Assessing the fallout of Google’s ad tech antitrust trial

During the last 12 months, it has faced separate duels with the U.S. Justice Department. The DOJ’s first concern is Google’s search empire, a case that Google lost, and it could now be forced to sell its Chrome web browser. Google has voiced its intention to appeal this case, meaning these proceedings will likely continue for years.

However, some are now asking if the appeals process will benefit or unnecessarily burden Google, especially when it comes to the low-margin field of ad tech, Google’s second front with the DOJ.

A Virginia court heard closing arguments in Google’s ad tech antitrust case last week, leaving Google and the DOJ waiting for the judge to deliver a decision that could reshape the online ad market. Either that or barely scratch the surface.

A decision is expected between now and February (most expect presiding Judge Brinkema to deliver her verdict early next year), but don’t expect a tidy resolution. Far from closing the chapter, this ruling will likely mark the beginning of a protracted legal slog.

A hearing on potential remedies — assuming they’re deemed necessary — will not take place until next year at the earliest. Sources said they are more confident of a DOJ victory in this case than in the earlier search antitrust trial.

Whatever the decision, appeals are almost inevitable, and the Supreme Court could very well have the last word. Ahead of all this, here’s a closer look at what’s likely, unlikely, and downright far-fetched in the aftermath.

Least likely 

The idea that lawmakers and regulators will do nothing is the least plausible outcome. The trial unearthed too much damning evidence about Google’s control over ad dollars for this to end without action. Even if drastic remedies aren’t implemented, steps will be taken to weaken Google’s grip and foster a more competitive ad market.

Megan Gray of GrayMatters, Law & Policy said evidence suggesting Google employees made efforts to conceal internal communications and other such findings are likely to be viewed unfavorably by the courts; arguably, Google’s team is already aware of this. 

“I think Google has seen the writing on the wall for some time,” she told Digiday, noting the sophisticated nature of Google’s operations. “It’s arguably one of the reasons why it started going down the path of building [the] Privacy Sandbox.”

Probable

While dismissing Google’s ad tech empire would undeniably shake up its dominance over online ad dollars, it’s anything but a sure bet. The political calculus adds complexity, with President-elect Donald Trump signaling a reluctance to back measures he believes could harm U.S. interests. But it’s unclear how that position could manifest in exact executive change.

What’s more realistic is a ruling that forces Google to adopt stricter, transparency-driven guidelines. For instance, Google could be required to make the decision-making behind its buy and sell-side ad technologies fully visible. This might mean separating its publisher ad server from its ad exchange in a way that ensures data isn’t hoarded–allowing other programmatic marketplaces equal visibility and access. In other words, no more closed-loop dominance.

But even this measured approach comes with challenges. Implementing such remedies will be anything but swift. Google’s ecosystem is deeply interwoven, from its audience profiling capabilities to its location data pipelines fed by tools like Google Maps. Untangling this intricate web would demand significant expertise and time, likely stretching into years before any meaningful impact is felt, with Google’s detractors likely to demand third-party oversight of such an endeavor.

For U.S. lawmakers and regulators to succeed, they’ll need a masterful grasp of Google’s systems to shape a remedy that would deliver true transparency and equity. Anything less risks falling short of expectations.

Possible

While a total breakup of Google’s ad tech business may be unlikely, partial divestitures or forced separations are realistic options. 

For example, spinning off its ad server, its exchange (or both) could loosen Google’s market control while stopping short of dismantling the entire empire. However, it could also (inadvertently) impact publishers that spent years placing Google at the core of their monetization efforts, a sentiment popularly voiced in Digiday Research earlier this year.  

Richard Kramer, founder of equities analyst firm Arete Research, has proposed a resolution requiring Google’s parent company, Alphabet, to spin out “Google Network,” a.k.a. the entity formerly known as DoubleClick.

Arete Research has further suggested Alphabet spin out this asset to its existing shareholders as a public-interest “B Corp” with a capped profit margin, minimized fee extraction from advertisers and publishers, and a mandate to operate more transparently.

According to advocates of such a settlement, this arrangement could assuage accusations that Google’s ad tech operations have inherent conflicts of interest while also avoiding the divestiture concerns cited by publishers.   

Kramer echoed Gray’s observations and points to such trends, i.e., how Google Network generates some of the lowest margins but carries (arguably) the most significant regulatory liabilities, as one of the reasons why executives there may gladly unburden themselves of its ad tech assets. 

In its latest financial filings, Google Network revenues were down 2% year-on-year to $7.5 billion, compared to Alphabet’s $88.3 billion earnings, up 15% annually, for the period. Executives also noted that this part of the business, which is primarily concerned with generating third-party websites, has far higher traffic acquisition costs compared to its search business.

Such a setup would minimize the risk to the publisher and third-party ad tech ecosystem, all of whom are nervously eyeing the outcome of the ongoing trial along with investors on Wall Street, according to Kramer. “The investor community wants to be free of it [regulatory hassles] and have it resolved,” he told Digiday, noting how such a clean divestiture could free Alphabet to charge forward with its AI developments, a focus that would more readily appeal to Wall Street.  

According to Param Singh, Professor of Business Technologies and Marketing at Carnegie Mellon University, the decisions in both cases could have far-reaching ramifications beyond Google.

“If you think about it, Google has been declared a monopoly [in the search case],” he said, noting how the potential financial impact on Apple (which had a $20 billion-a-year deal with Google to be the default search engine on Safari), and further potential downstream consequences. 

He also pointed to defense arguments Big Tech defense lawyers may turn to, either in an appeals process or future trials. Although, he’s not necessarily convinced of the inevitability of a DOJ victory in the pending ad tech case.

“This won’t just stop at Google,” he said, pointing to how Amazon and Meta are intermediaries in two-sided markets, similar to Google. “These intermediaries can actually go and build better systems if they integrate the whole tech stack across the exchange as well as providing resources for advertisers and publishers. Intermediaries then have the benefit of what we call network effects… if more people join on one side, that becomes more valuable for the other side as well.”

Singh went on to add, “If the DOJ wins in this case, I think the ramifications will extend beyond Google; other tech giants, like Amazon and Meta… could face significant regulatory challenges.”

Microsoft all over again?

Similar to Singh, Kramer also noted how Google’s regulatory travails mirror those of its Big Tech cohorts and how Alphabet’s leadership may look to the past in order to devise its best move, especially as the internet enters a new era when AI will be a key differentiator.

“What’s interesting between what’s going on right now are the parallels with Microsoft fighting the DOJ for 10 years [in an antitrust case] over [tying] Internet Explorer and Windows… this meant it missed mobile and fell behind [Facebook and Google] on the internet,” he said.  

And it is perhaps with this historic comparison in mind that Alphabet’s executive leadership and board are likely to ask themselves, “Is it better to stick or twist with ad tech?”