Will The EU Break Up Google's Ad Business?

The answer is a hard “No.”

Now that we’ve got that out of the way, we can tackle the fact that the European Union filed a formal antitrust complaint against Google last week in which it followed up on the two-year-long investigation it did to look into the competitive marketplace around Google’s advertising technology.  The findings were apparently that Google dominates the ad business.

I could have told them that in far less than two years.

Of course, the EU also claims Google engages in unfair and illegal anti-competitive practices by preferring publishers and buyers to use its own ad tools versus those of competitors.  I’m sorry, but is that really a surprise?

Sarcasm aside, of course Google dominates the ad space.  The reason it does is quite simple.  First, it dominates search, and search dominates total digital media spend, accounting for as much as 43% of all digital ad spend.  Second, Google builds (or acquires) better tools than most of the rest of the ad-tech space.  There were a lot of companies in the space of the DSPs and networks, but many of them were niche or provided terrible customer experiences -- or, even worse, were rife with fraudulent activity.  Google steps in, provides a solid service, and makes it easier for advertisers to accomplish their goals.



I am an advertiser, and I know how much simpler it can be to work with a single partner that provides multiple solutions rather than stitch together my own collection of independent companies who may or may not work well together.  The name of the game is ease, and simply put, Google is easy.

Does Google have an unfair advantage?  Of course it does, but that’s capitalism to some extent.  So does Amazon.  So do a host of other companies.  The market economy promotes advantage.  The challenge is in the landscape of the ad-tech business itself.  Where can the innovation come from that will chip away at the advantage that a Google has?

Terry Kawaja recently showed a slide at one of his events that talked about how the last 15 years in ad tech were about efficiency, and now the industry needs to pivot toward creativity.

Google has never been overly creative.  It’s all about efficiency -- engineers creating a model for advertising. And now the window is opening for creatives to re-engineer advertising in their own likeness again.  In the interim, the EU will likely fine Google/Alphabet and maybe make it divest something in its stack, but I don’t think this filing will have a distinct impact on its business.  It could spin out the ad server again, releasing Doubleclick from the confines of Alphabet, but my guess is that won’t happen.  

If anything, AI poses a far more existential threat to Google’s ad business, because all the money that goes to search advertising is destined to dwindle as AI search results negate the need for users to click on all the links.  Instead, AI will extract and structure the information, delivering it to the users.  Traffic will drop dramatically, and much of the infrastructure behind paid search will shift into some other model.  That next model will be more creative, and likely focus more on video than text, further chipping away at the systems Google has built over the last 15 years.

Creativity can create competition that could unseat Google over time, or at the least create a more level playing field.  Will the EU break up Google’s ad business?  No.  Will Google’s ad business start to change over time regardless of the EU?  All signs point to “Yes.”

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