How Google's Ad Stack Works and Why Regulators Are Probing Its Dominance

Big Tech is under fire from governments frustrated with its pervasive societal influence many believe allows it to operate without the checks and balances that constrain legacy industries. Amazon, Apple, Facebook and Google are facing scrutiny from governments across the globe for a litany of reasons, and the CEOs of all four companies are set to face an antitrust inquisition before Congress today. The congressional showdown comes after months of reports that state and federal authorities are probing Google’s dominance of the online advertising market and how it relates to the competitive landscape. The U.S. Department of Justice is reportedly expected to file suit against Google owner Alphabet by the end of 2020. A particular area of concern, sources told Adweek, is Google's suite of advertising tools (see chart) and whether or not it constitutes a monopoly. [kickout id="1" label="chart"] Google owns and operates some of the most recognizable online brands, from its eponymous search engine to its mobile operating system Android and YouTube. Although, it is how it bundles these services with its suite of online ad tools—the vast majority of which are invisible to the public and primarily affect advertisers, media owners and ad-tech middlemen with rival offerings—that is at the center of the DoJ's inquiries, according to sources. [article_summary section="1"]How the tools function and how they ultimately impact consumers is the main concern. (Watch the video below for more on that.) [kickout id="2"] A chorus of critics Critics of Google's effect on ad-tech's competitive landscape are not hard to find and in recent months, academic studies have added to the chorus. U.S. nonprofit bodies, such as Omidyar Network and Public Knowledge, and academics from Yale School of Management have grown vocal on the matter. Their studies are based on market analysis by the U.K.'s Competition and Markets Authority—a regulator widely perceived as more stringent than its U.S. counterparts—which recently called for a "new regime" to take on tech giants. In a report published in early July, the CMA announced the formation of a task force to address its competitive concerns. "Whilst [sic] this recommendation is U.K.-focused, many of the problems that the CMA has identified are international in nature," the department said. "It will, therefore, continue to take a leading role globally in relation to these issues as part of the CMA’s wider digital strategy." U.S. antitrust laws Three main laws govern U.S. federal antitrust power—the Sherman Antitrust Act, the Clayton Antitrust Act and the Federal Trade Commission Act—each covering various threats to competition. They require prosecutors to prove a company's actions result in a situation that negatively impacts market competition and ultimately harms consumers. [article_summary section="2"]Speaking with Adweek prior to the CMA's latest report, Charlotte Slaiman, competition policy director at Public Knowledge, explained how the body, which works alongside economists, lawyers and former public servants, has been looking into Google's dominance of the market for two years. "Based on what we can see from the U.K. [interim] report, it does look like an anticompetitive situation that would be illegal under the [U.S.] antitrust laws," Slaiman said. David Dinielli, senior advisor, beneficial technology at Omidyar Network, co-authored the report "Roadmap for a Digital Advertising Monopolization Case Against Google," which drew parallels between the CMA's findings and U.S. antitrust law. "A big-picture narrative is that Google has used the power it acquired through search—whether legally or illegally—to try and construct its own walled garden whereby anyone that enters the Google-sphere has to use their services," Dinielli said. The 'Google-sphere' Multiple sources familiar with regulatory bodies' inquiries told Adweek there are two specific areas of concern when it comes to the operations of Google's suite of online advertising tools. [kickout id="3"] One concern is "interoperability," or the difficulties advertisers face if they seek to use rival services to audit the performance of ad campaigns on Google's owned and operated media properties. The concept of "tying" is also deemed problematic. For instance, advertisers seeking to use automated ad targeting on YouTube have had to use Google's ad-buying tool DV360 since 2015. "The narrative here is that Google gained power in search and then used that power to build a bridge between advertisers and publishers," Dinielli said. "Then, through exclusive operability and exclusive arrangements and refusal to share data, made it the one-stop shop that nobody can avoid." Remedies? Google often cites consumer privacy as its rationale for restricting data access to third parties and in recent weeks has made several PR overtures, such as disclosures over how it splits profits from its ad stack with publishers. Earlier this year, in a filing with regulatory bodies in Australia, Daniel Bitton, partner in the antitrust practice of Axinn Veltrop & Harkrider, and Stephen Lewis, partner at RBB Economics—both of whom have represented and advised Google in its dealings with regulators in the U.K. and U.S.—claimed Google's historic reliance on paid-for search ads meant it was in its interest to operate in a competitive ecosystem. They also point to recent surveys of media buyers suggesting Google competes in a healthy marketplace whereby advertisers can choose from a number of options for ad tech, including Amazon's DSP. "Google faces stiff competition for all of its ad-tech products from players of all shapes and sizes, from well-known names like Adobe, Amazon, AT&T, Comcast, Facebook, Twitter and Verizon to highly successful industry specialists like MediaMath, OpenX, Rubicon Project and The Trade Desk," the filing read. Undoubtedly, Google's services are crucial components at multiple tiers of the online media ecosystem, but remedies to the current status quo are required, according to multiple sources. While the prospect of a wholesale breakup of the online behemoth is unlikely, the divestiture of certain aspects of the business could be on the table, according to Slaiman. "It's always a really high bar to try and win divestitures at court and even harder to try and get a settlement where the company will agree to divestitures, but I think that could be appropriate," Slaiman said. Dina Srinivasan, a fellow with the Thurman Arnold Project at Yale, pointed to the potential for antitrust authorities to require Google to construct "firewalls" so that data gleaned from one side of its operation cannot be used to bias the decision-making of another. "There could also be data-sharing requirements so that Google has to make some data available to advertisers or publishers or competitors," Slaiman said.