Is Google’s Ad Tech Biz Ripe for the Breaking?

Google has been let off the hook for its search monopoly. But what about its equally gargantuan ad tech business? We’ll soon find out.

On Monday, the company entered the remedy phase of its ad tech monopoly trial, after antitrust regulators at the US Department of Justice successfully argued the unit was an illegal monopoly earlier this year. But what would a break-up of the division even mean for Google, and the online ad business writ large?

On Display

In determining remedies for Google’s search monopoly, a US judge essentially found that time heals all wounds — and that the advent of generative AI chatbots meant the market finally created an organic competitor to Google’s search engine. The DOJ sees a much more straightforward path toward cracking Google’s ad tech monopoly, however: forcing the company to divest AdX, the ad exchange software that connects ad buyers and ad sellers. Note: Google also owns and operates unique platforms for both buyers and sellers; it was found to have a monopoly in the latter space, too, though DOJ regulators say only a divestiture of AdX is necessary to crack its unfair grip.

But would kicking out the third leg of the ad stool truly impact Google’s bottom line? To understand the value of AdX, it’s worth looking at the bigger picture of Google’s total advertising business:

• Google is expected to generate some $86 billion in US online ad revenue this year, but the vast majority of that, roughly $70 billion, is from ads featured in search results that are outside the scope of its ad tech business. The remaining $16 billion or so comes from the display ads on websites served by its ad tech unit; in other words, relatively small potatoes for Google.
• But for the entire display advertising industry, it’s still most of the potatoes in the entire sack. In the trial portion of the case, the DOJ argued that AdX owns a roughly 65% market share of all ad exchange transactions, or about nine times more than its next closest competitor.

Tied Up: A little more than half might not sound like a monopoly. But Google’s tool for ad sellers, DoubleClick for Publishers (DFP), controlled roughly 91% of its respective market, and the DOJ found that DFP clients were effectively coerced into also using AdX. Tying the two services together allowed Google to snare a roughly 20% fee on each ad dollar that moved through the exchanges, a higher cut than other competitors. Google says there’s a much easier solution to cracking its monopoly than forcing it to divest AdX: Keep the platform, but allow DFP and its buyer platforms to be interoperable with third-party exchanges. Gee, why didn’t they think of that earlier?