The Justice Department’s second monopoly case against Google is beginning trial on Monday in a Virginia court, with federal prosecutors taking aim this time at the internet giant’s lucrative business as the middleman for online ads.
The case could be a boon for major news organizations, including Gannett, News Corp. and the Guardian, as well as The Washington Post. Such outlets pay Google a cut of revenue for brokering their website ads, and many of then have struggled with their finances in the digital age. Google’s rivals in this sector, Meta and Amazon, also stand to gain if Google loses the case.
Prosecutors say Google has abused its monopoly power over the online ad market, dominating it to such an extent that a Google executive once ventured to ask in an internal email if it presented a legal problem, saying, “The analogy would be if Goldman or Citibank owned the NYSE,” referring to the New York Stock Exchange.
The result, prosecutors allege, is higher prices for advertisers yet fewer dollars for publishers, which in turn has meant poorer offerings of news and other content for readers.
“This conduct hurts all of us because, as publishers make less money from advertisements, fewer publishers are able to offer internet content without subscriptions, paywalls, or alternative forms of monetization,” the Justice Department complaint said.
Google has called the allegations “wrong on the facts,” declaring to Judge Leonie M. Brinkema of the U.S. District Court for the Eastern District of Virginia that “success is not illegal.” The company says that customers choose Google because its services are the best and that it faces a robust field of competition.
“In court, we will show that ad buyers and sellers have many options, and when they choose Google they do so because our ad tech is simple, affordable, and effective,” Lee-Anne Mulholland, Google’s vice president of regulatory affairs, said in a blog post on Sunday. “In short — it works.”
While Google is the target of the trial, the proceedings are also expected to shed some light on how businesses like the New York Times and Wall Street Journal actually make their money these days, and how they depend on arcane marketplaces run by internet giants to do so. Prosecutors said they may call executives from the Times, Journal parent company News Corp., Disney, BuzzFeed, USA Today, the Daily Mail and Vox to testify in court in the coming weeks.
The trial means Google is fighting the Justice Department on two fronts, with a potential breakup of its business at stakein both cases. The legal actions are seen as a weather vane, with a string of federal antitrust cases against other Big Tech companies in the pipeline.
The Justice Department, and the 17 states that joined the lawsuit, enter this trial with the wind in their sails, after Google lost two other antitrust legal battles in a year. A federal court in D.C. ruled last month that Google maintains an illegal monopoly over online search. In December, a jury in San Francisco declared Google’s app store an illegal monopoly in a separate case brought by Epic Games.
Before the online ad trial’s start on Monday, the pretrial hearings already generated fireworks, with Brinkema castigating Google for deleting internal records that could have been relevant in the case. “An awful lot of evidence has likely been destroyed,” Brinkema said in a hearing last month, calling it a “very serious” problem for Google’s credibility in the trial. Brinkema will rule on the dispute without a jury.
A string of media executives have sat for depositions, such as Ken Blom, executive vice president of strategy and operations at BuzzFeed, who told attorneys that his company’s online ad sales through Google’s exchange are three to four times those from the next largest vendor.
The Justice Department is asking Brinkema to order a divestment of Google’s Ad Manager suite of services, which is responsible for many of the rectangular ads that populate the tops and sides of webpages across the internet.
Prosecutors allege that Google has been able to manipulate the online ad market by buying out rivals until it was the go-to representative for both the buyers and sellers of ads, acting like a real estate agent representing both parties in a home sale. The company also owns a major exchange that sits between the buyers and sellers. The result, prosecutors say, is that Google keeps at least 30 cents of each advertising dollar crossing its service. Google has argued that customers prefer the convenience of a one-stop shop.
Fiona Scott Morton, former chief economist of the Justice Department’s antitrust division, said there are few close parallels of a single company dominating the buy side, sell side and also the exchange of a market. The technical obscurity of this sector, she added, helped Google build out this footprint without officials and the public understanding what was happening.
“I don’t think if that happened in, say, cars or steel, that it would take very long for policymakers, enforcers, governments and consumers to say, ‘Wait, something’s wrong,’” she said.
According to eMarketer, Google has been consistently No. 1 in the U.S. digital ads space, commanding a 25.6 percent share of the $303 billion market, followed by Meta with 21.3 percent and Amazon with 13.9 percent. Prosecutors say Google’s market share is even higher in certain subsectors, with about 90 percent of online publishers using Google to source their websites’ display ads.
Google has boasted of helping a long list of news organizations and other companies boost advertising revenue. Its promotional materials say Google’s Ad Manager helped Time magazine increase user time spent on its website by 40 percent, and helped the Wall Street Journal target website ads to readers, resulting in a 37 percent improvement in advertisers renewing their campaigns in 2021.
Google said in 2018 that it drove “seven-figure additional revenue” for The Post over the previous year, through methods like allowing buyers to bid for ad space on an exchange, and native advertising, which blends in ads that resemble news content. The Post declined to comment.
The internet giant also has said it once helped Politico land 25 new advertising clients, with Politico’s Executive Director of Audience Solutions Jeff Daker quoted as saying the company would have otherwise left “millions of dollars on the table.”
A person familiar with Politico’s advertising operations said that Google’s upbeat report was from nearly five years ago and that Politico could adapt to any market changes.
Other Google Ad Manager customers have included the Guardian, Al Jazeera, the Canadian Broadcasting Corporation, Best Buy, AccuWeather, Spotify and NASCAR.
Not all of them are satisfied customers. Gannett, the largest U.S. newspaper publisher and owner of USA Today, sued Google in 2023, blaming the tech firm’s hefty cut of Gannett’s ad revenue for contributing to the publisher having to shutter more than 170 publications since 2019.
“The result is less news where it is needed most,” Gannett’s complaint said. “Communities throughout the United States now do not have a suitable local paper to advise on local events.”
Arielle Garcia, director of intelligence for the industry watchdog Check My Ads, said she believed many publishers large and small have been reluctant to criticize Google publicly, since their incomes depend on Google Ad Manager.
“You see the hesitancy of the publishers,” she said. “Google still holds the keys to their businesses.”
The Google-backed lobbying group Connected Commerce Council held a news conference on Thursday in which several small business owners who use Ad Manager expressed fear over the unpredictable effects of the court case.
“I’m really worried about my business right now,” said Pavlo Prannyk, co-founder of a leather goods store, on the prospect of not being able to use Ad Manager anymore. “I know that I wouldn’t have enough organic clients to my website to be a sustainable business.”
Scott Morton said while monopolists tend to raise the specter of a vacuum if their monopoly is broken, the reality is that other competitors would fill the space.
“Imagine a monopolist in cars saying, well, it’s either me or you go back to a horse,” she said. “That’s actually not the right alternative. The alternative is a monopolist in cars or competition in cars. Nobody has to ride a horse.”
Google’s parent company, Alphabet, doesn’t usually break out financials for Google Ad Manager, but one exhibit filed to the court showed the service making $7.4 billion in “booked revenue” in 2020. The business unit encompassing Ad Manager, Google Network, reported $31 billion in revenue for 2023, about 10 percent of Alphabet’s revenue that year.