress, which, if passed, would establish new restrictions on Google’s business practices.

At the same time, Google and other tech giants are under coming under increasing fire in the EU, where regulators are attempting to crack down on anti-competitive practices with frameworks like the Digital Markets Act, which was signed into law last September.

Ultimately, Google may have to reevaluate its course into the future. “Since so much of Google’s infrastructure is based on data, it will be interesting to see how they pivot their strategies around innovation if this lawsuit impacts them,” says Brian Mandelbaum, chief exec at Attain, a commerce data platform. “Undoubtedly, there will be an effect on revenue but when all the pieces of a company’s puzzle are focused on data, and one of those pieces is [challenged], it makes you wonder what happens next.”

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