The feds want to make Google sell the money-printing products that sustain its online ad monopoly

Can Google be trusted to act less like a monopolist in digital advertising? The U.S. Department of Justice says no — which is why it wants to force the company out of whole segments of the business instead.

Just catching up? For more than two years, Google has faced antitrust charges over allegations that it holds too much power in the digital advertising market. The tech giant owns AdX (Google Ad Exchange), the dominant platform where advertisers bid for ad space on websites. (Roughly half of all digital ad impressions worldwide are sold through AdX, according to DOJ.) It also owns DFP, the dominant platform for online publishers who want to sell programmatic ad space. (It has a roughly 88% market share among online publishers in the U.S. My fellow old-timers may remember it as DoubleClick for Publishers.) As one might expect, playing middleman to both advertiser and publisher has been enormously profitable to Google, with some estimates saying the company keeps 30-35% of all the ad dollars that flow through its tools.

Last month, a federal judge ruled that Google was indeed functioning as a monopoly in online advertising. Which raises the question: What’s the court going to do about it?

That’s the remedies stage of the case, where we are now. Late on Monday, the Justice Department told the court what it wants; The Wall Street Journal, I believe, had it first:

Google should sell two of its ad businesses to address antitrust issues, the U.S. Justice Department said in a court filing after a federal judge ruled last month that the tech giant had created a monopoly in advertising, a move that could upend one of the company’s core businesses…

The DOJ proposed that Alphabet-owned Google sell its AdX business as soon as possible under the oversight of a court-appointed divestiture trustee, who would solicit potential buyers. AdX is a marketplace where advertisers and publishers can sell and buy ad inventory. The filing said Google should also look to offload its DFP ad platform for publishers, claiming that it too had substantial anticompetitive effect and was an instrument of the tech company’s monopoly power in the market.

And that’s not all: DOJ also wants Google to have to share some its real-time-bidding secret sauce and for the company to be banned from running an ad exchange at all for 10 years. (Google actually offered to sell AdX last year in order to cut off a European antitrust case, but “European publishers rejected the proposal as insufficient.”)

Unsurprisingly, Google is arguing that such a move “would harm publishers and advertisers,” has “no basis in law,” and “is not as simple as selling” because DFP and AdX are all intermingled with other Google products. And it’s already announced it will appeal the judge’s finding of a monopoly in the first place. So we’re still dealing in the realm of hypotheticals.

So let’s lean into the hypotheticalness. If Google is forced to break up its ad business, what sort of impact might that have on publishers?

If you’re envisioning a giant pile of ad dollars exiting Silicon Valley and floating peacefully into local newsrooms, well, don’t get your hopes up. The fundamental reasons ad spend has moved from publishers to tech companies over the past 20-plus years will continue unabated. (Our lives online are far less local than in the analog days, turning a distribution advantage into a penalty; tech companies have far more targeting data and better tools to use it; people spent infinitely more time using the tech giants’ products than they do with news, feeding them more of that targeting data to close the loop.)

What’s at stake here is less where ad dollars go than the route they take there. Right now, for all the reasons laid out in the government’s case, a large share of them flow through Google, and Google takes a hefty cut along the way. And because it has such a lock on the marketplace, it has little incentive to compete for either publishers’ or advertisers’ business. A non-Google DFP and AdX wouldn’t have that Google lock-in to count on and thus might offer better deals to both sides. And even if they didn’t, rival ad tech companies would have an easier time competing for market share. The hope would be that advertisers and publishers could both end up getting a better deal — because each could recapture some of the pie slice Google has been hoarding.

But my strong suspicion is that — should Google actually be forced to break up its ad business — the primary beneficiaries would be other tech companies, not publishers. The second tier of ad exchanges and other ad tech firms would have a better chance of competing; some share of that might be passed along to their customers. That’s a good thing, but it’s hardly transformational for news companies; breaking up Google’s monopoly is not the same as turning off the internet.