Google’s lucrative ad tech business goes on trial
The US government is targeting the core of Google’s vast wealth—its highly profitable ad tech sector.
A trial set to start on Monday will address the Department of Justice’s claim that Alphabet, Google’s parent company, unlawfully maintains a monopoly in the advertising market. Last year, Alphabet generated over $200 billion (£152 billion) from placing and selling ads to internet users.
While Alphabet contends that its success stems from the “effectiveness” of its services, prosecutors argue that the company has leveraged its market power to suppress competition.
Laura Phillips-Sawyer, a professor at the University of Georgia School of Law, noted, “This is a crucial industry that captures billions of consumer dollars annually. All consumers have a stake in this litigation.”
This case marks the second significant antitrust challenge faced by the tech giant in the US. In August, a judge ruled that Google’s dominance in search was illegal, although the specifics of the penalties for Google and Alphabet remain uncertain.
According to the lawsuit filed by the Department of Justice (DoJ) and a coalition of states in 2023, Google dominates the digital ad marketplace and has leveraged its market power to stifle innovation and competition.
Google meanwhile contends it is just one of several hundred companies that facilitate the placement of digital ads in front of consumers.
It argues that competition in the digital ad space is growing, not contracting – citing increased ad growth and revenues for companies such as Apple, Amazon, and TikTok as proof in a blog post responding to the DoJ’s lawsuit in 2023.
Both sides will present their cases to US District Judge Leonie Brinkema, who is expected to deliver a verdict.
The bench trial comes on the heels of a landmark decision last month in a different monopoly case brought by the Justice Department against Google.
Judge Amit Mehta ruled that Google acted illegally to squelch competition in its online search business.
“Google is a monopolist, and it has acted as one to maintain its monopoly,” he wrote.
During last year’s trial, Google said it dominated online searches because it had a better product.
And the company is seemingly deploying a similar defense in the ad tech case.
When asked for a statement, it referred the BBC to its 2023 blog post, in which it states that “no one is forced to use our advertising technologies – they choose to use them because they’re effective.”
Judge Mehta held a status conference on Friday as he began the process of deciding on remedies for Google’s conduct.
“The DoJ clearly had a big win, and they’re going to ride that momentum,” Dan Ives, managing director at Wedbush Securities, told the BBC.
He said he expects those remedies to involve “business model tweaks, not a breakup” of the company.
Meanwhile, in Justice Brinkema’s courtroom, the arcane process that governs advertising technology could make the DoJ’s attempts to prove its case an uphill climb.
“We all use search. We all intuitively understand that product,” said Rebecca Haw Allensworth, an antitrust professor at Vanderbilt University Law School.
By comparison, advertising technology is “so complex that I think that’s going to be a real challenge for the government to make a clear, simple monopolization argument here.”
The US is not the only country where regulators are unhappy with Google’s ad tech business.
On Friday, the UK Competition and Markets Authority said it believed Google was abusing its dominance in the ad tech industry, according to the findings of its initial investigation.
It said it found that Google used anti-competitive practices to dominate the market for online advertising technology – and the potentially unlawful behavior could be harming thousands of UK publishers and advertisers.
A Google representative said the decision was based on a “flawed” understanding of the ad tech sector.
