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U.S. probe of Google's online ad dominance would appeas...

Business Maverick

Business Maverick

U.S. probe of Google’s online ad dominance would appease long suffering rivals, publishers

The Google Inc. logo hangs illuminated over the company's exhibition stand at the Dmexco digital marketing conference in Cologne, Germany, on Wednesday, Sept. 14, 2016. Photographer: Krisztian Bocsi/Bloomberg
By Reuters
04 Jun 2019 0

Ad tech firms and publishers have had to stay in the good graces of Google or risk insolvency. For them at least, the US Justice Department probe is welcome.

Ad tech firms and publishers have had to stay in the good graces of Google or risk insolvency.

That is why the U.S. Department of Justice is examining the dominance of Alphabet Inc’s Google in online advertising as part of a potential antitrust investigation, two sources told Reuters.

Google’s control over the market has long hurt the profits of smaller advertising technology companies who must appease the No. 1 online ad firm to be profitable, and online publishers who need Google’s search reach and ad tools to build an audience and make money on their content.

The ad market is just one of several areas of possible inquiry.

Google has declined to comment on the potential investigation, but has repeatedly said that it acts in the best interest of its users and offers sufficient warning to industry partners potentially affected by its moves.

Google is expected to capture 37% of the $129 billion spent on online ads in the United States in 2019, compared to 22% for No. 2 Facebook Inc and 10% for No. 3 Amazon.com Inc , according to ad research firm eMarketer.

Digital advertising revenue accounted for about 85% of revenue last year for Google parent Alphabet.

The U.S. government is gearing up to investigate the massive market power of Amazon.com Inc, Apple, Facebook and Google, sources told Reuters on Monday, setting up what could be an unprecedented wide-ranging probe of some of the world’s largest companies.

Apple and Facebook did not immediately reply to a request for comment on Monday. Google and Amazon declined to comment.

UNFETTERED GROWTH

The U.S. government has done little to slow Google’s ad market dominance despite having several opportunities.

In 2007, the FTC approved Google’s $3.1 billion acquisition of software firm DoubleClick, saying it would not substantially lessen competition, and it made the same finding in 2010 for Google’s $750 million purchase of AdMob.

Those deals have helped make Google’s tools dominant in how businesses buy and sell ads on the internet. The Google Marketing Platform is the main way big advertisers buy ads, while Google Ad Manager is the most widely used service among publishers selling ad space on their websites or apps.

The company also owns the Chrome web browser and the Android mobile platform, which are two of the largest gateways to the internet. And its search and YouTube properties are two of the largest ad-supported applications.

Smaller ad technology vendors and website owners have said that Google’s power enables it to dictate industry policies and practices in ways that squeeze out their companies and favor its own.

“I’m worried that (Google is) moving toward a position of dominance across all of digital advertising, from control of the user to the control of display of an ad,” said Andrew Buckman, chief operating officer of British advertising firm Sublime. “It’s good Justice is looking at that.”

In a heated situation last year, Google required websites using its technology to adhere to a new European privacy law in a way that major news websites said was too strict of an interpretation of the rules and would cost them revenue. Some of those critics, including German digital publishing house Axel Springer, declined to comment on the U.S. investigation but media industry associations said they were pleased to see the action.

At a Justice Department workshop last month on competition in advertising, Breitbart News Network Chief Executive Larry Solov said a Justice Department antitrust action against Google was the best way to address concerns without “heavy regulation.”

“No one advertising and tech company, especially one with a proven viewpoint bias, should have control over picking winners and losers in publishing,” Solov said of Google.

This year, Google announced changes to Chrome affecting how ad software vendors track users online that could curtail the industry’s data collection and revenue. The plan and a similar move related to the look and feel of ads last year have attracted concern from smaller rivals including Sublime and Rumble, which did not respond to a request to comment.

Brian O’Kelley, the former chief executive of ad tech firm AppNexus, told Reuters on Sunday that he was forced to sell his company to AT&T Inc last year because of Google’s stranglehold on the market. AppNexus was valued at $1.6 billion in the purchase, the Wall Street Journal reported at the time.

Among O’Kelley’s issues was that in 2015, Google began requiring advertisers to purchase YouTube ads thru its own ad-buying platforms, effectively preventing companies such as AppNexus from getting involved in the transaction. And because Google owned the dominant search and video sites, it became difficult to compete, O’Kelley said.

“Google’s monopoly forced me to sell my business,” he said.

O’Kelley said investigators will face a difficult task in reconciling antitrust and privacy issues. Restricting data collection tends to benefit companies with user relationships, such as Google and Facebook, as opposed to behind-the-scenes software vendors.

“Privacy law is good for the monopolist,” O’Kelley said.

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