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Research reveals the scope of Google’s digital ecosystem dominance

May 27, 2020 | By Rande Price, Research VP – DCN

Fifty state attorneys general in the U.S. are looking into Google’s abuse of market power and use of anti-competitive conduct in the digital advertising market. These investigations are as complex as they are numerous. However, a new report from the Omidyar Network offers insight into the core issues under examination.  

Roadmap for a Digital Advertising Monopolization Case Against Google showcases the company’s market power, which it achieved through orchestrated acquisitions and vertical integration. The authors, Fiona M. Scott Morton and David C. Dinielli, delve deeply into the Market Study Interim Digital Report produced by the UK’s Competition and Market Authority (CMA) to continue the narrative. The detailed report includes a description of markets relevant to allegations of antitrust and a detailed explanation of anticompetitive conduct. It outlines and explores 20 specific instances. These showcase Google’s market dominance and the harm that causes to competition and consumers.

Key points

Audience and inventory

Citing the CMA report, 95% of all web users in the U.K. access at least one Google site or app each month. YouTube, a Google product, reaches 91% of the total U.K. web audience. And when it comes to inventory, Google Search is approximately 90% of the total supply. Serving as the main point of entry for the internet and controlling most of the supply for search advertising and a sizeable supply for display (especially open display and video) are strong indicators of market power.

Advertising intermediation

Google’s many data services, together with its stack, dominate the ad tech ecosystem, which targets and places digital ads. Google holds an overwhelmingly high market share in three functions plus in data services: the publisher ad server market is (90%+), the supply side platform/inventory (40–60%), and the demand side platform (50–70%).

Google’s role in advertising intermediation

Providing all of the functions in the ad stack allows Google to, essentially, manage the price. In the digital ecosystem there is a price charged by each intermediary in the ad tech supply chain (take rate). The take rate is the difference between what the advertiser pays and what the publisher receives. The CMA estimates Google’s take rate is at 40%, given it provides all the functions in the ad stack. In other words, Google keeps 40 cents of every advertising dollar.

Further, actions by Google can paralyze aspects of the market. Earlier this year, Google announced plans to retire the third-party “cookie.” The cookies websites place on a user’s browser to identify each unique user. This enables intermediaries in the ad stack to track consumers as they visit different sites. Google doesn’t rely on cookies in order to place targeted ads and track attribution. Its sites, aps, and devices collect user data. Google has no problem identifying users for targeting practices with or without the cookie. However, retiring the cookie has direct and negative implications for others in the ad stack.

Market dependency

Advertisers and publishers alike continue to use Google’s intermediation services. Otherwise, they can’t connect to Google’s must-have supply (YouTube and publisher inventory) or must-have demand (advertiser dollars). As a result, competitors have exited or become competitively irrelevant. A clear example is the fact that Google currently maintains a 90% share of the publisher ad server market, which means most ads cannot reach a publisher’s site without the go-ahead of Google.

This report clearly and persuasively demonstrates Google’s monopolistic practices. It provides an excellent resource for any researching the company and should inform the investigation by the states’ attorneys general and the U.S. Department of Justice.

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