Department of Justice files a new lawsuit against Alphabet’s subsidiary Google. The end goal of this lawsuit is to sever Google’s ad business from the company. This partition will mean that Google’s ad business will act as a separate entity from the main company.
Google’s dominance of the online advertising market has brought the company under a lot of scrutiny over the years. This latest filing by the company is not the first and certainly not the last.
The most likely scenario in all of this is nothing might even come out of it. These cases usually take years and by then Google might restructure its business in such a way as to reduce the pressure from the government.
Additionally, due to the vast wealth Google has acquired over the years; it can easily lobby for its cause in government which it has been doing along with other tech companies.
Attorney General Merrick Garland is alleging that Google has engaged in anti-competitive behaviors to keep its dominance. “Google has engaged in exclusionary conduct that has severely weakened, if not destroyed, competition in the ad tech industry,”.
First, Google controls the technology used by nearly every major website publisher to offer advertising space for sale. Second, Google controls the leading tool used by advertisers to buy that advertising space. And third, Google controls the largest ad exchange that matches publishers and advertisers together each time that ad space is sold,” Garland said.
Dan Taylor, Google’s VP of global ads, hit back at the post on the company’s blog about the recent filing. “Today’s lawsuit from the Department of Justice attempts to pick winners and losers in the highly competitive advertising technology sector. It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court.”, he said.
Advertising makes up for roughly 81% of Alphabet’s $256 billion in revenue for 2021, the market is currently in a downturn and Alphabet recorded a 27% decrease in profits last year due to a decrease in ad revenue. Other sectors such as AI and Google cloud is steadily growing but the big whale is still the Google ad business.
It remains to be seen what will come out of this but even if Google loses, how will the structural change look is hard to predict. We are a long way from such a conclusion.
