The possible breakup of Google’s ad division is potentially going to have major effects on the ad market. This states The Wall Street Journal in an analysis on the lawsuit that the U.S. DoJ has now launched.
According to the business newspaper, the lawsuit is potentially going to lead to major changes in the current digital ad market segment. Within this segment, which has a market value of about $500 billion, Google now more or less has a monopoly position. Especially because of the various tools and platforms the tech giant makes available for this purpose, which ensure that supply and demand for digital ads come together.
In this way, publishers and advertisers cannot avoid the Google Ad exchange and related tools. These platforms are so dominant that it is difficult for other parties to make a fist against them. They can never compete with Google on that scale.
This dominance is a thorn in the side of the U.S. Department of Justice (DoJ) and judicial authorities within several U.S. states. With the recently filed lawsuit, they want to end this monopoly position. If the DoJ were to win this case, it would have major consequences for Google and the advertising market.
Consequences of the lawsuit
One of the consequences of the lawsuit could be that Google has to break up its digital advertising division. For example, by divesting certain solutions of its digital ad platform and/or tools, or perhaps spin them off.
More specifically, the ministry sees a divestment of two key components of the tech giant’s ad systems. First, this involves the ad server that publishers use to offer ad space for sale on their sites, known as Google Ad Manager. In addition, it involves the ad exchange that creates automated transactions between supply and demand for digital ads in milliseconds. This happens the moment the websites in question load at end users.
Corporatization best option
A corporatization of Google’s digital advertising solutions seems the most obvious solution, as opposed to selling these operations. If parts are sold, buyers could potentially expect competition actions themselves, according to the business newspaper. A spin-off of the digital advertising business is therefore more obvious.
A spin-off could potentially create a market with multiple smaller providers for digital advertising processes. This gives publishers and ad providers more choice and flexibility for their digital ad processes outside the Google ecosystem.
Ad revenue is Google’s largest source of income. The impact of a spin-off on Google is not easy to predict. However, it won’t go by unnoticed, that’s for sure.
Impact on entire ad business
Whatever will happen, experts expect this lawsuit to have major implications for the entire digital ad market. However, they do assume that the lawsuit will last a long time. Therefore, it is possible that publishers have already found alternatives before a final verdict is reached.
If a decision is made to spin off Google’s digital ad business, experts say it must be done very carefully. Otherwise, it could also affect the revenue of the parties using it.