About 15 years ago, the US Federal Trade Commission approved Google’s $3 billion acquisition of DoubleClick, a pioneer in the fast-growing online advertising space.
A prescient FTC commissioner disagrees. She noted in a memo that the U.S. search business has a market value of $207 billion and “best-in-class” engineers. Those resources, she suggested, could help it gain dominance in what is known as ad tech.
Today, Google’s market capitalization is $1.6 trillion, based almost entirely on digital advertising revenue. The European Commission says it must now break up Google’s advertising business.
The ad tech business is made up of publishers who want to sell ad inventory and marketers who are trying to reach consumers. The two met at an exchange, buying and selling advertising space.
Google now has a strong presence in the buyer-seller interface, while it also operates an exchange. The commission said Google used its tools to push transactions to its exchange and then charged “exorbitant service fees.” It considered that any “behavioral” remedy would be insufficient.
According to a similar complaint from the U.S. Department of Justice earlier this year, Google bought up rivals to seize its position in the ad tech space. It forced customers to use its products and distorted advertising auctions, the complaint said. This “illegal monopoly” is said to allow Google to take a cut of as much as 30 percent of the dollars flowing through its network.
The U.S. Department of Justice is seeking damages from Google for the alleged overpayment by the U.S. government. Separately, it is suing Google over its dominance of Internet search and search advertising.
Google strongly disputes the commission’s and Justice Department’s allegations. It has been struggling in the wake of the pandemic. Digital advertising has declined. OpenAI could help Microsoft turn Bing into a real competitor in search.
What unnerves regulators is that their newfound enthusiasm is the result of past failures and the technological advantage of scale. They couldn’t say, “We never saw this coming.” Some of them did.