Google offers to split part of its ad-tech business to avoid DOJ trouble

In their latest efforts to fend off a lawsuit from the US Department of Justice, Google is offering to split the part of the business that auctions and places ads on websites and apps into a separate company under the Alphabet umbrella. 

No word from the DOJ. While the Justice Department spokesperson isn’t commenting at this time, it’s not entirely clear if they would accept any offer short of an asset sale. Antitrust officials have hinted at deeper structural changes to the ad-tech business, rather than promises to change business practices. 

Trouble for Google in EU. Google is also facing a similar ad-tech investigation in the European Union. Last month we reported that in their offer to the EU, Google has stated that they would allow competitors to broker the sale of ads directly on YouTube. “We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack,” said Margrethe Vestager, the EU’s competition chief.

Additional cases against Google include:

• The ongoing case from the DOJ alleging Google uses anticompetitive tactics to maintain the dominant position in online search.
• A lawsuit from Texas argues that Google is running a monopoly that harms ad industry competitors and publishers. One which Google is attempting to get dismissed and says is “full of inaccuracies and lacks legal merit.”
• U.S. senators have proposed a new antitrust bill that could force Google to divest parts of its ad-tech business.
• EU agreed this spring on two new major tech regulations, including one called the Digital Markets Act, that puts new fairness obligations on companies like Google.
• In 2013 Google resolved an FTC investigation by agreeing on changes to it’s practices. Google attempted to do the same in the EU but the EU rejected their offer and filed antitrust charges in 2015.

What Google says. “We have been engaging constructively with regulators to address their concerns. As we’ve said before, we have no plans to sell or exit this business. Rigorous competition in ad technology has made online ads more relevant, reduced fees, and expanded options for publishers and advertisers.”

Regulators are also investigating whether Google is abusing it’s role by representing both advertisers and publishers in online auction exchanges. Google denies the allegations. 

What else is in store for Google. You can read the full article from the Wall Street Journal here.

Why we care. Any moves by Google to restructure parts of its ad-tech business or offer policy changes could disrupt the digital advertising industry. We all make a good living off of Google presently. But if Google gets broken up or changes, our industry will feel it.

Jeff Ferguson, Adjunct Professor, UCLA and CEO, Amplitude Digital adds “Google isn’t anywhere close to a monopoly of the internet advertising business, much less the entire advertising business, and there’s little chance the DOJ can prove actual anti-competitive practices. The only way they’ll ever get Google (or Facebook, by the way) is to rewrite the laws. Google must see something else going on because splitting off this part of the business won’t solve the DOJ concerns.” 

On the other hand, giving rival ad-tech publishers the chance to compete and buy ads on Google owned platforms like YouTube could drive down costs for advertisers, who will have more options and additional ad-buying tools to consider.