EU applies pressure on Google to sell part of ad-tech business

Paid Media

The European Union (EU) has ordered Google to sell a portion of its advertising business due to concerns about anti-competitive practices. The EU’s competition commission accused Google of favouring its own online display advertising technology services over competing providers, advertisers, and online publishers.

After a two-year investigation, the regulator concluded that Google had abused its monopoly in online advertising by giving preference to its ad exchange, AdX, in auctions held by its ad server, DFP, and in the bidding process of its ad-buying tools, Google Ads and DV360.

What is Google Ad Exchange?

Google Ad Exchange, also known as Google AdX, is an online advertising marketplace developed by Google. It enables publishers and advertisers to buy and sell digital advertising inventory in real-time through programmatic technology. Ad Exchange operates on a real-time bidding (RTB) system, where advertisers bid for ad impressions on publisher websites and apps.

Margrethe Vestager, the EU competition commissioner, highlighted the complexity of the investigation and Google’s evasive behaviour, stating that each time a problematic practice was detected, Google would modify its behavior to make detection more difficult while maintaining the same objectives and effects. Google will have the opportunity to respond to the EU’s concerns. In response to the ruling, a Google spokesperson emphasised the value created by their advertising technology tools, supporting content creators and businesses of all sizes to reach new customers. They disagreed with the EU’s view and planned to respond accordingly.

The EU’s competition commission stated that behavioral remedies alone, which involve commitments to pro-competition actions, would not be sufficient. The commission believes that a divestiture is necessary, given Google’s dominant presence in almost all levels of the ad tech supply chain, potentially harming competitors, publishers, and increasing costs for advertisers. Google holds a 28% share of global ad revenue, according to research firm Insider Intelligence and is the leading digital advertising platform, with a significant portion of its revenue coming from advertising across various properties.

This enforcement action by the EU follows Google’s previous attempt to settle the case almost two years ago, which regulators found unsatisfactory due to the slow progress and lack of substantial concessions.

The UK’s Competition and Markets Authority (CMA) has also been investigating Google’s ad-tech platform since May 2022, expressing concerns that Google may be favouring its own services at the expense of rivals, customers, and consumers. The outcome of the CMA investigation is still pending.

Spike’s Head of Paid Media, Matt Wilkinson commented; “I think the quote from Margrethe Vestager, and the ultimate response of forcing divestiture is particularly telling: ‘each time a problematic practice was detected, Google would modify its behaviour to make detection more difficult’.

Hopefully, this will serve as a warning to operators in any technical space, that simply trying to obfuscate their activity and baffle regulators could ultimately backfire. The danger is that it sets a precedent for regulators that if they are struggling to understand a particular issue they can just drop the hammer.”

Why does this matter?

It feels that we have been here many times before, but this latest round of investigation suggests that the EU regulator’s order for Google to divest part of its ad-tech business reflects the increasing concern over the company’s monopolistic practices and the need to ensure a level playing field in the online advertising market.