The US government wants to split up Google – Adam Epstein has other ideas

Adam Epstein is the CEO of AdMarketplace – a company that offers a marketplace for advertising in search from New York City. Epstein testified in the DOJ trial against Google.

The trial about Googles monopoly is divided in two parts, right? One already ended with saying Google has a monopoly. And there's the second part now about the consequences. Can you bring us up to what exactly is discussed at the moment?

Sure. So, even pulling back a little further out, there are three different antitrust trials in the United States against Google. And they've been found to be a monopoly in five different markets by three different courts. The first was the Google Play Store. The search, which is obviously their core asset, they were found to be a monopoly in both search text ads and in search results. And then in what they called the ad tech case, they were found to have two monopolies there as well.

And the case that we're involved in is in the search case. Both the search and the ad tech case are both entering the remedies phase. I've testified on last Monday about some of those remedies. And now Google is putting out its case. After the remedies are concluded in the search trial, we expect a judgment in this summer.

So, by the end of this year, you'll see five different sets of remedies for five markets for Google in the United States. I don't know that any other company has been ever found to hold a monopoly in five different markets, which in some ways is actually kind of impressive.

They have an opportunity now to really have the next chapter of their organization. You know, they built a great search engine. They leveraged it to five different monopolies because the United States hasn't done a great job of enforcing antitrust in digital markets for the last 25 years. Obviously, that's changing now.

You already testified. What was that about?

A lot of it is just having the judge in the court, and really the government, understand what native search advertising even is. And so native search is when a user is searching on a browser, or a website, or an app outside of a search engine, and they're entering a query. The newest one now is AI-sourced chatbots. We're all putting in prompts these days. So that's what we call native search. You didn't go to a search engine to do a search. You're doing it natively in the browser or the application or the AI that you're in.

Native search advertising is when you allow advertisers to then respond with relevant ads to what the user has typed in, and the user can then transit directly to the advertiser page without going to the search engine result page.

And currently, the way that Google sets up most of its deals in native search is it forces all those searches to go to their search result page. So they have default distribution agreements with Apple and Firefox and Samsung. And even if you're doing a search on Apple or on Firefox or on Samsung, you're still going to end up at the Google search result page. Whether you sort of wanted to or not.

Actually, publishers like Apple or Firefox or Samsung could pull assets from Google, like search results, like search ads, but they could also pull them from folks like AdMarketplace or an AI-chatbot. And so they could create their own custom search experiences. They can create their own custom monetization through what we call syndication remedies. They're syndicating these assets and they're able to now build differentiated and unique search experiences. Instead of this all every three billion people in the world who search every day, all going to the same one-size-fits-all search experience with just Google products and services on the search result page.

So that was the idea that we shared in a memo with the government back in September. They ended up putting this idea into their proposed final judgment. And then we spoke for an hour and a half with the judge and the Google lawyers, the DOJ lawyers about that remedy. And the judge seemed very engaged and interested in learning about it. He does his research and he has really learned this industry over the last four and a half years. So it was a remarkable experience.

One of the consequences could be that Google has to sell Chrome. You were just talking about Firefox and Apple. They're getting a lot of money from Google for having Google as the default search engine. What do you think it would mean for them? Is there a possibility to change this whole advertising system?

There definitely is. And so our view and our memo about Chrome divestiture is that it should be used as an enforcement mechanism. The syndication remedies that we've talked about are what are called behavioral remedies. It requires Google's behavior to change and really to offer licensing agreements on fair and reasonable terms and to make sure that they comply with those agreements. So that gives some people some concern because there's a level of trust that you need to have, that Google is gonna do that. And what we say is, well, trust but verify. And then if they're not complying, go ahead and sell Chrome to somebody else and have another management team that will comply. So that's how we view the Chrome divestiture. And of course, the judge is gonna make whatever decisions the judge is gonna make. The advertising industry, if the syndication remedies are complied with, will absolutely fundamentally change.

There'll be an opportunity for folks like Apple and Mozilla and Samsung to get really full value for the searches that are going on in their site. We think that they're pretty underpaid right now. We think Google's kind of overcharging advertisers as well. Our estimate is about a $15 billion to $17 billion a year margin that's being extracted by the monopoly that Google holds in the ad space. You can imagine billions of dollars more going back to advertisers and ultimately consumers. You can see billions of dollars going to publishers to create more innovative search experiences and really browsers and websites generally speaking.

