The U.S. Department of Justice, together with eight states including California, filed an antitrust lawsuit Jan. 24 against Google. The DOJ wants to force the company to sell off the most lucrative division of its trillion-dollar business, the Google advertising system.
If the case succeeds, it could lead to more competitive online advertising rates for businesses. It could also mean a World Wide Web with much more competitive media sources, where publishers need not rely on paywalls and subscriptions to support their online products.
More than 9 of 10 internet searches use Google. In 2022, Gmail accounted for 37 percent of all emails opened worldwide. More than 1 billion people every month, in 220 countries and speaking 40 languages, depend on Google Maps to get them where they’re going. That’s 72 percent of online map users. Google also crushes competition in the online video industry. YouTube – which Google bought in 2006 for $1.65 billion – draws 76 percent of the market.
Google created or developed services that have changed the very nature of everyday life. And those household-name Google products have one thing in common: They’re free. Almost all of holding company Alphabet’s revenue comes from a service that most users never think about: Google Ads.
Almost 81 percent of Alphabet’s $183 billion in 2020 revenue came from its ad operation. In 2021 the percentage was 81.4 percent, but the amount went up to $209.5 billion.
How does Google generate such staggering amounts of cash from those tiny little ads? When a user searches for a topic, the results page often includes a series of links marked “Ad.” Money earned from search-result ads accounts for 71 percent of Google’s advertising revenue.
Advertisers pay for these listings mostly on a pay-per-click basis. In other words, every time a user clicks on an advertising link, the advertiser pays and Google’s cash register rings. The price of each click is not fixed but is determined by auction. The software that powers this 24-hour, 365-day auction came to Google through another corporate acquisition, of online advertising company DoubleClick in 2007.
Google’s various pieces of software – many obtained from DoubleClick – that allow advertisers to target their ads are collected into a toolkit named Google Ad Manager. The DOJ is asking the courts to force Google to sell off its Ad Manager software kit.
“One industry behemoth, Google, has corrupted legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools,” DOJ’s lawsuit asserts. Google denies the industry lacks competition.
The complaint quotes an internal email from a Google executive on the company’s ownership of so many components of its advertising system: “The analogy would be if Goldman or Citibank owned the New York Stock Exchange.”
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