The Justice Department and eight states are sue Google on its digital advertising business, accusing the company of using its dominance in the market to undermine competitors and force advertising buyers and sellers to use its products on less favorable terms than another company could offer. Meanwhile, Google takes a good percentage from the top, at least 30 percent, the lawsuit says.
“Website creators make less and advertisers pay more,” Attorney General Merrick Garland said at a press conference announcing the lawsuit.
This means, according to the DOJ, that websites that rely on digital advertising get less revenue from those ads than they otherwise would, meaning less money to fund their offerings. Advertisers pay more than they should, and those costs are usually passed on to the client.
The DOJ is trying to force Google to sell or spin off parts of its digital advertising arm so that it no longer has control over every side of the advertising tech stack: the buyer side, the seller side, and the exchange in between. Google earned approx $169 billion in digital ads worldwide in 2022, but the vast majority of that revenue (as well as Google’s revenue, period) comes from search ads, which are ads that companies place in users’ searches that may be relevant to them. This lawsuit does not target Google’s search ad empire, but rather the part of its business that places ads on websites on the Internet outside of Google’s properties. That’s a much smaller, but still sizable share of Google’s revenue.
In a rare move, the DOJ is also seeking monetary compensation for the government, saying Google’s inflated anti-competitive ad prices are costing the government money through the $100 million worth of display ads it has bought since 2019 to promote various agencies and services. Yes, even the federal government is saying it is a victim of Google’s bad advertising behavior.
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 laying off 12,000 people, which represents about 6% of its workforce. The DOJ lawsuit is surely an unwelcome addition to Google’s woes. But cases like this take years to work their way through the justice system, and there’s no guarantee the Justice Department will win.
A more immediate threat to Google is that a further fight with the government presents another distraction for a company that is also pushing back new regulations and struggling with growing competitive threats in some other areas. YouTube had to introduce “Shorts” to keep up with TikTok. Microsoft is pouring out billions of dollars in OpenAI, a company that rivals Google’s AI efforts and threatens to use its ChatGPT chatbot to power Microsoft’s search engine, Bing. Meanwhile, ad spending is down across the board, including for Google and its properties. Google’s advertising business hasn’t been hit that hard like othersbut its overall revenue is not growing as much as it was before.
The Justice Department has reportedly prepared its case against Google’s digital advertising business For years, even before the Biden administration. This last seed also unites four other government antitrust lawsuits that Google is already facingIncluded a DOJ lawsuit from October 2020 on its Search Engine and Search Activity Announcements and one submitted by 38 state attorneys general in December of that year, also on Search Activity. 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 the DOJ is bringing now.
“Today’s DOJ lawsuit attempts to pick winners and losers in the highly competitive ad technology industry,” Google said in a statement. Vice President of Global Ads Dan Taylor She said the lawsuit would hurt the ad industry and innovation, not help it, and that the government shouldn’t be able to force companies to relax Acquisitions of 15 years that had once been approved by regulators.
Google also emphasized that it’s in a crowded and competitive space. Google, Meta and, increasingly, Amazon has the largest shares of the digital advertising market in the United States, while Google has the largest share. The other antitrust agency, the Federal Trade Commission, has sued A half And Microsoftincluding on acquisitions that it claims are anti-competitive.
The Chamber of Progress, a Google-funded Big Tech advocacy group, said in a statement that the case was “unrelated to economic reality” and that Google’s digital ad market share (valued to be about 29 percent in 2022, giving it the largest share of any company) was “at an all-time low.”
Antitrust advocates who have railed against Big Tech for years have applauded the move. Kyle Morse, deputy executive director of the Tech Oversight Project, said in a statement that “Google is rightly held accountable for years of abuse in the online marketplace,” adding that Google’s rivals should take a lesson and rethink their behavior. “Otherwise, you’re next,” said Morse.
The DOJ’s other antitrust lawsuit against Google — filed in October 2020 — is expected to go to trial in September 2023, which gives you an idea of how long it might be before the lawsuit filed today sees the inside of a court of law. Google’s governance problems will likely carry over into the next decade, at which point there may be an entirely new company dominating the internet.
Jonathan Kanter, head of the Justice Department’s antitrust division, suspends the lawsuit he just filed against Google on January 24.Anna Moneymaker/Getty Images