If you’re like me, you probably barely notice the advertisements for skin care products, niche kitchen appliances, and the latest pumpkin-flavored treat that fill the margins of nearly every website you visit. While we’re all familiar with the omnipresent digital pop-up ads on everything from cooking blogs to news sites, many internet users don’t understand the economic and technological processes that facilitate this super-targeted ad matching.
“Ad Tech” refers to the software used to buy and sell digital ads. In the few seconds while a website loads, a complicated series of transactions occur between the website publisher, one or more ad exchanges, and bidding advertisers. These transactions result in the sale of an ad targeted directly to you.
The ad tech stack can be broken down into three primary components. First, demand-side advertisers purchase digital ads using advertiser ad networks. Second, supply-side publishers offer website space through publisher ad servers. In the middle, an ad exchange functions as an auctioneer, matching advertisers to publishers.
In January of 2023, the United States Department of Justice launched a 153-page complaint against Google, charging the tech giant with maintaining an illegal monopoly in the open web display ad market. In September of 2024, both parties made their case to federal judge Leonie Brinkema in Alexandria, Virginia. Over the course of just three weeks, both parties called expert witnesses to the stand, including Google employees, publishers, and even a Berkeley professor. Closing arguments are set to take place on November 25th, and Judge Brinkema is expected to announce a decision sometime next year.
The DOJ charges Google with corrupting “legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control” of all levels of the ad tech stack. The DOJ contends that these actions harm publishers, advertisers, and internet users alike.
Google has been a major player in the ad tech industry since its inception. The tech giant began on the demand side of the ad tech market when it launched Google Ads in 2000. It quickly expanded from simple search ads to placing ads on third-party websites. However, it wasn’t until Google acquired Doubleclick for Publishers (DFP) in 2007 that federal regulators began to scrutinize the company’s actions. DFP was the leading publisher ad server at the time, holding about 60% market share. Although the Federal Trade Commission ultimately determined that no illegal monopoly existed, the DOJ now contends that further acquisitions and anti-competitive practices constitute illegal conduct.
According to the DOJ, Google has monopolized the publisher ad server market and the ad exchange market, and it has attempted to monopolize the advertiser ad network market. The company’s control of the publisher ad server market stems from its ownership of DFP which retains more than 90% market share in this market, well above the standard to qualify as a monopoly. It also owns 50% of the ad exchange market through AdX. Finally, Google controls approximately 80% of the market share in the advertiser ad network market that primarily caters to smaller advertisers, as well as 40% market share in the Demand Side Platform (DSP) market that is used by marketing agencies and other larger advertisers. Together advertiser networks and DSPs compose the buy-side demand of the ad tech stack.
How does each side synthesize the issue? The DOJ defines these three components of the ad tech stack as separate markets and says Google has a monopoly in each of them. Google proposes a different view of the ad tech industry, claiming that only one market exists, with stakeholders (publishers and advertisers) on both sides. If the judge agrees with Google’s characterization, it will be more difficult for the DOJ to win its case.
While the DOJ seems to have a good case that Google maintains a monopoly in the ad tech market, American anti-trust law doesn’t make a monopoly itself illegal. The Sherman Anti-trust Act holds that a monopoly is unlawful when it is obtained by suppressing competition rather than through competition on the merits. Thus, the DOJ has to prove that Google obtained this monopoly by engaging in anticompetitive conduct.
The DOJ contends that Google has done so, namely through a series of acquisitions whereby Google has bought out competing firms rather than choosing to compete “on the merits.” The DOJ points to not just the Doubleclick acquisition, but also Google’s 2010 purchase of Invite Media, another demand-side platform, and 2011 purchase of AdMeld. AdMeld had developed technology that helped publishers better compare inventory and optimize revenue. When Google purchased the company it effectively smothered the evolution of this technology, which might have given publishers more control over how they sold their space.
Lastly, the DOJ argues that Google’s ‘tying’ of its advertising demand through Google Ads with its ad exchange AdX constitutes illegal conduct. When Google acquired DFP in 2007, it made AdX the default and privileged ad exchange through which DFP publishers sold ad inventory. It concurrently made Google Ads advertising demand available only through AdX. This essentially forced publishers to choose DFP as their publisher ad server if they wanted access to Google Ads’ unique demand. The DOJ called publishers in the industry to testify that they felt as though they had no choice but to use DFP.
The DOJ makes these charges under the 1890 Sherman Anti-Trust Act. This act was passed in an effort to protect American consumers from the excesses of large corporations and monopolized markets. The Sherman Act gives federal entities like the FTC and DOJ the power to regulate mergers between companies and sue corporations that engage in anti-competitive practices like price fixing or market division. The intent is to promote competition which benefits consumers through lower prices, greater consumer choice, and technological innovation.
The DOJ certainly presents a detailed and compelling argument. The complaint also laid out its requests for remedies to what it considers an illegal monopoly. This includes breaking up Google’s ad tech components by separating DFP, AdX, and Google Ads, or making mandatory changes to Google’s advertising auction system. These remedies would help publishers retain more revenue on every ad sale, thus helping to keep the internet open, vibrant, and free of paywalls.
A forced divesture would have major implications for the ad tech industry, and Google did not take the accusations lightly. For its part, Google argues that the DOJ’s characterization of the ad tech market doesn’t take into account the importance of other advertising sources like the ads you see on social media, in videos, or within apps. Google further contends that its integrated ad tech stack benefits consumers, publishers, and advertisers alike.
So, who’s right? The disagreements between the DOJ and Google are filled with technical jargon and require a high-level understanding of both the ad tech stack and economic concepts like monopoly. And while Judge Brinkema has years of experience serving as a federal judge and has overseen high-profile cases in the past, it’s not clear how she will rule or what remedy she might impose if she sides with the DOJ. What’s certain is that Google will appeal any unfavorable ruling. The tech giant has already stated its intention to appeal a recent ruling in another antitrust case involving its search engine.
While the potential effects on advertisers and publishers have been debated, neither the DOJ’s brief nor Google’s response centered consumer interests. Google argued that its products benefit advertisers and publishers, but said little about consumer interests. And while the DOJ contends that “Google’s anticompetitive acts have had harmful effects on competition and consumers,” the Justice Department doesn’t explain these effects.
In this specific case, the effects on consumers may be secondary. However, this trial, alongside another anti-trust action brought against Google regarding its search engine, could have lasting impacts on the digital landscape. Economics professor Renaud Foucart explains that a breakup of big tech could lead to more competition and more choice. This could look like a greater number of apps available for consumers, with more options for consumers to choose between. And while consumers might pay for some services that are free today, they would also have more control over the data that tech companies collect. Foucart argues that this digital landscape could be better for consumers.
The future of the digital world is murky. Potential changes to the way digital ads are bought and sold could have big impacts on the online landscape.
Featured Image Source: Rooney.Law
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