On July 8, the Wall Street Journal reported that Google, the search-engine subsidiary of Alphabet, had offered concessions to the US government in an attempt to stave off a potential antitrust lawsuit targeting its advertising business. “As part of one offer, Google has proposed splitting parts of its business that auctions and places ads on websites and apps into a separate company under the Alphabet umbrella,” the Journal reported; according to sources, that new entity would be worth tens of billions of dollars. The proposal was described as a “sign that legal and regulatory pressures on the tech giant are coming to a head.” Over the past two years, Google and Alphabet have been the target of half a dozen antitrust actions led by both state and federal authorities, aimed at the company’s control over both the search market and the digital ad market, and members of Congress have proposed a law that would break up Google’s digital ad business. The European Union’s antitrust regulators are also investigating the company’s ad operations.
Google’s proposal to split up its ad business doesn’t seem to have won over the US Department of Justice, however. Yesterday, Bloomberg reported that antitrust authorities are “likely to reject concessions offered by Alphabet, clearing the way for an antitrust lawsuit over Google’s dominance of the online advertising market,” with that lawsuit possible by as early as August. The DOJ probe into Google’s digital-ad practices is being handled by Doha Mekki, the principal deputy attorney general in antitrust who, earlier this year, pledged “a lot more litigation” from her division. “The division’s position is we are not planning to take settlements,” Mekki said at an event in April. “Settlements suggest compromise.”
Google’s advertising business is also the subject of an antitrust suit brought by a number of state attorneys general and led by Texas AG Ken Paxton. That lawsuit, filed in December 2020, was recently updated with an unredacted document that details how Google allegedly uses its control of all aspects of the ad market to rig auctions in its own favor, boosting revenue by potentially hundreds of millions of dollars. (Online ads generated more than $30 billion in revenue for Google last year.) Like most of the other lawsuits and regulatory actions against Google for its dominance of the digital-ad business, the one from the state attorneys general focuses on Google’s simultaneous control of the world’s largest digital ad-buying platform, largest online advertising exchange, and largest platform for displaying ads on publishers’ websites. According to Wired, one unnamed employee who was quoted in the state attorneys general lawsuit compared it to “if Goldman or Citibank owned the New York Stock Exchange.”
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In May, a group of congressmen led by Mike Lee, a Republican senator from Utah, introduced a bill called the Competition and Transparency in Digital Advertising Act, which would prevent any company with more than $20 billion in digital ad revenue—in other words, Google and Facebook—from owning multiple parts of the online ad market. These digital giants could choose to own the ad-sales business, or an online ad exchange, or the ad buying and display business, but not all of them at once. Lee said in a statement when the bill was introduced that the lack of competition in digital ads “means that monopoly rents are being imposed upon every website that is ad-supported and every company that relies on internet advertising to grow its business.”
Among the companies that most rely on internet advertising are digital news publishers, most of whom use ad networks and ad exchanges. The largest of these, in both cases, belong to Google. Using them allows publishers to take advantage of reader targeting, as well as tools such as “real-time bidding,” in which a split-second virtual auction for ad space is held as soon as a page is loaded. The Paxton lawsuit alleges that Google uses its control of both sides of the ad market to rig these auctions in its favor. The Competition Markets Authority in Britain recently announced that it is concerned that Google may “illegally favour its own ad exchange services.” One of the dangers of Google’s control over the market, the CMA says, is that it could “reduce the ad revenues of publishers, who may be forced to compromise the quality of their content” or put it behind paywalls.
Google initially succeeded by building a better search engine, the CMA stated in a 2020 overview of the online ad market, but “they are now protected by such strong incumbency advantages—including network effects, economies of scale and unmatchable access to user data—that potential rivals can no longer compete on equal terms.” Not surprisingly, Google disagrees with this assessment. In a response to Paxton’s lawsuit in January, Google maintained that the suit was filled with “inaccurate and inflammatory allegations,” and that it “fails to acknowledge that ad tech is a highly dynamic industry with countless competitors.” Google has responded in the past to allegations about the effect it has on publishers by pointing out that its ad technology “helps news organizations make money by showing ads on their websites, apps and videos,” and that, every year, Google pays “billions of dollars directly to the publishing partners in our ad network.”
Here’s more on Google and advertising:
- Ad nauseam: An analysis of the online ad market by Digiday, published in February, predicted that Google, Facebook, and Amazon will account for more than half of the global ad market this year—not just digital ads, but all ads. According to one estimate, last year the three companies took in almost three quarters of all global digital-ad spending. Google’s ad business, including ads sold on its own sites as well as ads sold through third-party networks, brought in more than $200 billion in revenue, while Facebook brought in $115 billion. According to a report in the Financial Times, the three tech giants have doubled their share of ad revenues in the past five years.
- OpenTube: Last month, Google offered to let rival ad networks and agents place ads on YouTube as part of an attempt to settle an investigation by the European Union into its advertising dominance. As part of the case, “the EU competition watchdog singled out Google’s requirement that advertisers use its Ad Manager to display ads on YouTube and potential restrictions on the way in which rivals serve ads,” Reuters reported. If Google can’t find a way to settle the case, it could wind up having to pay a fine equivalent to 10 percent of its global revenue, or about $26 billion.
