What does ruling on Google’s illegal ad tech monopoly mean?

SAN FRANCISCO: A US judge’s ruling that Google has illegal monopolies in ad technology sets up the possibility of US prosecutors seeking a breakup. Here’s what the case involves and what Google owner Alphabet faces from here.

WHAT IS THIS ABOUT?

The most important thing is what this is not about: this is not about search, Google’s bread and butter, although there is a separate antitrust case about search. The Justice Department’s ad technology case revolves around Google Network, a division of the business that manages its auction-style system that advertisers use to purchase digital ad space. The ad tech chooses what ad to put where at what cost.

Federal prosecutors said that Google’s power over the ad tech allows it to illegally fend off competition, which hurts web publishers, such as news outlets. The judge agreed. Google’s argument was that it out-competed rivals with superior technology.

Advertising accounted for about 75 per cent of Alphabet’s $350.02 billion in revenue for 2024. The Google Network business accounted for only 8.7 per cent of the revenue.

WHAT HAPPENS NEXT?

The judge who ruled there are illegal monopolies now will hear arguments about what to do. The Justice Department had been seeking, at a minimum, the divestiture of Google Ad Manager, a platform within the Network division. Ad Manager represented 4.1 per cent of overall revenue and 1.5 per cent of operating profit in 2020, according to Wedbush research and analysis of court documents. More recent figures were redacted from court documents.

HOW BIG A DEAL IS THIS FOR GOOGLE?

Erik Hovenkamp, a professor at Cornell Law School, earlier in the case had predicted that if it lost, Google would probably have to divest some, not all, of its display advertising business, and the net effect would be a drop in revenues of less than 10 per cent.

Google has even been open to some ad tech divestiture. Reuters first reported on September 18 that Google itself offered to sell its advertising exchange, which is part of Google Ad Manager, to appease European antitrust regulators. Publishers rejected the proposal, sources said.

COULD THIS HAVE RIPPLE EFFECTS?

The most serious implication of the ruling might be how the company manages the ripple effects of court-ordered remedies across other parts of its ad tech suite, Nikolas Guggenberger, a law professor at the University of Houston, has said. In theory, a DOJ win would make it easier for advertisers and publishers to switch ad tech platforms.

There is also the political precedent set in terms of political will: the Biden and Trump administrations both have supported this case so far, showing an almost unique level of cooperation on the two sides of the political aisle in the prosecution of Big Tech.

There is a separate, higher stakes antitrust case about Google’s search technology that continues, and this is a flesh wound compared to the implications of a loss in search, analysts say. A judge in Washington next week will hold a trial related to search.

IS THIS THE END?

No. Google already has said it will appeal. The federal judge next must decide what the remedies are to the illegal monopoly. It will be some time, likely years, before this is finished, unless a settlement is agreed.