Why Google should not be punished if competition is weak

A recent Reuters article has identified five ways Google stifles business to ensure growth in its $116 billion-a-year advertising business.
Google Android dominance
U.S. authorities investigating Alphabet’s Google for anti-competitive behavior have recently begun probing the company’s $116 billion-a-year advertising business.

Attorneys general for 50 U.S. states and territories along with the U.S. Department of Justice will be acting on accusations from rivals, lawmakers and consumer advocacy groups that the biggest seller of online ads engages in unfair tactics.

Google spokesman Josh Zeitz said: “Publishers and advertisers mix and match technology partners to meet their different needs, creating both competition and innovation.”

“Our tools and platforms make it easy for advertisers and publishers of all sizes to choose whom they want to work with in this open, interconnected ad system,” Google Vice President Sissie Hsiao wrote in a blog.

Concerns about Google

The following concerns, shared by advertisers, indicate that Google has grown its business because of weak competitors.

About 80 percent of Google’s ad revenue and most of its profits come from ads within Google search results, YouTube, Gmail and other internet services. Rivals say that Google controls these properties in a way that hinders advertising competition.

Google’s ad buying tool is the only technology system for buying ads on YouTube, the world’s largest video streaming website. Facebook maintains similar control, in part to limit too widely sharing users’ data.

The remaining 20 percent of Google’s ad revenue is from display business. Google boosted this operation by acquiring seller tools such as DoubleClick for $3.1 billion in 2008 and AdMob for $750 million in 2010 and buyer services including Invite Media for a reported $81 million in 2010.

The combination of deals gave Google unprecedented positioning in every facet of how ads end up on websites and smartphone apps.

Google’s ad tools enable it to bundle them in a way that rivals cannot afford to match. App owners and websites called publishers have become reliant on Google’s DoubleClick ad serving tool. DoubleClick ad serving tool, which is nearly free to use for publishers, is the only system that can receive real-time bids from Google’s ads marketplace called AdX.

Advertisers get key consumer data for free, access to some purchasing options and additional benefits if transacting through AdX when using the Google ad-buying tool. Rivals view Google’s packages for buyers and sellers to boost use of AdX as anticompetitive.

“The ubiquity of Google’s ad server provides virtually total control over which ads are shown and monetized for the majority of the Internet,” said Romain Job, chief strategy officer at competitor Smart AdServer. “This control of the ad server is strategically critical to Google.”

Google has allowed publishers using DoubleClick to sell ad space on various marketplaces, not just AdX. Google’s AdX widely held a special advantage: At the last second it could give its customers the opportunity to outbid competing advertisers trying to purchase through other, non-Google, marketplaces.

This last look was one of several ways Google favored itself. Google last week eliminated last look as part of move to a new sales system.

Google may be using its Chrome internet browser, which has about 50 percent market share in the United States, to restrict most advertising systems, beside its own, from building profiles on consumers as they browse the web.

The restrictions largely spare Google because consumers sign into their Google accounts when using Chrome. That enables tracking that it is not possible for ad tech firms that do not offer any services directly to users.

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