Google’s ad empire under fire, and US antitrust lawsuit to begin

Google from Alphabet Inc. heads to court on Monday to face US Justice Department charges that it is manipulating the $677 billion display advertising market in violation of antitrust laws, just a month after losing a landmark ruling that it illegally dominates online search.

The DOJ and an eight-state coalition accuse Google of acquiring tools used to buy, sell and serve ads on the Internet over the years, blocking the technology behind ads on the site and hurting publishers and advertisers.

The trial, which will take place in Alexandria, Virginia, marks the first case brought by the Biden administration against Big Tech to see its day in court. The previous Justice Department lawsuit accusing Google of illegally monopolizing Internet search is the biggest antitrust case in technology since a ruling against Microsoft Corp. more than two decades ago. It was filed in October 2020 under former President Donald Trump.

Google has denied the Justice Department’s claims, saying its tools work perfectly with products made by competitors and that the government’s case rests on an outdated understanding of digital advertising markets.

Google holds the top spot in the global digital ad market, which has grown to $676.9 billion, according to research firm EMarketer’s 2024 forecast. Of Alphabet’s nearly $260 billion in revenue in 2023, about $31.3 billion came from the display advertising at issue in the case, according to the company’s most recent annual report.

Justice Department antitrust lawyers say Google, using its position as an intermediary that controls the market from end to end, raises the price of ads while paying less to the websites that display them. Because of its dominance of the technology, Google has the ability to force publishers and advertisers to use its suite of products, generating monopoly profits: Google keeps about $36 of every $100 in advertising spent through its tools, according to the DOJ lawsuit, which was submitted last year.

“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 technology tools that would eventually lead to higher quality transactions and lower costs for market participants”, justice. The department said in the lawsuit.

Websites serve more than 13 billion display ads each day, bringing in about $12 billion in revenue annually, according to the Department of Justice.

Google plans to argue that as the Internet has evolved, so has the ad technology that supports it. Google says it now faces competition from major players in social media, apps and TV streaming services, including Meta Platforms Inc., ByteDance Ltd.’s TikTok, Amazon.com Inc. and Netflix Inc.

The tech giant also claims that end-to-end integration into its web advertising tools makes the technology more efficient, safer and more reliable. Marketers and publishers choose their products because they’re superior, not because they have no other options, Google says.

In presenting its case, the DOJ plans to show how Google built up power in digital advertising starting more than a decade ago by buying up early ad networks like DoubleClick. That 2008 deal, the agency argued in its complaint, “was a first step in Google’s march toward monopoly.”

Before acquiring DoubleClick, Google used its burgeoning advertising business to place ads next to results on its own search engine. But according to the DOJ suit, it struggled to launch a technology known as an ad server that would allow it to place ads on other websites. Also, the company has yet to build relationships with top advertisers.

The DoubleClick deal helped in both areas. The startup made the leading ad server and had several connections with top publishers and top advertisers. The Justice Department claims that Google now controls 91 percent of the market for publishers to provide space to sell ads and can unfairly raise ad prices on a whim. To make its case, the agency plans to call Neal Mohan, now CEO of Google-owned video site YouTube and formerly a vice president at DoubleClick, to testify.

Google notes that the federal government approved the DoubleClick deal, as well as other acquisitions, such as the 2011 acquisition of ad optimization platform AdMeld, when they occurred.

Google’s actions hurt publishers, the DOJ claims, some of which were forced to switch from advertising to subscription business models, while others were forced to close. Testimony from current and former executives at News Corp., The Daily Mail and Gannett Co. can be presented at trial.

Google has said it plans to call small publishers and companies as witnesses. A breakup of its ad tech business “would slow innovation, increase advertising fees and make it more difficult for thousands of small businesses and publishers to grow,” the company said in a statement when the Justice Department request was filed. .

Federal prosecutors may also call top Google executives who have held key roles in its advertising businesses to testify. The witness list includes Google AI director Sissie Hsiao, who previously served as director of the company’s display, video and app advertising businesses, and Jerry Dischler, now director of Google Cloud, who once oversaw Google’s advertising products and was also called to testify in the DOJ’s Antitrust Search Process.

Photo: Photographer: Jason Alden/Bloomberg

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