Why Is Google’s Role in Ad Tech Under Scrutiny (Again)?

Why Is Google’s Role in Ad Tech Under Scrutiny (Again)?

Google vs the Department of Justice (DOJ):

In a statement released by the Department of Justice (DOJ) on January 24, 2023, Google is being sued by the DOJ and eight states for “monopolizing digital advertising technologies.” This is the second anti-trust suit for Google brought forth by the DOJ since 2020. This announcement comes on the heels of the ever-increasing concern for user privacy. So, what does this all mean for marketers and how can we prepare for the outcome today?

What are the DOJ Allegations?

In its most recent statement, the DOJ alleges that Google uses some “unsavory techniques” to dominate the online advertising market. Some of the major claims included are:

  • Engaging in anticompetitive and exclusionary conduct through acquisitions, such as DoubleClick (2008) and Admeld (2011).

  • Forcing publishers to adopt Google’s newly acquired tools by restricting demand to its ad exchanger.

  • Limiting real-time bidding to its ad exchange.

  • Manipulating auction mechanics to reduce competition and slow the rise of rival technologies/scale.

The statement also claims that Google controls many facets of the ad buying and selling exchange. The DOJ further breaks this down in the graph below:

Simply put, Google controls the method that many website publishers use to offer their inventory (publisher ad server), the tool used to help buy ad inventory (advertiser ad network), and the largest ad exchange that runs real-time bidding auctions to align bidder requests with bidder responses. In addition to this, the DOJ states that Google admits to keeping ~30% of the advertising dollars garnered through using their technologies, sometimes more depending on the publisher/advertiser. This is a big asset distribution for one company, but is it illegal?

Google’s Response:

In a blog statement, Google refers to the DOJ allegations as a “mischaracterization” of their business practices, and claims that the “government shouldn’t pick winners and losers in a competitive industry.” Here is how they responded to the major claims in the monopoly suit against them:

  • Acquisitions – Google acquired DoubleClick 15 years ago, allowing them to “expand and improve” the services initially offered by DoubleClick to aid publishers, which allegedly was reviewed and cleared by the Federal Trade Commission (FTC). Similarly, Google acquired Admeld in 2011, enabling them to provide a service in which “aids publishers to monetize their ad space.” This acquisition was allegedly reviewed and cleared by the FTC and the DOJ.

  • Forced Adoption of Google’s Tools – Contrary to the DOJ claims, Google assures that “Publishers are free to use our ad exchange with different ad servers.” They continue to say that this claim, along with similar claims in the 2020 suit, are not supported by any evidence. They noted that “while Google offers integrated tools, which work well when used together, Google does not control the transaction and ultimately, advertisers and publishers can choose what works best for their needs.”

  • Real-Time Bidding – Google responds to claims that their bidding technology favors inventory in its own ad exchanges by stating that they have evolved from “waterfall” sequencing, phasing out “last-look” auctions, and applying a “unified, first-price auction” to streamline the buying process, therefore “reducing complexity for publishers and advertisers.”

  • Auction Manipulation – Google states that their products “help advertisers bid more efficiently and to help publishers make more money.” They go on to say that “Open Bidding is a competitive response and improvement upon Header Bidding.” The tools that Google currently utilizes in auctions are allegedly mischaracterized by the DOJ, claiming that they allow advertisers to bid more efficiently on all exchanges, including their own, rather than inhibiting them. Google also notes that they “don’t have a duty to bid on rival auctions,” which is what they claim the DOJ is trying to force them to do.

What’s Next?

Although the DOJ has brought forward some big claims against Google, their main focus is to break up the looming control that Google has acquired in the digital advertising space. This means that if Google is forced to sell off its various ad businesses through litigation, it could change the landscape of digital marketing as we know it. Some examples of what may happen if the DOJ wins its case against Google:

  • Create a more balanced marketplace; here is a comparative chart (provided by the DOJ) to the one above. You can see how prevalent Google is in the industry when comparing the two charts.

  • Shifting a small portion of Google’s revenue (which could include re-allocation of assets such as D/V 360) to other publishers/content creators, potentially increasing the diversity of new, entertainment, and ads on the web.

  • Increased interest in the programmatic/advertising space (regarding smaller businesses).

If Google wins? There will still need to be some massive hurdles: navigating the ever-shifting privacy landscape, contend with growing AI technology, and increased competition with companies such as Amazon (and other major players), who have launched their very own ad network. No matter the claims, Google now has the task of operating under intense scrutiny while simultaneously fending off competition–not exactly an easy feat when the DOJ is on your tail.

In Summary

We know that this is not the first time that the DOJ has sued companies for similar practices, the most notable being Microsoft during the 1990s. While the government ultimately won in that case, we did not see very much change within Microsoft’s business practices thereafter. Keep in mind that it is not illegal to “dominate market share,” only to “prevent competition,” which Google states they are not guilty of. It should also be noted that if the DOJ expects to see any results from anti-trust cases, they must be as accurate as possible with their definitions. We saw them rise to the challenge in the 90s, but can they keep up with the constantly changing digital world we live in today? Are they willing to decide if they want to sacrifice fair competition ideals vs communal benefit?

It is difficult to predict what the implications of this trial might have on the future of advertising. Do multiple acquisitions by a singular company and monopolies go hand in hand, eventually? How well does this resonate with the advertising community? Do we, as advertisers, need Google to determine the tools required for our success? Is unified, first-price auction the best approach for advertising across the board?

Despite unanswered questions, this is a potentially ground-breaking suit and will most likely result in changing the way that companies move forward in the world of advertising acquisitions. It will be interesting to see how Google handles this “negative” press moving forward, and how this trial may affect other major advertisers and their current methodologies.

Butler/Till is a DSP (Demand Side Platform) agnostic company. We collaborate with many different partners to ensure that we are holistic in our approach. We will continue monitoring this situation as it develops and, as always, will keep our client’s best interests in mind. Litigation for this case begins in September 2023.

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