We think that the remedies that we've proposed and that we talked to the judge about can really unlock a lot of innovation, a lot of value and really feed this market in a way that it's really been starved as Google put kind of a grip around user and advertisers and publishers.

Wouldn't it be possible to force Google to sell the whole advertising business?

We worry about just a wholesale sell of one to another. It is that you're just maybe moving the monopoly power somewhere else. We also talked about cold start problems and access to the advertisers is important and you don't want just one company to have the access to all the advertisers or to all the searches. The whole idea here is that there's more access to for more firms to be able to build, innovate and create value.

Boundaries between democracy and capitalism

As long as the syndication remedies are being complied with, I think that's our best chance of having competition, innovation, and a rebalancing of value, allocation, and modernization, quite frankly, but you can certainly come up with scenarios where if you sold it to the wrong company, you maybe just made the problem worse. I get that there's sort of a visceral, emotional like, hey, let's break up Google. Like it was with standard oils, the big case where it was you get the refineries and you get the railroads and you get the oil derricks or whatever. But this is not a physical market. This is a digital market. And we're talking about digital assets. We're really talking about data licensing agreements. And as boring as that sounds, getting that right and getting those complied with, to me, is how we're going to bring antitrust into the 21st century and to really stop the consolidation of control that you see from these companies. We need to come up with a set of solutions. Really an antitrust is what sets the boundary between democracy and capitalism. That the control can be a little bit more spread to entrepreneurs and to new entrants and to competitors and to advertisers instead of being consolidated.

How about AI? Do you think AI will change everything? We're talking about how Google worked before and now Google has to change, too, right?

I think AI is really the catalyst for why this needs to happen now. If you go back a year and look at what Google was doing in AI, their Gemini product was a joke. I mean, it was literally making crazy recommendations. It's a lot better a year later. They continue to be able to have a stranglehold on every query and every search. And whatever Google decides to make Gemini, what it's going to be, because they will have starved out all the other potential competitors. So it's really important that as search does go through its next technological transformation, which is what's going on, then this is the exact moment where we have to open up competition.

We have to offer monetization of these AI search providers. I mean, you can imagine, you should be able to go somewhere and see a ChatGPT response to your prompt right next to a Google response. Like, why doesn't that exist? Well, it doesn't exist because Google doesn't let it exist. And yet with the syndication remedy, you can see a couple of different chatbots, you can see Google all in one place. The idea is that we can have these differentiated and unique search experiences that are not completely controlled by Google, yet Google is a participant in.

I think we will see great changes in search because of antitrust in AI and I think you'll see it a lot more quickly than people are expecting. And I think we'll all be sitting around talking about what your favorite search experience is. Hey, I like this browser. Why, you know, I like this app. We'll be having conversations about search in a way that we really haven't had in 25 years. And that to me is extremely exciting. That sort of shows what's possible for the consumer for the searcher with a really effective antitrust remedy.

When we're talking about AI, we are all having OpenAI in mind. They want to build a browser, a social network, and they are having ChatGPT, it's like a Google Blueprint. Aren't you afraid, OpenAI will be the next monopoly?

I think it's really important that we understand how to regulate antitrust in a digital market. So, doing it with Google in search, if we can get it done there, we can get it done anywhere. But you're absolutely right. The blueprint is being formed right now in a courtroom in DC by Judge Mehta, who will rule on this. I think it'll open up competition that'll make the chances of what you're describing a lot lower because Google will be competing against OpenAI, will be competing against perplexity, competing against anthropic. You'll have more money flowing to the highest values, you'll have more differentiation. I think the chances are a lot lower, but if it's, hey, you get these five monopolies and then, OpenAI, you're gonna get these six monopolies, you end up with like three companies in the digital world. And we're certainly on a path to getting there.

I think that the remedy in the Google case is extremely important because it will not only open up the search market, it will be a blueprint for any other market that anybody else is thinking about, trying to monopolize. And it'll create incentive to not engage in monopolistic behavior. An incentive that Google hasn't had for 25 years because we have not had effective antitrust regulation.

Google, I said it in court, I don't think they're evil. I don't think they're bad people. I think they've been following their incentives. And if we're not going to have any regulation around antitrust, what are you going to do except for build a bunch of monopolies, if you can?

What happens in these courtrooms and how effective these remedies are, have real-world implications, not just for the companies involved, but for the next generation as well.

(emw)