The Justice Department and eight states are Sue Google about its digital advertising business, accusing the company of using its market dominance to harm competitors and force ad buyers and sellers to use its products on terms less favorable to them than those of another company. Meanwhile, Google makes a healthy percentage of the top — at least 30 percent, the suit says.
“Website creators are making less and advertisers are paying more,” Attorney General Merrick Garland said at a press conference announcing the lawsuit.
That, according to the DOJ, means that websites that rely on digital ads are getting less revenue from those ads than they otherwise would, meaning there’s less money to fund their offerings. Advertisers pay more than they should, and that cost is usually passed on to the customer.
The DOJ is trying to force Google to sell or spin off parts of its digital ad arm so that it no longer controls each side of the ad tech stack: the buyer side, the seller side, and the exchange in the middle. Google earned approx $169 billion in digital advertising worldwide in 2022, but the vast majority of that revenue (as well as Google’s revenue, period) will come from search ads, which are ads that companies place on users’ searches that may be relevant to them. This lawsuit is not targeting Google’s search advertising empire, but rather the portion of its business that places its ads on websites across the Internet outside of Google’s properties. That’s a much smaller, but still significant portion of Google’s revenue.
In a rare move, the DOJ is also asking for monetary damages for the government, saying Google’s anti-competitive high ad prices have cost the government money through the $100 million worth of display ads it has bought since 2019 to sell various agencies. and promote services. Yes, the federal government says it’s also a victim of Google’s bad ad behavior.
The lawsuit comes at a relatively grim time for Google, which has lost about 25 percent of its stock value over the past year and is in the process of being laid off. 12,000 people, representing about 6 percent of the workforce. The DOJ suit is certainly an unwelcome addition to Google’s woes. But lawsuits like this take years to get through the justice system, and there’s no guarantee the DOJ will win.
A more immediate threat to Google is that an extra fight with the government will mean an extra distraction for a company that also balks at new regulations and face burgeoning competitive threats in some other areas. YouTube has had to introduce “Shorts” to keep up with TikTok. Microsoft is pouring billions of dollars into OpenAI, a company that rivals Google’s own AI efforts – and is threatening to use its ChatGPT chatbot to boost Microsoft’s search engine, Bing. Meanwhile, ad spend has fallen across the board, including for Google and its properties. Google’s advertising business hasn’t been hit as hard as othersbut total revenue is not grow with the same amount as before.
The DOJ has reportedly prepared its case against Google’s digital advertising business for years, even before the Biden administration. This latest lawsuit also joins four other government antitrust cases Google is already facing, including one DOJ suit from October 2020 on its search engine and search advertising activities and one filed by 38 attorneys general in December of the same year, again on the search activities. In July 2021, 37 attorneys general sued Google over the Play app store, and 17 attorneys general filed suit against the digital advertising business in a similar case to what the DOJ is now bringing.
“Today’s lawsuit from the DOJ seeks to pick winners and losers in the highly competitive ad technology industry,” Google said in a statement. Global Ads Vice President Dan Taylor said the lawsuit would hurt the advertising industry and innovation, not help it, and that the government should not be able to force companies to shut down 15 year old acquisitions ever approved by regulators.
Google also pointed out that it’s in a crowded and competitive space. Google, Meta and, increasingly, Amazon have the largest shares of the US digital advertising market, with Google the largest. The other antitrust enforcement agency, the Federal Trade Commission, has also sued Meta and Microsoft over acquisitions it says are anti-competitive.
The Chamber of Progress, a Google-funded big tech advocacy group, said in a statement that the case was “decoupled from economic reality” and that Google’s digital advertising market share (estimated to be about 29 percent by 2022, making it the largest share of any company) was “at rock bottom.”
Antitrust advocates who have protested Big Tech for years applauded the move. Kyle Morse, deputy executive director of the Tech Oversight Project, said in a statement that “Google is rightly held accountable for years of abuse in the online marketplace,” adding that Google’s rivals need to learn a lesson and rethink their own behavior. “Otherwise you’re next,” Morse said.
The DOJ’s other antitrust suit against Google – filed in October 2020 – is scheduled for September 2023, which gives you an idea of how long it could be before the lawsuit filed today sees the inside of a court. Google’s government woes will likely extend into the next decade, at which point a brand new company could dominate the Internet.