Google Could Derail Antitrust Probe by Splitting Up Ad Business With Alphabet: WSJ


Google is planning to spin off part of its ad tech business to its parent company Alphabet in what appears to industry experts as an attempt to evade an antitrust investigation that could eventually develop into a full-blown lawsuit.

According to sources who spoke with the Wall Street JournalOpens a new window , the U.S. Department of Justice has been picking up pace in its investigation of Google in the past few months. As such, Google executives, as well as those from over a dozen other companies, including competitors, have been questioned on the matter.

The DoJ is reportedly probing the extent of Google’s stranglehold over the online advertising space. Ad tech, the Mountain View-based company’s bread and butter, earned $54.66 billion in Q1 2022Opens a new window , 80% of the company’s total revenue in the same period.

Currently, Google earns more than 27%Opens a new window of total U.S. digital advertising revenues, a number unlikely to be surpassed by Meta, the next biggest player in ad tech. Google’s ad business is unique because it is in charge of almost all the platforms and tools in the online ad supply chain, making it difficult for advertisers and publishers alike to find alternatives.

Currently, Google dominates online search and video sharing (YouTube) and is one of the top two players in the mobile app market. However, the biggest point of contention for the DoJ is that Google has a monopoly over being a broker for buying online ads and selling through ad exchange, the tool used for auctioning ads.

See More: Google Under Probe For Sharing User Data With Sanctioned Russian Company

Additionally, the DoJ is also looking into Google’s decision to prohibit third-party advertisers from brokering online display advertisements on YouTube and making it obligatory to use Google Ad Manager (previously DoubleClick for Publishers) to do so.

Google is facing similar antitrust scrutiny in the European Union. In June 2021, the European Commission (EC) initiated a probe into Google’s ad tech business that encompasses what the DoJ is investigating and then some, including:

  • If Google favored ads made on its ad exchange (AdX) and/or Google Ads
  • Why Google mandates the use of its services Display & Video 360 (previously DoubleClick Bid Manager) and/or Google Ads to purchase online display advertisements on YouTube
  • Why Google leverages user identity and behavioral data for targeted ads while restricting online display ad competitors, third-party advertisers, and publishers.

Google was penalized €1.49 billionOpens a new window ($1.74 billion) for breaching EU antitrust rules for AdSense in March 2019. In June 2021, the company was fined €220 millionOpens a new window ($268 million) by France’s antitrust watchdog for abusing its dominance in the market. Google is also facing three coalition-led lawsuits in the U.S.

Google’s game plan to keep the DoJ off its tail is to split its ad business into two separate units. Splitting up Big Tech companies into smaller units has been a hot topic of discussion amongst lawmakers for a while, so Google feeding into it seems like a worthy compromise on paper. It is basically the spinning off their 2008 acquisition of DoubleClick.

The catch is that by sending the operational aspects of a divided advertising unit to Alphabet, both will remain within the same umbrella, reporting to the same CEO. Provided the DoJ accepts the split, it is hard to imagine any difference between the two unless safeguards such as a legal and technical firewall are established.

Officially, Google maintains that they have no plans to exit ad tech. Julie Tarallo McAlister, a spokesperson for Google, said to the WSJ, “We have no plans to sell or exit this business. We’re deeply committed to providing value to a wide array of publisher and advertiser partners in a highly competitive sector.”

However, it can be construed as a shell game, much like Google consolidating its brands under Alphabet and, more recently, Facebook consolidating its operations under Meta.

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