Recent chats between top Google executives revealed as part of the discovery process of the adtech trial and scrutinized by X user Jason Kint highlighted a few interesting comments shared between David Mitby, Vice President of Product Management, and Sissie Hsiao, VP of Google Display, Video and App Advertising, back in 2020.
just found some eye-popping stuff in google discovery under the examples of substantive chats (not deleted). you ready? it's between two key VPs (33+yrs collectively working at Google) and strikes at the intersection of privacy and antitrust as they began cookie deprecation. /1
— Jason Kint (@jason_kint) September 17, 2024
These chats revealed that Google execs are very concerned about the impact that privacy restrictions could have on the company’s billionaire advertising business as this could result in massive challenges to its user tracking capabilities.
Google’s advertising technology relies heavily on third-party cookies and cross-app user tracking. The formers were expected to be phased out by the end of 2023 and then this year but the decision was ultimately reversed despite regulatory concerns. Google’s ability to target small niches of users seems to be a major driver of profit for many of Google’s projects including the search engine and YouTube.
Mitby and Hsiao discussed the implications of these changes and said that admitting that the need to roll out new and improved methods to track users’ activities online implied that their previous efforts “sucked.”
This may explain why Google ended up rolling back its decision to stop using third-party cookies as they did not want advertisers to perceive that they were not as effective as they supposedly were.
Apple’s Consumer Privacy Enhancements Threatens Android’s Market Share
Google seems to be stuck between a rock and a hard place. Increased competition from Apple (AAPL) through its transparency and privacy protection features – all of which are now accessible to consumers who own their iPhones, iPads, and other devices – is becoming a major threat to the company. In turn, it is looking for ways to change the perception that they can both deliver great advertising results while also protecting users’ privacy. However, ad targeting and strong user privacy are essentially mutually exclusive as extensive user data is necessary for effective targeting.
Finally, the exchange shows that the impact that increased privacy measures for Chrome and Android could have on “properties” like YouTube could be important. Mitby said that the true impact of privacy measures in dollar terms does not appear to be well understood.
Google is being dragged to the courthouse again to face a second antitrust lawsuit just a month after a federal judge from the District of Columbia said Google Search is a monopoly.
The new case, which began on Monday 9, will now focus on the company’s advertising technology business and it is the first time that the Biden administration will get a chance to confront the tech giant and its practices.
The recent “you are a monopoly” ruling could already have severe implications for the company including the possibility of a court-mandated breakup of its business into smaller and independent parts.
DOJ Teams Up with States to Bring Google’s Monopolistic Practices Down
The Department of Justice (DOJ) has been grueling tech companies lately and Google is just its latest target. In a previous high-profile case, it also sued Apple over its restrictive and anticompetitive iOS ecosystem while the Federal Trade Commission (FTC) went against Meta Platforms and Amazon for its monopolistic practices on advertising and third-party marketplaces.
The DOJ, joined by a coalition of states including California, Colorado, Connecticut, New Jersey, New York, Rhode Island, and Tennessee, alleges that Google has violated Sections 1 and 2 of the Sherman Act through anticompetitive behavior in the ad tech market.
The government’s case centers on the claim that Google has built a monopoly over the technology that matches online publishers to advertisers.
Julia Tarver Wood, a Justice Department lawyer, summed up the government’s position in her opening statement: “One monopoly is bad enough. But a trifecta of monopolies is what we have here.”
The DOJ contends that Google’s control over multiple sides of the market – buying, selling, and operating an ad exchange – gives the company unique insights and potential leverage that its competitors just can’t replicate.
The government argues that Google’s acquisition strategy, including the purchase of DoubleClick in 2008, has allowed the company to build an incumbent position in the ad tech market. They claim that this dominance enables Google to charge excessive fees, keeping as much as 36 cents on the dollar when brokering sales between publishers and advertisers.
Google Argues that the DOJ Claims are “Outdated”
Google maintains that the government’s case is based on an outdated view of the internet. Karen Dunn, Google’s lawyer, likened the DOJ’s case to a “time capsule with a Blackberry, an iPod and a Blockbuster video card” in her opening statement.
The company argues that the online advertising landscape has evolved significantly with advertisers now more likely to turn to social media platforms like TikTok or streaming services like Peacock.
Google mentioned the revenue declines experienced by its Networks division lately as evidence that it has no monopolistic powers. Dunn highlighted that the government’s focus on how ads are displayed and accessed via desktops fails to take into account the radical shift that the market has experienced as the percentage of ads displayed on mobile apps and social media platforms has increased dramatically.
The company emphasized that any actions that result in bringing their business down will just result in other large tech businesses like Amazon (AMZN) and Microsoft taking over the space and that this won’t benefit small businesses at all.
Google Risks Losing Billions of Dollars in Revenue from Both Trials
The previous trial involving Google Search may redefine the market for online searches while the adtech trial that started last week, which could last several months, may lead to significant changes in the company’s practices and marketplace dynamics.
The government may be seeking to force Google to divest its interest in the Google Ad Manager and may even suggest a full-blown breakup of its advertising arm. Billions of dollars in revenue are on the line in both cases and Peter Cohan, a professor from Babson College that the outcome of this second trial could be “potentially more significant than initially meets the eye.”
The case has also drawn attention from international regulators. British competition authorities recently accused Google of abusing its dominance in the country’s digital ad market while the European Union competition watchdog has suggested that breaking up the company might be the only way to address these concerns.
As the trial unfolds over the coming weeks, its outcome could have far-reaching implications not just for Google but for the entire digital advertising ecosystem. A strong ruling against Google could potentially reshape how online ads are bought and sold, affecting publishers, advertisers, and consumers alike.
As Judge Leonie Brinkema considers the evidence presented, including the conversations shared by Kint on X, she will need to weigh the potential benefits of intervening against the risk of setting in motion a set of events that could do more harm than good in a complex and highly dynamic industry.