Taming Google's advertising dominance
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Trying to stay ahead of "growing regulatory scrutiny," Google is looking at divesting part of its advertising business, said Keach Hagey and Rob Copeland at The Wall Street Journal. Antitrust officials have intensified their investigation of the company, and last week met with state attorneys general, who are also investigating Google, to coordinate federal and state probes. They've focused increasingly on ad tools that are "used to buy and sell ads on sites across the web," not just on Google's own sites. That business "was built largely on the company's 2008 acquisition of the ad technology firm DoubleClick." More than 90 percent of large publishers use the DoubleClick tools, now known as Google Ad Manager, to promote and sell advertising space on their websites. Why? It's the only way to get full access to the world's largest ad marketplace, Google's AdX, where advertisers enter bids to reach targeted users. That gives Google dominance over "the leading selling and buying tools, and the biggest marketplace where online ad deals happen."
Google should just sell off these ad tools before the feds break it up, said Alex Webb at Bloomberg. Google's AdSense network generated sales of $21.5 billion last year, or about 13 percent of its total revenue. Spinning off the business would be "a significant concession," but it would safeguard search advertising, which makes up almost three-quarters of Google's revenue. AdSense ads have already reached the point of saturation, and "the value of commercials plastering every nook and cranny of the internet looks set to decline." This all sounds like a good idea, said Tom Foremski in ZDNet, except for one thing: The Ad Manager technology "is core to how Google makes money, and it cannot divest that business." Yes, it can dump the AdSense network, which "consists of websites that have signed up to show Google ads and receive payments per click or impression." But there's no way Google will let go of DoubleClick's technology, which has become key to how Google sells ads across phones, desktop machines, and even smart TVs.
Google's choices are starting to look like a rock and a hard place, said Gerrit De Vynck and Mark Bergen at Bloomberg. Antitrust regulators are unhappy that Google controls everything from how buyers bid for ads to how sellers display them on their sites. But privacy advocates are angry about too many companies tracking your browsing. To satisfy one group of critics, Google limits advertisers' access to data. Then other critics argue that's just a "cover" to "force advertisers to play by its rules." No wonder Google executives complain that they are "stuck in a 'damned if you do, damned if you don't' situation." Indeed, said Elaine Moore at the Financial Times, everybody seems to be angry at Google. But "the impact of the investigations is unclear," because so far there are two groups that seem unconcerned: shareholders and — most important — consumers.
This article was first published in the latest issue of The Week magazine. If you want to read more like it, try the magazine for a month here.