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The DOJ sues Google over ad dominance, plans to break up company

Enlarge / Let’s see, you’ve landed on my “Google Ads” page, and with three houses… that’s $1,400.

Ron Amadeo / Hasbro

It’s been expected for some time, but today the Justice Department and eight states are suing Google over its alleged dominance of the online advertising market. The government has a problem with Google’s position in “ad technology” or the tools used to automatically match advertisers with website publishers. In order to solve the problem, the DOJ has apparently told Google that it is considering breaking up the company.

“Today’s complaint alleges that Google engaged in anti-competitive, exclusionary and unlawful conduct to eliminate or seriously reduce any threat to its dominance over digital advertising technologies,” said Attorney General Merrick Garland. “Regardless of the industry and company, the Department of Justice will vigorously enforce our antitrust laws to protect consumers, uphold competition, and ensure economic fairness and opportunity for all.”

The press release provides a brief overview of the DOJ’s list of anticompetitive behavior by Google:

  • Attracting Competitors: Participating in a pattern of acquisitions to gain control of key digital advertising tools used by website publishers to sell advertising space;
  • Force takeover of Google tools: Bind website publishers to its newly acquired tools by confining its unique, must-have advertiser demand to its Ad Exchange and, in turn, conditioning effective, real-time access to its Ad Exchange to use of its publisher ad server;
  • Distorting Auction Competition: Limit real-time bidding on publisher inventory to its Ad Exchange and hinder the ability of competing Ad Exchanges to compete on the same terms as Google’s Ad Exchange; and
  • Auction Manipulation: Manipulating auction mechanisms on several of its products to insulate Google from competition, downsize competitors, and halt the rise of competing technologies.

Google is the largest digital ad broker in the US, but not by much. Axios reported that Google accounts for 28.8 percent of all digital advertising spend in the US, followed by Meta at 19.6 percent. Many other companies like Amazon, TikTok, Spotify, and Apple also have growth potential, but for now these companies tend to focus only on their specific platforms.

The DOJ's chart of Google's ad business.
Enlarge / The DOJ’s chart of Google’s ad business.

Ron Amadeo

However, it’s not the overall market share that the DOJ is concerned about, but rather the market share of the individual tools used by publishers and advertisers. On the “sell side” (the side of sites that have ad space for sale – like this one), the DOJ says that Google’s “DoubleClick for Publishers” ad server has over 90 percent market share. On the “buyer side” (the side of advertisers looking for a place to put their ads), the Google Ads network has an 80 percent market share for smaller businesses, while Display & Video 360 has a 40 percent market share for large advertising agencies percent market share. The Google Ad Exchange, which brings sellers and buyers together, has a 50 percent market share.

As a solution, the DOJ says: “To redress Google’s anticompetitive behavior, the Department is seeking both just compensation on behalf of the American public and treble damages for losses incurred by federal agencies that overpaid for web display advertising.” . This enforcement action marks the first monopoly case in about half a century in which the department has sought damages for a civil antitrust violation.” Basically, it wants Google to pay back money.

Google has published a blog post stating that it disagrees with the government’s recent antitrust lawsuit. After the usual babble about how the market is more competitive than the plaintiff thinks, he adds a new threat not mentioned in the press release, saying, “The DOJ requests that we reverse two acquisitions made by the US regulators were audited 12 years ago (AdMeld) and 15 years ago (DoubleClick). In attempting to reverse both of these acquisitions, the DOJ is attempting to rewrite history at the expense of publishers, advertisers, and internet users.”

Hard to believe that Google will ever be broken up. We hear the threat quite often, but the last time the government broke up a company was almost 40 years ago. Back then, the phone company, Bell Systems, was split into AT&T, Verizon and Lumen Technologies/CenturyLink/Qwest. The US government’s desire to regulate companies has since declined sharply, and today the threat is mostly just a starting point for negotiations.

In the run-up to that lawsuit, Google told the DOJ last year that it was willing to “break up” its ad business by moving a unit from Google to its parent company Alphabet. That seems like a move that would hardly get noticed when Google and Alphabet share the same CEO, CFO, and stock ticker, and all share the same (very large) pile of cash.

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