Why Google May Be Facing "A World of Hurt" in September
DCN CEO Jason Kint on next month's big anti-trust trial
Roughly a week ago, many were caught by surprise when it was announced that Google had been found guilty of anti-trust violations. The outcome wasn’t exactly a shocker, but the timing caught many in the ad world off guard.
This September, Google faces a similar decision over its programmatic ad business. This long awaited trial won’t sneak up on anybody.
As for the outcome - it’s hard to tell - just how bad will it be? Is this really going to shake up the market? Will Google’s beautiful business actually be hurt?
Or this another case of too little too late by those plodding bureaucrats?
I asked Jason Kint, CEO of Digital Content Next on my podcast this week to help sort things out.
“This is arguably the most important trust case of the last 30, 40 years, maybe more important than Microsoft’s (in 2000,” he said. Google’s ad machine “pays for the entire media industry, right? There's $300 billion of ad revenue going through this platform.”
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I’ve known Jason for a long time, and few have followed the often arcane aspects of regulatory and legal action facing big tech like he has. To be sure, Jason is not exactly a neutral party here, in that he leads a trade group advocating for digital publishers - i.e. the little guy in world of digital duopolies. Still, he is absolutely realistic about Google’s power and value to the market.
Here’s his take on the outcome of the Big September Trial:
“I think they're going to lose the ad tech case and it hasn't even started yet, but that's just my own view on the evidence in the case,” he said.
“I think they're in a world of hurt.”
Ok, but what will that really mean in practice? Well, here’s my attempt to break down the various outcomes Jason and I discussed:
The Microsoft 1990s Scenario - aka It’s Too Late Anyhow
Some of you may recall - many of you have likely read about the fact that Microsoft got hit with an anti trust violation in 1994 (of the irony that Microsoft is rooting for the feds against Google). The US Government ruled in 2000 that Microsoft had forced its web brower Netscape on Windows users. Sounds bad, until you realize that by that point, Netscape barely mattered, and browser race was headed in an entirely different direction.
Yes, Microsoft had to open up competition, but its growth was hardly hampered going forward.
This is what the cynic in me wondered - that that DOJ is essentially nailing Google for stuff that happened 15 years ago. Google has already reaped billions through domination much of ad tech, and whatever failed ad tech startups that might have been able to compete if Google hadn’t been allowed to buy DoubleClick, Invite Media, etc. are never coming back.
So if Google is simply forced to pay a fine and maybe let advertisers use whatever ad tech they want when buying Google ads…will anything really change?
Kint said he believes things are too far along - and the evidence too damning - for this kind of slap on the wrist result to unfold.
The Just Dump Your Ad Network Scenario -Aka No Big Deal
The Google Display Network has never seemed entirely core to Google’s ad business, which remains dominated by search ads, and increasingly, YouTube. As its revenue continues to decline, industry analytic Eric Seufert has called it ‘vestigal.’ So why not just shut it down or spin it off right?
Well, Kint says that this network more integral that you’d think. “[Google is] going to point at the revenue numbers [for the network business] and say, it's just a small piece of our business.” But, for “the sell side of it is so incredibly important to them beyond the revenue numbers,” which he says is proven in many of the cases’s documents.
“It matters because it gives them more premium inventory,” Kint added. “They get to drive how the market is shaped and they think of the entire web as their network that fits into their broader picture and they merge all that data together into a single profile. And so it gives them real time access and the closed loop to the data. And they wouldn't necessarily have that if they don't own that business.”
So in this case, regulators may not way to give Google an easy out, since they know how much they’ve already milked from this product.
The Get out of Ad Tech Entirely Scenario
This is the one that gets bandied about the most - that ‘breaking up Google’ means making the company sell off its DSP/SSP/Exchange, etc - run that as a separate company, and disconnect the ad demand and operations from Google proper. This sounds straightforward - and also harsh-ish, rights?
But remember, Google actually already floated this idea out there voluntarily - and regulators “gave them the Heisman,” Kint said.
Yeah but - as Chalice Custom Algorithms co-founder Adam Heimlich noted, the court actually lists such a scenario in its ‘remedies’ section:
Order the divestiture of, at minimum, the Google Ad Manager suite, including both Google’s publisher ad server, DFP, and Google’s ad exchange, AdX, along with any additional structural relief as needed to cure any anticompetitive harm;
“I think losing it would seriously hurt Google performance for advertisers,” Heimlich said. “They would not longer dominate measurement like they do today. I agree they’d have to focus on search and YouTube, and compete more directly with Meta.
Kint isn’t so sure. “I don't think there's any way just to split off… the ad tech business for them.” This kind of breakup could actually oddly benefit Google, Kint argues, by creating two strong, focused companies. “In history, these often end up good for the shareholders, right? Like spin off some baby Googles.”
Rather than just create a separation, Kint wonders if the feds will have to take things further, but striking at the heart of Google’s competitive advantage. “I think you're to find a way to divest the data piece or put limitations on the data piece from the advertising piece. And I don't know if that means splitting it off entirely or not.”
The Great Data Breakup - i.e. The Drop The Hammer Scenario
OK, so this would theoretically be a much bigger deal - and would really sting, says Kint. Google’s power, in his and many other’s eyes, is in its massive pool of identity data. He argues that Gogole has already blown off the FTC “where they actually merged all of the cookies from ad tech, analytics, Android, all across the board, into a single identifier.”
“They said they weren't going to do that. That gave them a single identifier for billions of people suddenly.”
Like many have noted, Kint said that the post cookie, privacy first world could actually make giants like Google stronger - something regulators don’t want to support.
“The money's not all just going to disappear where the third -party cookie disappears,” he said.
Right, but how exactly do regulators facilitate, or police the breakup of an identifier? Do they want to go there?
“There’s nothing illegal about collecting data through owned sites and apps,” said Heimlich.
The Future Restrictions (AKA We’re Not Gonna Let You Rule AI) Scenario
In my head, this one feels like the SMU Death Penalty. Could the DOJ actually go beyond hitting Google for its current monopoly, but put in a bunch of rules to prevent the next one?
As Kint noted, Google’s search dominance isn’t just good for its current ads business.
“They have 98 % of all the unique queries every day,” he said. “And there is no way in the future world of AI, in terms of grounding and training large language models in real time, that anybody can touch Google long term. And so they're going to further entrench their power unless they're stopped. And the reason they'll be stopped is because they have used their market power as a monopoly.”
Heimlich tends to agree: “The Sherman Act was written to address Rockefeller’s domination of both oil and refineries,” he said This matches data/AI pretty well!”
What do you think? Do I have any of this right? What do you think is going to happen?
Will any of these scenarios result in advertisers actually spending less on Google search ads, YouTube ads, etc?