Google’s Profitable Advertising Technology Business is on Trial.
The US government is focusing its attention on the highly profitable ad tech sector, which significantly contributes to Google’s vast wealth. A trial set to begin on Monday will examine the Department of Justice’s claims that Alphabet, Google’s parent company, is operating an illegal monopoly in this market.
Last year, Alphabet generated over $200 billion through the placement and sale of advertisements that reach internet users. This immense revenue underscores the importance of the ad tech business to the company’s financial success.
Alphabet contends that its achievements stem from the “effectiveness” of its advertising services. However, prosecutors argue that the company has leveraged its dominant market position to suppress competition and limit the opportunities for rivals to succeed.
Laura Phillips-Sawyer, a professor at the University of Georgia School of Law, highlighted the significance of this industry, stating, “It is a really important industry that grabs billions of consumer dollars every year.” She emphasized that all consumers have a vested interest in the outcome of this litigation.
This trial marks the second major antitrust case that Alphabet has faced in the United States. In August, a judge ruled that the company’s dominance in the search market was illegal, raising questions about the potential penalties that Google and Alphabet may encounter as a result of that decision.
As the legal proceedings unfold, the implications for the tech giant and the broader market will become clearer. The outcome could have lasting effects on how digital advertising operates and the competitive landscape within the industry.
Anticompetition claims
In 2023, the Department of Justice (DoJ) and a coalition of states filed a lawsuit claiming that Google holds a dominant position in the digital advertising marketplace. They allege that the company has used its market power to suppress innovation and competition. In response, Google argues that it is merely one of hundreds of companies involved in placing digital ads and asserts that competition in this sector is actually increasing. The company cites the growth in advertising revenue for competitors like Apple, Amazon, and TikTok as evidence of a thriving market.
At a press conference in January 2023, US Attorney General Merrick Garland announced the lawsuit, stating that Google’s practices have enabled it to “halt the rise of rival technologies.” This assertion highlights concerns about the impact of Google’s dominance on innovation in the tech industry. The case has garnered significant attention, as it reflects broader issues surrounding market competition and regulatory oversight in the digital age.
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The trial will be presided over by US District Judge Leonie Brinkema, who is expected to render a verdict on the matter. Both parties will present their arguments, with the outcome likely to have far-reaching implications for the digital advertising landscape. This case is particularly noteworthy given its timing, following a recent landmark decision in a separate monopoly lawsuit against Google.
In that earlier case, Judge Amit Mehta ruled that Google had acted unlawfully to suppress competition in its online search business. He characterized Google as a monopolist, emphasizing that the company’s actions were aimed at maintaining its monopoly status. This ruling sets a precedent that could influence the current lawsuit and shape the future of regulatory actions against major tech companies.
Make up or break up
During last year’s trial, Google asserted that it led the online search market due to its superior product. The company seems to be using a similar defence in the ongoing ad tech case. In response to inquiries, Google directed the BBC to its 2023 blog post, where it emphasized that “no-one is forced to use our advertising technologies – they choose to use them because they’re effective.”
Judge Mehta held a status conference on Friday to begin determining remedies for Google’s actions. Dan Ives, managing director at Wedbush Securities, suggested that these remedies would likely involve “business model tweaks, not a breakup” of the company. This indicates a focus on adjustments rather than drastic measures against Google’s business practices.
The complex nature of advertising technology may pose challenges for the Department of Justice (DoJ) in making a clear monopolization argument. As antitrust professor Rebecca Haw Allensworth from Vanderbilt University Law School noted, the general public easily understands search technology, while the intricacies of ad tech could complicate the government’s case.
Additionally, the US is not the only country where regulators are scrutinizing Google’s ad tech operations. On Friday, the UK Competition and Markets Authority announced its belief that Google was abusing its dominance in the ad tech sector, based on initial investigation findings. They indicated that Google’s potentially unlawful practices could be harming thousands of UK publishers and advertisers, a claim that Google representatives dismissed as stemming from a “flawed” understanding of the ad tech landscape.
