Approximately 15 years ago, Google’s acquisition of DoubleClick, a prominent player in the rapidly growing online advertising industry, was approved by the US Federal Trade Commission. While most agreed with the decision, an insightful FTC commissioner dissented, recognizing the potential for Google to dominate the adtech sector with its market capitalization of $207 billion and exceptional engineering talent.
Fast forward to today, and Google’s market capitalization has skyrocketed to $1.6 trillion, largely attributable to its digital advertising revenue. However, the European Commission now demands the breakup of Google’s ad business.
The adtech industry brings together publishers who wish to sell ad space and marketers looking to target consumers. This interaction takes place on exchanges where ad inventory is bought and sold.
Google has established a formidable presence on both the buy and sell side interfaces, in addition to operating its own exchange. The commission alleges that Google manipulates transactions to favor its own exchange and charges exorbitant fees for its services. It insists that mere “behavioral” remedies are inadequate.
A complaint from the US Department of Justice earlier this year mirrors these allegations. The DoJ accuses Google of acquiring competitors to solidify its dominance in adtech, compelling customers to use its products, and distorting ad auctions. This alleged “illegal monopoly” allows Google to take up to a 30% cut of the funds flowing through its network.
In response to these allegations, the DoJ seeks damages from Google for the alleged overpayment by the US government. Separately, they have filed a lawsuit against Google, challenging its domination in internet search and search advertising.
Google vehemently denies these allegations by both the commission and the DoJ. Furthermore, the company faces challenges due to the pandemic, as the digital advertising industry has experienced a downturn. Microsoft’s alliance with OpenAI presents an opportunity to transform Bing into a formidable contender in the search market.
The regulators’ newfound fervor is driven not only by current tech giants’ scale advantage but also by their past failures. It is clear that they cannot claim that “they never saw this coming” since some of them did.
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