DOJ sues Google over their dominance on online advertising market

Google parent company, Alphabet, says it plans to cut about 12,000 jobs, or 6% of its global workforce as it looks to cut costs amid the latest signs of a slowing economy.

The Department of Justice (DOJ) and eight states sued Google, accusing the company of harming competition in its dominant online advertising market and demanding that the company break up.

Google's critics have argued for years that the company's extensive role in the digital ecosystem, which allows advertisers to place ads and publishers to provide digital advertising space represents a conflict of interest that Google exploited in an anti-competitive manner.

Google's alleged anti-competitive practices have led to 15 years of reduced advertising revenue for websites and publishers and higher advertising costs for marketers.

As part of the lawsuit, the US government demanded that Google be dissolved and the court order that the company separate, if not more, at least its online ad exchange and ad server for publishers.

Google's central engine of ad sales under scrutiny

The lawsuit is a direct attack on the huge and primary advertising business of Google. According to its annual report, Google generated 209 billion dollars in advertising revenue in 2021, which is more than 80% of its total revenue.

By comparison, the second-largest online advertising giant, Facebook's parent company Meta, earned $115 billion in 2021.

Google and Facebook had the largest share of US digital ad revenue and peaked around 2017, with Google capturing about a third of the market.

Google controls the platform that publishers use to distribute ads online, but also the advertising tools that marketers use to distribute ads and the exchange that facilitates those transactions.

According to Google's own filings, it keeps at least 30 cents for every ad dollar that moves through Google's advertising tools in which some situations that number could be much higher.

Google, Amazon, Apple and Facebook have monopoly power in key business segments. The report was the result of a 16-month investigation in which congressional staffers reviewed company records and interviewed numerous technology industry customers and competitors. Among other things, Google is uniquely positioned to benefit from its strong role in the online advertising industry.