Department of Justice and Eight States sue google over its digital advertising business, accusing the company of using its market dominance to harm competitors and force advertising buyers and sellers to use its products at less favorable terms than those offered by another company. Meanwhile, Google is taking a significant percentage off the top — at least 30 percent, the lawsuit says.
“Website builders make less money and advertisers pay more,” Attorney General Merrick Garland said at a press conference on the lawsuit.
This means, according to the Department of Justice, that websites that rely on digital advertising earn less revenue from those ads than they otherwise would, meaning less money to fund their offerings. Advertisers pay more than they should, and these costs are usually passed on to the client.
The Justice Department is seeking to force Google to sell or spin off parts of its digital advertising arm so that it no longer controls every side of the ad technology stack: the buyer side, the seller side, and the exchange in the middle. Google earned about $169 billion digital advertising worldwide in 2022, but the vast majority of that revenue (as well as Google’s revenue, period) comes from look for ads, which are advertisements that companies place in the search queries of users who may be related to them. This lawsuit is not aimed at the Google search advertising empire, but at the part of its business that advertises on websites on the Internet outside of Google properties. This is a much smaller, but still significant, share of Google’s revenue.
In a rare move, the Justice Department is also seeking monetary damages from the government, alleging that Google’s anti-competitive inflated advertising prices have cost the government money because of $100 million in display ads it has bought since 2019 to promote various agencies and services. Yes, the federal government says it too is a victim of Google’s bad behavior in advertising.
The lawsuit comes at a relatively bleak time for Google, which has lost about 25 percent of its stock value over the past year and is in the process of being fired. 12000 people, which is about 6 percent of its workforce. The DOJ lawsuit is certainly an unwelcome addition to Google’s problems. But such suits go through the court system for years, and there is no guarantee that the Justice Department will win the case.
The more immediate threat to Google is that the extra fight with the government is another distraction for the company, which is also fighting back. new rules and combating growing competitive threats in some other areas. YouTube had to enter “Shortsto keep up with TikTok. Microsoft is investing billions of dollars in OpenAI, a company that competes with Google’s own AI efforts, and is threatening to use its ChatGPT chatbot to improve Microsoft’s Bing search engine. Meanwhile, ad spending is down across the board, including for Google and its properties. Google’s advertising business hasn’t been hit as hard like othersbut total income does not grow as much as it was before.
The Justice Department is reportedly preparing a case against Google’s digital advertising business. for years, even before the Biden administration. This latest lawsuit also joins four other state antitrust lawsuits Google is already facing, including one DOJ suit of October 2020 in relation to its search engine and search advertising, and one filed by 38 state attorneys general in December of that year, again in connection with the search business. In July 2021, 37 state attorneys general sued Google over its Play app store, and 17 state attorneys general sued the digital advertising business in a case similar to the one currently brought by the Department of Justice.
“Today’s lawsuit from the Justice Department seeks to pick winners and losers in the highly competitive ad tech sector,” Google said in a statement. VP Global Advertising Dan Taylor said the lawsuit will hurt rather than help the advertising industry and innovation, and that the government should not force companies to wind down 15 year acquisitions that were once approved by the regulatory authorities.
Google has also indicated that it is in a crowded and competitive space. Google, Meta and, increasingly, Amazon have the largest digital advertising market shares in the US, with Google having the largest share. Another antitrust agency, the Federal Trade Commission, has also sued Meta and Microsoft over acquisitions it claims are anti-competitive.
The Chamber of Progress, a Google-funded big tech advocacy group, said in a statement that the case was “out of touch with economic reality” and that Google’s share of the digital advertising market (estimated around 29% in 2022, giving it the largest share of any company) was “at an all-time low.”
Antitrust advocates, who have opposed Big Tech for years, hailed the move. Kyle Morse, Deputy Executive Director of the Tech Oversight Project, said in a statement that “Google is rightfully responsible for decades of abuse in the online marketplace,” adding that Google’s competitors need to learn a lesson and rethink their behavior. “Otherwise you’re next,” said Morse.
Another DOJ antitrust lawsuit against Google, filed in October 2020, is due in court in September 2023, giving you an idea of how long it could be before a lawsuit filed today makes it to court. The problems with the Google government are likely to continue into the next decade, at which point an entirely new company could be on the Internet.