Google still faces breakup – Advertising business in court

Following the recent ruling in the monopoly case and the accompanying requirements, Alphabet got off lightly and will not have to spin off its browser business. However, there is another remedy procedure underway. This concerns the advertising business of the parent company Alphabet Inc. This is also part of Google's monopoly position, and here too, there could be a requirement to sell the business. Google earns most of its money from its advertising business. The spin-off could therefore be unpleasant for Google.

Judge Leonie Brinkema from Virginia is responsible for the proceedings. Over the next two weeks, she will hear testimony – from publishers, technology experts, from the advertising environment, and from Google employees themselves. Brinkema then decides what Google needs to do.

The US Department of Justice and individual states have already said that they would be in favor of selling the advertising marketplace. They see both advertisers and website operators disadvantaged. They say that fair competition can only be restored through the spin-off. Google, on the other hand, says this is not necessary. Instead, they want to open up the platform further to competitors. Google also believes that publishers and website operators use Google's systems because they are "simple, affordable and effective", wrote Lee-Anne Mulholland, Google's Vice-President for Regulatory Affairs.

Google operates both a marketplace and a platform

Google Ad Exchange (AdX) is a kind of marketplace where publishers can sell their ad space to advertisers. Advertisers place bids in real time – an auction called real-time bidding (RTB). This happens in a very short time, namely every time a visitor calls up a website. Only then does the advertising space actually exist. The winner of the auction displays their advertisement on the space. They pay both the website operator and Google for this. But the website operator also has to pay a fee to Google.

The advertisers are not the brands themselves, but larger companies that take on this role. Advertisers can also display personalized ads to people based on user profiles, tracking, and cookies. This also happens in real time.

However, Google does not only operate this marketplace and the auctions. There is also plenty of space for advertising in search results and on YouTube, which is also sold via the marketplace. Not least because of this, Google is effectively playing on several fronts at once. And it does so very dominantly. According to the US Department of Justice, 90 percent of the ad servers that run advertising in real time are controlled by Google.

The allegations also include that Google is said to have given itself preferential treatment within this system. Another issue will be how Google took over competing advertising companies in the past. In addition to the outcome, i.e., the conditions imposed on Google, it is also expected that revealing facts about how the advertising business works will come to light.

The market regulator in the UK has also already announced its intention to launch an investigation. A fine of €4.12 billion is already on the table because Google used its market power with Android to promote its advertising business. The Advocate General of the European Court of Justice supports the corresponding ruling of the EU court. The decision now rests with the ECJ. However, there are already voices within the EU Commission calling for the company to be broken up.

(emw)