It isn’t a secret that Google has been under investigation by the Department of Justice for over a year. Google even confirmed as much earlier this year, in a statement to The Wall Street Journal. This week it became clear that a case is likely to be brought sooner rather than later. Specifically, The New York Times is reporting that it could come in the next few weeks despite the objections of some of the investigators involved.
Let’s set aside the politics of rushing to get a case filed before an election. It would be tempting to think it’s a good thing for the government to rein in big tech companies, especially those with such an outsize impact over our daily lives, right? Sure, to some extent that’s true, but the reality is that the government, and especially the courts, are usually ill-equipped to grapple with the complex business models of most tech companies.
You don’t have to look any further than the government’s case against Microsoft in 1998, which ended up with prosecutors abandoning their pursuit of a breakup, and instead settling for relatively minor penalties in 2001. The final result of all that effort is that Microsoft ceded the browser war (now dominated by Google’s Chrome). Microsoft is now worth $1.5 trillion. Seems like a fair trade, though not the one the DOJ intended.
So, it’s worth considering what might result from an antitrust case against Google. Bloomberg is reporting that the DOJ’s primary interest is in the way the company ties services together, encouraging its customers to use only its advertising products. Tying isn’t necessarily illegal unless a company does it in a way that uses a monopoly position to force companies that have no other alternative.
In Google’s case, the argument is that it dominates the software used to sell ads on websites, the market where advertisers purchase ad inventory, and the technology that connects the two. Unraveling that is not only complicated, but it could also dramatically change the way everyone uses the internet on a daily basis.
Specifically, there are three areas that any outcome might affect both users and businesses.
Search is by far the biggest piece of Google’s $160 billion in revenue. Specifically, the ads Google sells that appear at the top of search results. One of the main proposals is that Google should be split up. To be clear, I don’t think this will happen. Without those ads, there is no search–at least not the way we’re grown to expect. (Meaning, free.)
On the other hand, an antitrust case could mean a change in the way ads are displayed and the amount of them at the top of search results. That would be very good for users, but bad for advertisers. The reason Google search is the world’s largest ad platform is that they work. Fewer ads mean fewer opportunities for advertisers to reach their customers.
The bigger area of concern for the government (and for publishers as well) is the control Google has over the ads on third-party sites, meaning outside of search or other Google properties. This is probably the area of greatest vulnerability for Google, though it’s honestly a relatively small portion of its revenue (less than 15 percent).
The fact that Google controls most of the technology associated with both the demand and supply of ads means that it has the ability to influence pricing. If you’re an advertiser, that’s bad. A settlement that separates out Google’s ad network technology might change that, but it could also mean that advertisers would no longer benefit from the economies of scale that currently exist.
There’s an irony in that the biggest competitors in this space are Amazon and Facebook, so it will be interesting to see how much the government thinks it can do to level the playing field when the most logical beneficiaries have antitrust problems of their own.
This is where it starts to get interesting. For a lot of people, Google Maps is the default way to get directions or look up a local business.
More than that, however, Google Maps isn’t just a search engine for directions to a restaurant in a new city. It’s also where you can make a reservation for a table, hail a ride, or–if you’re staying in–order food to be delivered to your door.
One of the arguments has been that all of those interactions give Google so much information about users that it has an unfair advantage when it comes to targeted advertising. As a result, those critics suggest it should be spun off on its own. I think that misses the point.
Splitting off Google Maps might prevent Google from gathering information about users, but it would also disable most of the features that make it actually useful. Google Maps benefits from tight integration with Google Search–local search results often take you directly to Maps.
The bottom line is that it’s very complicated. Is Google’s dominance in search and advertising a problem? Probably. An even bigger problem is trying to figure out how to separate the two without ruining both. I’m not optimistic that the government has much of a chance at that.