COULD A GOOGLE SPIN-OFF OF AD TECH AVOID U.S. ANTITRUST LAWSUIT?
It still may not be enough to placate regulators
Alphabet Inc’s Google has allegedly offered concessions to spin off its ad-tech business in an effort to ward off a second U.S antitrust lawsuit. That entity would reportedly remain a part of Alphabet, the Wall Street Journal reports.
Even if the tech giant were forced to spin off its ad-tech business, it wouldn’t dampen the company’s digital advertising market power, sources previously told Adweek. But if the U.S. Justice Department proceeds with a suit, alleging Google’s ad-tech business is anticompetitive, the $1.5 trillion company may be forced to break itself up.
“We have been engaging constructively with regulators to address their concerns. As we’ve said before, we have no plans to sell or exit this business,” a Google spokesperson told Adweek.
Between the lines
Google gets most of its revenue from its advertising business—$54.66 billion in advertising revenue last quarter alone.
Previously, the U.S Justice Department sued Google in October 2020 for illegally using its market dominance to stifle competition. Similarly, the Texas Attorney General filed a separate lawsuit alleging illegal monopolization of the online ad market.
The company has also faced antitrust scrutiny from the European Commission in 2021.
On a regulatory front, a bill introduced in the U.S. Senate in May—the Competition and Transparency in Digital Advertising Act—aims to split Google’s ad-tech stack. Although not explicitly named, the bill refers to any business with more than $20 billion in digital ad revenue should not be allowed to own a digital advertising exchange if it also owns a demand-side platform (DSP) or sell-side platform (SSP), or if it also sells digital advertising spaces.
Google owns the largest demand-side and sell-side platform, along with an exchange platform for programmatic auctions, which could face the direct implications of the bill.
“Rigorous competition in ad technology has made online ads more relevant, reduced fees and expanded options for publishers and advertisers,” the Google spokesperson added.
The reported concession comes at the same time when Google remains in Europe’s crosshairs. There, the Digital Markets Act became law earlier this week.
“[As per this law], divestiture may not be a foregone conclusion, in contrast to the U.S bipartisan proposal,” said Arielle Garcia, chief privacy officer at UM Worldwide.
Even if Google were to break up its ad-tech business, “it remains to be seen whether spinning off parts of its ads business into a separate company under Alphabet would suffice to alleviate U.S.-side scrutiny,” Garcia added.