Google’s reign challenged: Ad Tech on the brink of disruption?

“Google is a monopolist, and it has acted as one to maintain its monopoly... No company - no matter how large or influential - is above the law.”

US District Court of Columbia Judge Amit P Mehta was unequivocal in his comments, while delivering the judgment on August 5, 2024, in a case on Google’s dominance in the search engine domain.

The fact is he was stating a fact the world already knew!

The four-year-old case was brought by the US Department of Justice (DoJ), joined by 11 States, against Google. In his 286-page-long judgment, Mehta remarked that Google violated Section 2 of the Sherman Act, which is aimed at controlling monopoly.

This case marks a pivotal moment in antitrust enforcement, potentially setting precedents for regulating other tech giants in the future.

DoJ has not imposed any penalties on Google. And remedies might be discussed in further court sessions. Kent Walker, Google’s President of Global Affairs, has emphasized that the company plans to challenge the ruling, maintaining that Google’s leading market position is the result of the excellence and innovation of its product.

The next case

Experts feel that the ruling is expected to have significant repercussions. One possibility is that the court may order for the break-up of Google’s parent company Alphabet.

A pivotal factor in the decision was the disclosure that Google allegedly pays Apple approximately $20 billion annually to secure its position as the default search engine on Safari.

Some analysts feel that this verdict is a victory for the US government against the tech giant, and this might bolster its stance in the forthcoming antitrust lawsuit against Google, focusing on its dominance in the digital advertising market. The bench trial (conducted without a jury) will begin on September 9 in the US District Court for the Eastern District of Virginia, with Judge Leonie Brinkema presiding.

One likely outcome, per experts, of this September 9 case is the potential breakup of Google’s ad tech stack if Google manages to avoid a significant penalty. (An ad tech stack refers to a collection of technologies/ platforms used by the likes of Google to manage and optimize their digital advertising activities.)

Such a scenario can have long-term implications for the digital advertising industry, potentially impacting innovation and investment in the digital advertising space.

Ad tech industry’s future

Experts are of the opinion that such a breakup could lead to a healthy competition in the ecosystem.

Google essentially controls all sides of the digital advertising equation, points out Mathieu Roche, CEO and Co-Founder, ID5.

“Breaking this down, we find that Google is present in the demand side (DV360 + Google Campaign Manager), supply side (GAM + Adex) as well as media ownership (Search and YouTube). Under these circumstances, Google will always have the upper hand and set the rules on how demand and supply meet. This dominance gives Google control over the digital advertising space, limiting the power of publishers and technology solution providers and hindering competition. Without regulatory intervention or oversight these circumstances will always leave independent players at a disadvantage,” he explains.

Roche feels that dividing Google’s ad stack would foster greater competition, allow smaller independent players to enter the market, and lead to a more equitable distribution of ad revenue, benefiting the entire ecosystem. In turn, he adds, this would lead to a more balanced market, drive innovation, and create more equitable access to essential data and ad inventory. Without this Google will maintain its position and continue to capture the majority of revenue.

Neena Dasgupta, CEO & Founder, The Salt Inc., observes that the scrutiny directed at Google is a natural consequence of their influence. According to her, it is essential to ensure that these regulations foster competition without stifling innovation. A large number of marketers and publishers have devised their strategies around the Google ad tech stack. Its continuity brings stability. It further allows for continued innovation, while they ensure no regulatory pauses, she adds.

“A breakup of Google’s ad tech stack could significantly make room for competition, but not without creating some short to midterm operational inefficiencies. The intricate interplay between Google’s search, ad serving, and ad exchange functions has facilitated the development of advanced auction mechanisms, real-time bidding, and sophisticated targeting capabilities. Changing this ecosystem will also put pressure on pricing till the system finds a way to optimise using new data sets,” explains Dasgupta.

According to Dasgupta, increased transparency will significantly mitigate consumer data privacy concerns, driving faster growth and investment in data clean rooms. This, she adds, will eventually make for better quality ads, targeted basis stronger data bunker matching methods. “This would also mean a shift in the strategies of marketers and publishers, consequently catalysing innovations and more strategic collaborations. A promising avenue to explore is the matching of psychometric data across relevant datasets. At The Salt, we are leveraging AI to enable and automate this for our clients. Regardless of the specific regulatory outcome – penalties or stricter oversight – the digital industry is likely to see a shift in competition, innovation, and more importantly, a shift in investments. While adjustments will take time, market forces are already adapting,” she says.

“Google is the largest and most widely used web search engine, and arguably the best. It’s not surprising that officials might see this as a monopoly. However, it’s also the nature of big tech to continue expanding, and Google is at the forefront of that trend,” says Siddharth Devnani, Co-Founder & Director, SoCheers.

He asserts that the corrective action that the DOJ wants Google to take will significantly impact the ad world, though there hasn’t been any news on that yet.

