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Behind the Numbers: an EMARKETER Podcast
Google Found Guilty of Monopoly: What This Landmark Ruling Means for Everyone | Behind the Numbers
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Marcus
Connected Media by United Airlines is the world's first airline traveler media network, delivering seamless, high impact advertising across every touch point in the journey. With best in class, tech, measurements and personalization, Connective Media enables brands and travelers to make connections. Discover more@connectivemedia.com hey gang. It's Monday, April 28th. Evelyn, Jeremy and listeners, welcome to behind the Numbers, an e marketed video podcast made possible by Connective Media by United and Airlines. I'm Marcus and today we're talking about Google's ad tech antitrust trial and what just happened and what might happen going forward. Join me for that conversation. We have two people. Let's meet them. We start with our senior analyst covering digital advertising and media based in Virginia. It's Evelyn Mitchell Wolf.
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Evelyn Mitchell Wolf
That's my name, don't wear it out.
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Marcus
Senior director of briefings. Joining us from New York is Jeremy Goldman.
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Jeremy Goldman
Happy National Blueberry Pie Day, Marcus. I'm really excited for it.
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Marcus
I'm going to stop inviting you on if you keep these up.
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Evelyn Mitchell Wolf
Why is it. Wait, hold on. Why is it Blueberry Pie day? Blueberries aren't in season yet.
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Jeremy Goldman
I don't make the holidays. I just know that it's true.
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Marcus
He just does the research and brings it up every episode.
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Evelyn Mitchell Wolf
Well, I'm excited to go blueberry picking this year.
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Marcus
Two year back, today's fact, more books are published in three hours. The most people will read in a lifetime.
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Evelyn Mitchell Wolf
Wow.
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Marcus
UNESCO estimates that 2.2 million books are published every year and an American reads around 12 books a year. If someone continues reading at that rate for 50 years, they could potentially read around 600 books.
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Evelyn Mitchell Wolf
That's a little depressing. I'm not going to lie. I mean, I'm glad that there's so much publishing happening. That's great.
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Jeremy Goldman
There's also, in fairness, there's a lot of really great podcasts that people are listening to that stop their ability from reading books. Right. Just saying.
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Marcus
Is this our fault that people don't read anymore?
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Jeremy Goldman
It might be Marcus's.
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Marcus
Yes, exclusively. Also, the Guinness Book of World Records holds the record for the most stolen book from US Libraries.
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Evelyn Mitchell Wolf
That's a delicious irony. Irony, Coincidence, Stealing from libraries. Oh, I bet it's a problem what's.
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Marcus
Wrong with the world.
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Jeremy Goldman
But it helps you avoid the late views.
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Marcus
Keep it. Jeremy is the answer to that question. Jeremy is the one stealing from the libraries. Anyway, today's real topic, the court say Google is an illegal monopoly. Whatever next. So a US Judge has ruled tech giant Google has an illegal monopoly in online advertising technology, writes Imran Rahman Jones of the BBC. He explains that the US Department of Justice with 17 US states sued Google arguing it was illegally dominating the tech that automatically determines which ads should be placed online and where. As David McCabe of the New York Times notes, the government was arguing that Google had a monopoly over three parts of the online ad market market. Federal District Court Judge Leonie Brinkhammer ruled that Google had an illegal monopoly in ad exchanges where publishers sell ad space through supply side platforms and ad servers used by publishers to manage their ad inventory. But the judge said Google does not have a monopoly in the general market for display ads online. This is the second antitrust case Google has lost in the past eight months after it was ruled the company had an illegal monopoly on online search. Google will appeal the decision. If it loses is the judge will move to figuring out which penalties or remedies to impose.
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Evelyn Mitchell Wolf
EVELYN actually it's remedies first and then appeals. That's why Google hasn't appealed officially. Either decision is because they have to. The judges will hear proposals for remedies, decide on the remedies, and then Google will be able to appeal.
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Marcus
Okay, yeah, seems backwards.
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Evelyn Mitchell Wolf
I think that I agree that it would make more sense to try and to appeal the decision before moving on to the remedies stage. But there's also, I imagine in the appeals process it's helpful to have the remedies decided by the first court. So then you can Google might also argue that or might be more successful at arguing that the remedies outweigh the, you know, the, it's a little bit.
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Jeremy Goldman
Chickener the egg in this situation because Google on some level knows that there's a chance that it's going to have to compromise at some point. So you have to kind of, you know, find out first how much you're being asked to compromise.
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Marcus
Good point. All right. Biggest segue.
