Antitrust Officials Focus on Google’s Advertising Ecosystem

In its antitrust investigation of Google, the U.S. Department of Justice and state attorneys general are looking at whether the Big Tech company engages in “tying,” a practice of bundling products together with the aim of blocking competition. According to sources, the government officials have questioned executives at competing companies about Google’s Network, the division that sells end-to-end digital advertising services, and whether it offers advertisers enticing terms to buy into its complete ecosystem.

Bloomberg reports sources added that, “regulators are also asking about how Google’s larger online search business interacts with the Network division to bolster its share of the digital ad market.” U.S. regulators are preparing to file a suit against Google in the next few weeks, making it “likely the largest monopoly case since the government sued Microsoft Corp. in 1998.”

Public Knowledge senior advisor Gene Kimmelman noted that the practice of tying isn’t illegal “but if the strategy is used to cement a dominant market position, it could be.” “If those tools are used to maintain a monopoly, prevent entry of new players and exclude rivals, then they may be antitrust violations,” he said. Google spokeswoman Julie Tarallo McAlister stated that, “the facts are clear: our digital advertising products compete across a crowded industry with hundreds of rivals and technologies.”

Google’s Network “generated more than $21 billion in revenue last year but it is growing slower than other parts of the company,” says Bloomberg, and “Google often frames the business as an aide to web publishers that rely on digital ads.”

Officials are investigating three ad-tech categories: “the ‘sell-side’ software web publishers use to sell ads; the ‘buy-side’ services marketers use to purchase those ads; and the exchange, which connects the two sides.” “The problem is Google controls all these entities,” said representative Pramila Jayapal (D-Washington). “It sounds a bit like a stock market, except, unlike a stock market, there’s no regulation on your ad exchange market.”

Investigators are also looking at “Google’s decision in 2015 to limit ad-buying on its dominant YouTube video service to its own bidding tool, DV360,” which, said rivals, “cut them off from a major source of valuable digital video ad inventory.”

Critics also point out that, when advertisers buy Search ads, “Google gives them the option to shift any excess marketing dollars to display ads … extra spending is then funneled into Google’s ad network and exchange.” Google’s ad-tech rivals cannot compete with this. Because search marketing budgets are so big, “the extra money that spills over to Google’s display ads sometimes accounts for about 10 percent of web publisher revenue.”

“Google is where you have to be,” said Kimmelman. “There is no good alternative.”