- Bedfellows: Oles Andriychuk, director of the Centre for Internet Law and Policy at the University of Strathclyde in Glasgow, wrote about how traditional media chose to get in bed with Google and Facebook instead of trying to fight them. “The current structure of digital advertising markets makes the Google-Facebook duopoly an unavoidable trading partner for every party in the content consumption supply chain,” he wrote. “The media industry remains the only meaningful market force potentially capable of mitigating the duopolistic order of digital advertising, but traditional media appear to be more interested in partnering with Big Tech than competing with it.”
Other notable stories:
- Chinese hackers sent a flood of malicious emails to White House correspondents and other prominent US journalists in the days leading up to the attack on the US Capitol on January 6, 2021, according to an analysis by Proofpoint, a US cybersecurity firm. The hackers were “scrambling to ascertain whether there would be a peaceful transfer of power in the US,” according to the report, so they used email subject lines about Donald Trump’s attempts to overturn the 2020 election, pandemic relief legislation, and other key US political topics. “Proofpoint attributed the hacking efforts to a group that has been linked to China’s civilian intelligence agency,” CNN reported.
- Tech platforms such as Facebook and Twitter seemed intent on removing misinformation about the war in Ukraine when Russian military attacks first started, but their commitment to do so has waned, according to a report in the Washington Post based on research from a European nonprofit. “Ukrainian officials who have flagged thousands of tweets, YouTube videos and other social media posts as Russian propaganda or anti-Ukrainian hate speech say the companies have grown less responsive to their requests,” the Post reported, and “accounts parroting Kremlin talking points, spewing anti-Ukrainian slurs or even impersonating Ukrainian officials” remain active on social networks.
- Britain’s proposed Online Safety Bill is expected to be delayed until the fall, due to the ongoing impact of the resignation of Boris Johnson, the British prime minister, as leader of the Conservative Party, Politico reported. “The bill would impose a legal duty of care on internet companies such as Twitter and Facebook to keep users safe [but] moves to include some legal but harmful content in the scope of the bill have been controversial,” according to Politico. One of the candidates to succeed Johnson as leader of the Conservative party has said that he doesn’t agree with some aspects of the Online Safety Bill as it has been drafted.
- A new study authored by a group of social scientists at Stanford, Cambridge, and the University of Pennsylvania suggests that American TV audiences are far more polarized politically than online audiences are. The researchers said they analyzed “billions of browsing and viewing events between 2016 and 2019,” and came to the conclusion that seventeen percent of TV-watching Americans are “partisan-segregated” in their content consumption, compared with roughly four percent of online news readers. TV news consumers are also “several times more likely to maintain their partisan news diets month-over-month,” the group found. “Our results suggest that television is the top driver of partisan audience segregation among Americans.”
- The Guardian announced Thursday that Betsy Reed will be the new editor of its US operations. She was previously the editor-in-chief of The Intercept, a position she took in 2015, just a year after the site was founded. While she was the editor, The Intercept won a number of journalism awards, including a Polk Award. Prior to joining the site, Reed was executive editor of The Nation. Reed replaces John Mulholland, editor of Guardian US since 2017. She will be replaced as editor-in-chief of The Intercept by Roger Hodge, formerly deputy editor; Nausicaa Renner, a former editor at CJR, becomes deputy editor.
- A Chinese woman “spent years writing alternative accounts of medieval Russian history on Chinese Wikipedia, conjuring imaginary states, battles, and aristocrats in one of the largest hoaxes on the open-source platform,” Vice reported. The hoax was exposed last month by Yifan, a Chinese novelist, who was doing research for a book. The user, known as Zhemao, wrote more than 200 articles on the Chinese edition of Wikipedia since 2019, complete with elaborate (but fake) footnotes and citations. “The content she wrote is of high quality and the entries were interconnected, creating a system that can exist on its own,”John Yip, a Chinese Wikipedian, told Vice. “Zhemao single-handedly invented a new way to undermine Wikipedia.”
- Reporters, editors, and producers who work at PBS NewsHour announced that they are attempting to unionize with SAG-AFTRA, which already represents the news unit’s anchors and correspondents, according to The Hollywood Reporter. “The workers, who are calling their group the NewsHour Union, announced their organizing attempt on Tuesday,” the magazine reported. The organizing committee representing the staffers said in a statement that, “as the creative engine behind one of the most trusted news institutions in the country, our goal is to strengthen this pillar of American television news by creating a better, healthier and more transparent workplace.”
- Greg Burns writes for the Local News Initiative at Northwestern University about a number of regional media chains that have been snapping up local newspapers over the past year or so, as chains like Gannett, Lee Enterprises, and Alden Global restructure their portfolios. “Since 2020, three companies have led the way,” he writes, including CherryRoad Media of New Jersey, which owns 63 papers in 10 Midwestern states; Paxton Media, which is based in Kentucky and owns 115 newspapers in 10 Southern and Midwestern states; and Ogden Newspapers, based in West Virginia, which owns 101 papers in 18 states stretching from New Hampshire to Hawaii.
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Mathew Ingram is CJR’s chief digital writer. Previously, he was a senior writer with Fortune magazine. He has written about the intersection between media and technology since the earliest days of the commercial internet. His writing has been published in the Washington Post and the Financial Times as well as by Reuters and Bloomberg.
TOP IMAGE: An empty reception desk is seen at Google headquarters office in early evening on a business day in Mountain View, California, United States on July 29, 2021. Surge in infection across America, driven mainly by the delta variant of the coronavirus, prompted several large tech companies to reconsider plans for employees to return to office. Google announced it will require vaccination for employees to work on campus and delayed company’s mandatory return to office to October. (Photo by Yichuan Cao/Sipa USA)(Sipa via AP Images)