It pays to advertise. US antitrust regulators have done so by going after Google. What better way to show you are serious about opening a new front in the antitrust battle against the world’s wealthiest corporations?
The Department of Justice has filed its long-awaited lawsuit against Alphabet’s largest unit. The 149-page complaint accuses Google of anti-competitive behaviour through its control of the digital ads ecosystem. It wants the company to sell off its “anti-competitive acquisitions”, such as the 2007 addition of DoubleClick, and to divest its Ad Manager suite.
The court battle will be long and protracted. Moreover, the burden will be on the DoJ to convince judges that Google’s alleged antitrust violations are bad for consumers.
That will not be easy, though there is no arguing Google is a digital ad powerhouse. Advertising makes up about 80 per cent of Alphabet’s $256bn revenue in 2021.
The company took in 30 cents of every dollar US advertisers spent online last year. The DoJ said that is largely as a result of its control over a vast swath of the technology that underpins the digital ad marketplace. Advertisers end up paying more and publishers made less money.
Imagine if Goldman Sachs or Citibank owned the New York Stock Exchange, the DoJ argued in its complaint.
One might counter that Google’s size and integrated ad platform allow it to deliver ads more efficiently. The DoJ must show that any anti-competitive effects outweigh the benefits to prevail with its claim under the 132-year- old Sherman Act.
Moreover, Google’s grip over the online ad market has slipped. At its peak in 2015, the company controlled 37.4 per cent of US online advertising spending, according to research group Insider Intelligence. That should fall to 26 per cent by 2024. By contrast, Amazon’s share should climb to 12.7 per cent of the market by 2024, doubling since 2018.
But the real issue is the ability of tech platforms to create quasi-monopolies through network advantages. Attempts by US trust busters to grapple with the new dynamics of dominance should be welcomed.
This post was originally published on Financial Times