Google faces adtech break up: what happens next?

In what could be a transformative moment for how media is funded by online advertising, Google is facing the very real prospect of having to break up its lucrative adtech business.

Two years ago, the European Commission had opened an investigation into the Alphabet company, focusing on potentially anti-competitive behaviours such as giving preference to its own ad services.

Now the body has set out its charges against Google in a statement of objections and could fine the company as much as 10% of its annual global turnover.

At a news conference, EU antitrust chief Margrethe Vestager said: “Google could divest its sell-side tools, DFP and AdX. By doing so, we would put an end to the conflicts of interest.

“Of course I know this is a strong statement but it is a reflection of the nature of the markets, how they function, and also why a behavioural commitment seemed to be out of the question.”

In response, Google’s vice-president of global ads Dan Taylor said: “The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view.”

Last year, Google’s ad business contributed 79% to its total company revenue of $283bn.

So what could happen next? The Media Leader asked a range of adtech specialists.

Nick Pink, CEO of privacy-first targeting solution provider Covatic

“This could have a major impact on the advertising industry, as Google Ads may become less effective as a result of the news. Selling the divisions will make data sharing between Google Search and Google Ads a much more complex arrangement, and it will be more challenging for Google if it decides to make use of the data people input into its Pathways Language Model (PaLM) products to create advertising segments.

“This is particularly relevant when you look at the rapid growth in generative AI solutions, and the potential advertising streams that those will generate in the coming months.

“Marketers may need to look for alternative advertising solutions as a result.”

Romain Job, chief strategy officer, Equativ:

“Google has been actively preparing to divest its ad business for a while now, with discussions around a ‘break-up’ commonplace over the last year. The company’s recent investments in its YouTube ad platform and Privacy Sandbox initiative demonstrate its plans for a Chrome-integrated ad engine; strengthening its walled garden by placing its ad business outside of its ad tech unit. Whether a break-up would be truly enough to put a stop to the tech giant’s dominance remains to be seen, but I suspect more would need to be done before we can enjoy an open web with fair opportunities for all.”

James Rosewell, co-founder of Movement for an Open Web (MOW):

“Google controls around 30% of online advertising revenue — and more than that of its profits — so it’s only right that this dominance is questioned.

“It’s therefore vital that this process is managed correctly.  The breakup of Google is only the first step and, if it’s going to have the desired result of more fairly balancing the market, attention also needs to be paid to the browser. Google is trying to dominate online advertising from the browser through to its exchanges so you can’t tackle one without the other.

“Separately from its ad exchanges, Google Chrome represents more than 60% of online ad traffic and, more importantly, ad data. Via the Privacy Sandbox project they are already trying to move ad data into the browser to give themselves preferential access while denying it to their competitors.  The EC must look at stopping this process whilst their complaint runs it’s course.”

Jochen Schlosser, CTO of Adform:

“The EU Commission’s Statement of Objections to Google left little room for interpretation. It’s clear that it wants to break up the monopoly in the digital advertising market after almost a decade of its dominance.

“If the EU Commission is successful in its litigation, the moves being proposed would have a significant and systemic impact on the digital advertising space and unlock a renewed wave of innovation and competition in the advertising industry. This is exactly what’s needed to recreate a level playing field in online advertising that the industry has been desperate for.”