It's a tale as old as time. Two star-crossed lovers hold their own against the world as forces strive to separate them. In this case, the two main players aren't so much lovers as they are in an unhealthily codependent relationship, which is measured not by heartbeats but by stock tickers. We’re talking, of course, about Google and the digital ad industry.
The two grew up practically together, following the same old script of doing everything together from learnings and lessons to achieving milestones and metrics, both evolving hand in hand. And then it got weird; to the point that people have started to notice, and authorities have started to act, as most recently demonstrated by the anti-trust lawsuit passed by the US Department of Justice against Alphabet for anti-competitive practices by its Google Search and advertising segments.
Market Forces
Alphabet, primarily through its subsidiary Google, has left, an indelible impact on the digital advertising ecosystem. Leveraging its dominance in search, alongside a wide array of digital products and services, Google has positioned itself as a central player in online advertising. This dominance is largely due to Google’s unparalleled ability to collect and analyze user data across multiple platforms, enabling the company to offer highly targeted advertising solutions. This level of precision in ad targeting has made Google an attractive choice for advertisers of all sizes.
Preetham Venkky, Chief Digital Officer, DDB Mudra Group, says, “Alphabet’s approach is straightforward: they create a series of great products by leveraging their capital and expertise in product development. Yes, they do utilize data from their other services and products. Traditionally, antitrust behaviour focused on horizontal integration, where companies expand by adding related products or services. But companies like Meta and Google have shifted to vertical integration. Instead of expanding horizontally, they now control various stages of the product life cycle.”
One of the key areas where Google has asserted its dominance is in search-based advertising. With a global search engine market share of approximately 90-92%, Google has become the go-to platform for search advertising. This market share not only underscores Google's dominance but also highlights its influence over the way businesses reach consumers through search engines.
In addition to search advertising, Google’s reach extends into display advertising through its AdSense and Display Network. These platforms connect advertisers with a vast number of websites and apps, broadening their reach across the internet. Furthermore, Google’s acquisition of YouTube has made it a major player in video advertising, with YouTube accounting for roughly 25-30% of all digital video ad spending. This dominance in video ads has cemented Google’s role in the rapidly growing video advertising market.
As Venkky points out, “Apple is the master of vertical integration, controlling everything from the chipset to the screen tap. They have achieved near-total control over their ecosystem. In contrast, Google has always favoured an open-source methodology, which doesn’t align with a monolithic approach. However, where Google exerts control—and this is key—is in the vast amounts of user data they manage. They have detailed insights into user behaviour, preferences, and actions. This data not only improves their products but also raises concerns about anti-competitive practices.”
Google's comprehensive ad tech stack, including tools such as Google Ads, Google Ad Manager, and Google Marketing Platform, has further solidified its position in the digital advertising landscape. These tools facilitate a wide range of advertising activities, from campaign management to programmatic ad transactions, where Google’s ad tech is used in approximately 70-75% of all transactions. This extensive integration of Google's tools into the digital advertising workflow makes it nearly indispensable for advertisers and publishers alike.
Moreover, Google's ability to collect vast amounts of data across its platforms has enabled precise ad targeting, enhancing the effectiveness of digital marketing campaigns. In the mobile advertising space, Google controls around 35-40% of the market, further showcasing its influence. However, this extensive data collection and market control have also led to scrutiny from regulators, who are increasingly concerned about potential monopolistic practices and privacy issues.
Bad Romance
All of this is to say that even if Google is forced to break up its various entities, the very nature of its relationship with digital advertising means that there’s no closure coming anytime soon, as Google’s different proposed companies will be just as enmeshed in the ecosystem as they are monolithically today.
A senior ad industry veteran noted that given how Alphabet's businesses are intertwined, it will be difficult to untangle the various aspects of its ad business. “Search delivers close to 70% of Alphabet’s Ad business, while YouTube is dependent on the Search business, and the Network business is dependent on YouTube. Thus a strong interdependence between the businesses, untangling them at an Alphabet level will have businesses with strong dependence on each other.”
Google Search remains the dominant search engine in India, with a market share of over 95%. This commanding position gives Google significant influence over the Indian digital landscape. For Google Ads, the platform continues to be a major player in India's digital advertising market. It's estimated to hold around 60-70% of the digital ad spend in the country. The exact figure may vary slightly depending on the specific metrics and sources used. However, it's worth noting that while Google maintains a strong lead, there is growing competition in the digital advertising space from platforms like Facebook Ads, Amazon Advertising, and local players.
Vaibhav Kandpal, CEO and Founder of Lead Experts, said, “To address Google's current challenges and appeal to the judge, the company should consider giving other businesses a fair chance at preferred placement on devices by capping vendor prices and increasing transparency in the ad auction process. These steps would demonstrate a commitment to a more competitive environment and help resolve the anti-competitive issues at the centre of the complaint, potentially avoiding harsher remedies like a company breakup.”
He added, “Google could further address antitrust concerns by making its ad auction system more transparent and easier to understand for advertisers. The DOJ could also ensure fair competition by introducing a ballot screen for search engine selection on devices and adopting a more competitive approach to partnerships, allowing multiple companies a fair chance at securing deals. These actions would promote a healthier, more balanced competitive environment.”
While it might be tempting to compare the Alphabet anti-trust lawsuit against Microsoft’s lawsuit troubles in the late 1990s, the resemblances, (given that Alphabet’s dominance in digital advertising and search engine services mirrors Microsoft’s position in the computer and operating system markets, and both companies face accusations of unfair practices), are more superficial than would appear at first glance.
Noting that the digital services market and legal landscape have evolved significantly since then, Pranav Bhaskar, Partner, SKV Law Offices, says, “Today, there is a sharper focus on how digital ecosystems impact competition and consumer choice, particularly when it comes to regulating tech monopolies. Moreover, Alphabet's business model is far more intricate, spanning multiple sectors, including YouTube and cloud computing. This means the current antitrust case against Alphabet will take a broader, more comprehensive view of its dominance in online advertising.”
In fact, the DoJ judgment echoes the 2019 order passed by the European Commission in the European Union, which fined Google €1.49 billion for abusing its dominant position in the online search advertising market.
“In India, the Alliance of Digital India Foundation (ADIF) has also petitioned the Competition Commission of India to address Google’s alleged abuse of dominant power in digital advertising. These developments point to a significant shift in how antitrust cases are being adjudicated globally, signaling major implications for Alphabet’s future business practices,” points out Bhaskar.
Together with Meta, Alphabet (Google) accounts for about 50-55% of global digital ad spending, underscoring the significant role it plays in shaping the digital advertising ecosystem. This market position has not only driven innovation and efficiency but also raised important questions about competition and consumer privacy in the digital age.