Devnani feels that if the DOJ wants Google to pay a fine, it won’t matter much to advertisers. However, he adds, if they stop Google from being the default search engine on Apple devices or even Android, it could severely affect the effectiveness of text ads (SEM). Devnani believes that in the short term, Google will continue to dominate. But if other players fill the gaps, SEM placements could become extremely diversified.

“Campaigns may suffer initially, but in the long run, competition is beneficial for any market. In dynamic industries like digital ad tech, these gaps will eventually be filled. Innovation, fueled by venture capital and AI, will quickly move into any space left by Google. The digital ecosystem is highly monetized and profitable, so there are likely many disruptors (search alternatives) waiting for their moment, and I bet they’re AI-powered,” concludes Devnani.

Likely trends

Beyond the immediate outcome of the trial, what does the future hold for the ad tech industry in the long-term? While the full impact of the ruling is yet to unfold, several trends are likely to shape the future of digital advertising.

Valli Lakshmanan, President, BPG Arabia and Chief CX Officer, BPG Group, points out that the ad tech industry’s future will be shaped by a combination of regulatory changes, technological advancements, and market dynamics.

Depending on the ruling, he adds, smaller players could get more opportunities to thrive if market monopolies are curbed. This, according to him, might lead to a more level playing field.

“Regulatory pressure might force big companies to innovate in ways that comply with new rules, potentially leading to new ad tech solutions. Venture capital and other investment might flow more towards startups and mid-sized companies if the dominance of major players like Google is reduced,” he adds.

According to Lakshmanan, AI’s impact on Ad tech include:

Personalisation:AI will continue to improve targeting and personalisation, making ads more relevant and effective.
Automation:AI-driven automation will streamline ad buying, placement, and performance analysis, reducing the need for manual intervention and improving efficiency.
Predictive Analytics:Advanced analytics will allow companies to predict consumer behaviour more accurately, enhancing the precision of ad campaigns

He adds that SearchGPT could potentially challenge Google’s dominance in the search market. If Search GPT (or similar tech) provides more accurate, context-aware results, it might attract users away from traditional search engines. Users might shift from keyword-based searches to more conversational, natural language queries. Google's primary revenue comes from search advertising. AI-powered search might necessitate new ad formats or placement strategies.

Blockchain’s impact on Ad tech:

Transparency and Trust:Reducing fraud and building trust among advertisers and publishers.
Decentralisation:Where intermediaries are reduced, and transactions are more direct.
Smart Contracts:Enforce terms of advertising agreements, ensuring fair compensation and reducing disputes.

“As technology evolves, niche players specialising in specific aspects of ad tech (for example, privacy-focused ad networks, AI-driven analytics firms) might emerge and thrive. Larger companies might continue to acquire innovative startups to stay ahead of the competition and integrate new technologies into their ecosystems. Major platforms might further consolidate their power by expanding their ad tech offerings and creating end-to-end solutions for advertisers,” Lakshmanan says.

Mathieu Roche foresees a consolidation in the space. He says, “In 2024 we’ve seen a rise in M&A activity, which suggests that the fragmented market is moving towards consolidation. Specifically, the crowded identity space, that has been steered by Google’s multiple announcements of cookie deprecation, will also go through consolidation. Advertising players will rally around the solutions that have gained more traction and proven their value, especially after the recent Privacy Sandbox test results demonstrated its flaws.”

Neena Dasgupta anticipates a more fragmented yet interconnected advertising ecosystem.

“Driven by diverse advertiser needs, the industry is witnessing a dual trend: consolidation among large tech platforms and the emergence of specialized, niche solutions. These niche solutions use sophisticated cross-platform capabilities, enabled by advancements in data management and identity resolution, to ensure smooth interoperability with the larger ecosystem. For instance, our in-house AI tool (Connect), enables advertisers to identify and target audiences based on psychometric profiles across platforms. This level of granularity is only achievable through a fragmented ecosystem that allows for specialization, and also supports interoperability across platforms,” she says.

Google’s position

Google argues that the DOJ’s allegations stem from a misunderstanding of the complex digital advertising ecosystem. Does this argument have any credibility?

This is not the first time that Google has faced regulatory scrutiny for anti-competitive behaviour, points out Mathieu Roche.

“Most notably, in 2017 the European Commission Court fined Google 2.42 billion euros for antitrust violations, for favouring its own price comparison shopping service to gain an advantage over EU rivals. This precedent highlights a recognized pattern of Google’s anti-competitive behaviour that mirrors the concerns raised by the DOJ. Industry feedback from ad tech firms and publishers that operate in the complex advertising ecosystem also highlights issues of unfair competition. The shift to a bench trial instead of a jury trial will likely allow a more detailed examination of complex issues. The judge can explore the topic and evidence deeply, leveraging the support of a witness list chock-full of experts from all sides of the digital advertising ecosystem. This makes Google’s advertising complexity argument more challenging to support,” concludes Roche.