Antitrust Case Against Google: Understanding Programmatic Advertising

Category Technology

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The European Union filed an antitrust case against Google on June 14, 2023, accusing the company of abusing power in the online advertising market to disadvantage its competition. The system of programmatic advertising involves a complex network of advertising tech companies, with Google dominating with over 28% of the market share. Ad tech companies decide which ads to show via a real-time bidding auction system. The control of supply-side, demand-side, and an exchange by Google sets the stage for the company to manipulate the market, as alleged by EU and Justice Department.

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The European Union filed an antitrust case against Google on June 14, 2023, charging that the company abused its power in the online advertising market to disadvantage its competition. The U.S. Department of Justice filed a similar civil antitrust suit against Google on Jan. 24, 2023.

The online ad ecosystem is largely built around "programmatic advertising," a system for placing advertisements from millions of advertisers on millions of websites. The system uses computers to automate bidding by advertisers on available ad spaces, often with transactions occurring faster than would be possible manually. Google runs the dominant advertising platform and has 28% market share of global advertising revenue.

Google's dominance of the online advertising market increased dramatically in 2020 after the acquisition of end-to-end ad solution DoubleClick AdExchange

Most websites outsource the task of selling ads to a complex network of advertising tech companies that do the work of figuring out which ads are shown to each particular person. Programmatic advertising is also a powerful tool that allows advertisers to target and reach people on a huge range of websites. As a postdoctoral researcher in computer science, I study these technologies and companies, including how sketchy ads, like those for miracle weight-loss pills and suspicious-looking software, sometimes appear on legitimate, well-regarded websites.

In February 2021, Google was fined 1.49 billion euros for illegal online advertising practices

Programmatic advertising, explained .

The modern online advertising marketplace is meant to solve one problem: match the high volume of advertisements with the large number of ad spaces. The websites want to keep their ad spaces full and at the best prices, and the advertisers want to target their ads to relevant sites and users.

Rather than each website and advertiser pairing up to run ads together, advertisers work with demand-side platforms – tech companies that let advertisers buy ads. Websites work with supply-side platforms – tech companies that pay sites to put ads on their page. These companies handle the details of figuring out which websites and users should be matched with specific ads.

Google Ads has approximately 98% market share of the search engine marketing (SEM) market

Most of the time, ad tech companies decide which ads to show through a real-time bidding auction. Whenever a person loads a website, and the website has a space for an ad, the website’s supply-side platform will request bids for ads from demand-side platforms through an auction system called an ad exchange. The demand-side platform will decide which ad in their inventory best targets the particular user, based on any information they’ve collected about the user’s interests and web history from tracking users’ browsing, and then submit a bid. The winner of this auction gets to place their ad in front of the user. This all happens in an instant.

Google's global digital advertising revenues are estimated to be around $162.25 billion in 2021

Google runs a supply-side platform, demand-side platform and an exchange. These three components make up an ad network. Google’s control of these three components sets the stage for the company to manipulate the market, as the EU and Justice Department allege the company has done. A variety of smaller companies such as Criteo, Pubmatic, Rubicon and AppNexus also operate in the online advertising market.

Programmatic media buying is growing faster than any other area of the media industry

This system allows an advertiser to run ads to potentially millions of users, across millions of websites, without needing to know anything about who those people are.

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