Google has reportedly proposed splitting parts of its business that auction and place ads on websites and apps into a separate entity under the Alphabet holding company.
“We have been engaging constructively with regulators to address their concerns,” a Google spokesperson wrote in an email to Search & Performance Marketing Daily. “As we've said before, we have no plans to sell or exit this business, and we're deeply committed to providing value to a wide array of publisher and advertiser partners in a highly competitive sector.”
The move is an attempt to divert a possible U.S. antitrust lawsuit.
The U.S. Justice Department has conducted a long-running investigation into allegations that Google abuses its role as a broker and ad auctioneer. Now it appears that the U.S. Justice Department is preparing a lawsuit alleging Google’s ad-tech practices are anticompetitive. It could come as early as this summer.
The Google spokesperson cited “rigorous competition in ad technology” that made online advertising more relevant, and prompted reduced fees with expanded options for publishers and advertisers.
That advertising part of Alphabet’s business could potentially be valued at tens of billions of dollars, repots The Wall Street Journal, which cited several sources.
Google’s parent company Alphabet in June said it would allow rival advertising intermediaries to place advertisements on YouTube as part of a European Union (EU) antitrust investigation. All in an effort to help Google settle an EU probe from last year without paying a fine.
“Google’s willingness to offer concessions to avoid a U.S. lawsuit is an evolution of the company’s strategy for handling growing legal and regulatory pressure,” the WSJ reports.
U.S. senators in May took aim at conflicts of interest in the advertising technology industry to force companies like Google to break up its dominant online-ad business.
Google’s first-quarter sales rose 23% from the year-ago period, despite slowing compared with last year. Its ad business amounted to $209.49 billion in 2021.
Advertisers are forecast to spend more than $600 billion on digital ads worldwide this year, according to eMarketer.
Google should generate $174.81 billion in net digital ad revenue worldwide, up 17.3%, in 2022, according to eMarketer. That gives it a 29.0% share of the worldwide digital ad market. Facebook is second with a 21.4% share.
This year Google also will remain dominant in worldwide search ad revenue with $142.30 billion, about 59.4% of the global search ad market. The display business is not thtat much different, with eMarketer estimating Google’s display business will grow to $32.51 billion, giving it a 9.6% share of global display spending.