In recent months, US investigative officials have asked executives of rival companies about the pricing and operations of Google’s Network division. The service sold by this business can handle almost every aspect of digital advertising, from brand ideas to content displayed on consumers’ screens.
The focus of the inquiry is the discounts, special features and other terms offered by Google, which push advertisers and publishers to only use Google’s products instead of mixing and matching with competitors’ services. People familiar with the matter said that regulators are also asking how Google’s larger online search business interacts with the Internet sector to increase its share of the digital advertising market.
The “tying” strategy makes the sale of one product conditional on the purchase of another product. Gene Kimmelman, a senior adviser at the think tank Public Knowledge and former chief legal counsel of the Department of Justice’s antitrust department, said that this practice is usually not illegal, but if it is used to consolidate its dominant market position, it may be possible. Violated the law.
Kimmelman said: “If these tools are used to maintain a monopoly, prevent new participants from entering, and exclude competitors, then they may be antitrust behavior.”
US regulators will file an antitrust lawsuit against Google in the next few weeks. This may be the largest antitrust case since the US government sued Microsoft in 1998. The Microsoft case initially focused on the concept of “tying”, that is, how Microsoft uses its dominant Windows operating system to encourage customers to use the company’s other products and to exclude alternative products.
Now, investigators are also asking similar questions about Google. They recently interviewed senior executives of Google’s rival company in July, and the inquiry became more and more detailed. According to people familiar with the matter, some interviewees even used whiteboards to outline the complex structure of the advertising technology market and Google’s operations.
Google spokesperson Julie Tarallo McAlister said: “Although we are still cooperating with the investigation, the facts are clear: Our digital advertising products compete with hundreds of companies in a crowded industry. Rivals compete with technology. This competition increases the choice, helps lower the price of Internet advertising, and lowers costs for businesses and consumers.”
Google’s Internet division generated more than $21 billion in revenue last year, but its growth rate is slower than that of the company’s other divisions. Google often framed this business as an assistant to online publishers that rely on digital advertising. But critics say that Google owns and makes full use of this market, so that advertisers and publishers are forced to use its products more.
US investigators are investigating the three major categories of the ad technology market: “seller” software used by online publishers to sell advertisements, “buyer” services used by marketers to purchase these advertisements, and exchanges that connect both parties. Google has the tools to provide all these functions.
Washington Democratic Representative Pramila Jayapal said at the congressional antitrust hearing on July 29: “The problem is that Google controls all these links. It sounds a bit like the stock market. The only difference is that Google’s advertising market is not regulated.”
According to people familiar with the matter, government investigators asked how Google would waive publisher fees for using its seller tools if publishers choose to auction their advertising space on the Google Ad Exchange. The regulator also asked about Google’s decision in 2015 to restrict the purchase of ads on its dominant YouTube video service to its own bidding tool DV360.
Other ad technology companies said that Google’s move cut off their association with important digital video advertising inventory. But Google said that other social media sites also operate in this way, and competing ad buying services, such as Amazon’s ad buying services, are growing without visiting YouTube.
Competitors also complained to investigators that Google used its dominant online search business to give its display advertising business an unfair advantage. When advertisers buy search ads, Google allows them to choose to transfer any excess marketing funds to display ads. Then, these additional expenditures will flow into Google’s advertising network and trading platform, and many competitors cannot provide this service.
The search advertising marketing budget is so large that the extra funds spilled over to Google’s display ads sometimes account for about 10% of the revenue of online publishers. For this reason, most publishers must pay to enter Google’s advertising market. Kim Melman said: “Google is the place you have to go, there is no better choice.”
A Google spokesperson said that online publishers can obtain this additional advertising spending through other exchanges, but declined to say how many of these ads are sold outside of Google’s platform.
Neal Mohan, who was in charge of Google’s advertising technology services, said the company is creating its own bidding service. Mohan said that once Google has a combination of bidding, buying and selling tools, this will ultimately “significantly increase” Google’s spending.
For many critics, the bigger concern is how Google passes information between its different departments in ways prohibited by other industries. Regulators are considering remedial measures, which may include separating Google’s ad server from other businesses. After all, this tool plays a key role in advertising selection and pricing.
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