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Evelyn Mitchell Wolf
Evelyn One of the most interesting takeaways for me was Judge Brinkema acknowledged the interplay between Google's two monopolies. So it's monopoly in the search market sort of attracted the advertiser demand, particularly from small and medium sized advertisers. That was so unique or is so unique to adex, which then because of the tie between the ad server and Adex, publishers have sort of been locked into this ecosystem. So there's like a domino effect from Monopoly to Monopoly. And that has been, it's just interesting to see the court sort of unpack that interplay.
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Marcus
So the judge, she'd written in her ruling that Google had engaged in unlawful Tying, she said, conditioning access to one product on paying for the other. But I mean, part of me was thinking, isn't that what companies have tried to do for a long time? They've tried to kind of lock you into an ecosystem. And it got me thinking of. I spoke to our health care analyst right before this recording to get his take on this as well. 2018, CBS buys Aetna for $70 billion in a Vert merger. And now CVS Health, the parent company, owns, they own primary care, they own the pharmacy benefit manager piece, they own Aetna, the healthcare benefits piece, and they own pharmacies. And so they were allowed to do this. That went through. Rajiv was saying UnitedHealth Group's an even bigger example. Those two companies are two of the top five companies in the US by revenue, immense market power, vertically integrated, and they're able to steer you towards certain parts of their business because they have other parts of their business. So I guess the difference here is that you have to pay for one to get access to the other. But I don't know, this seems like something that a lot of companies have been doing and getting away with.
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Jeremy Goldman
This is something that I think they've been getting away with in part because it was good business practice. Like this is the kind of thing that you wanted to build, essentially. Moats get people into your ecosystem, like you said. I think that there are definitely parallels to some of what's going on with Metta now, where you think about Meta with a few of its acquisitions that, you know, if I was in Mark Zuckerberg's position years ago, I would be insane to not try to acquire Instagram. And probably that was the time to look at some of these acquisitions. And I think that Google, obviously, as Evelyn knows well, made some major acquisitions a while back that allowed them to be in the position that they're in now. And those were just shrewd moves basically at the time. I think if they had to do it all over again, they would probably do the exact same thing. So it's a. We're in this interesting moment where things are kind of almost being re litigated. Moves that were allowed to have been made, you know, quite a while ago in the past, that again, if we were in the shoes of Google executives in that moment, we would probably do the exact same thing.
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Marcus
Yeah, yeah, there's, there's a lot of cases, as Jeremy's mentioned, there's a lot of cases going on in terms of antitrust. So Google isn't the only target. You've got the FTC looking to break up Meta's business, forcing it to separate from Instagram and WhatsApp. Potentially the FTC accusing Amazon of creating illegal monopoly in online shopping. Apple facing a Justice Department antitrust case over allegation. It prevents outside software to integrate with its devices, locking folks into its ecosystem. So a lot of cases out there. It's hard because Netflix.
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Evelyn Mitchell Wolf
And that's just the US too.
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Marcus
Yes, absolutely.
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Evelyn Mitchell Wolf
Plenty across the world as well.
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Marcus
Yeah, yeah, yeah. So it is hard and it does seem, I don't know, how do you prevent Facebook from buying Instagram for a billion dollars, you know, two decades ago knowing that it was going to get to be as successful as ours? Maybe it's because they were such a big company. You've got to be careful with big companies buying anyone because they have the funds to pump into any company to make them huge.
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Jeremy Goldman
I think the answer is, I mean, short of, you know, the E marketer team advising, you know, the, the DOJ and FTC on all these major acquisitions ahead of time. I mean, in all seriousness, you do need to have a little bit of the foresight of why, you know, an Instagram is acquired for the price that it commanded or WhatsApp going for a lot more than that. Right. I mean these are things that if a company is willing to buy something, you know, it's really worth probably looking in that moment to see like what did they see? That regulators that are less so technologists, they're not as equipped often to see some of these things ahead of time.
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Evelyn Mitchell Wolf
One of the findings was that Google's major AD Tech acquisitions, DoubleClick and AdMeld were not anti competitive. And a lot of that has to do with those original determinations. When mergers and acquisitions are reviewed by the DOJ and the ftc, they're kind of operating off of promises from the company to not do anti competitive things once everything is said and done and the companies are incorporated or whatever. So Brinkema's decision was that at the time that these acquisitions were made, that Google made these acquisitions and that the FTC and doj, that regulators approved the acquisition both of these acquisitions. So DoubleClick and AdMeld at the time they were not anti competitive and on their own they still are not anti competitive. It's what Google did with the power that it amassed through those acquisitions that is anti competitive. And that's where the rest of the decision comes in.
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Marcus
So Google's argument to play their side of the coin for a second, their response to the ruling was Quote, the court found that, as Evelyn just mentioned, our advertiser tools and our acquisitions, so just double click, don't harm competition. We disagree with the court's decision regarding our publisher tools. Publishers have many options and they choose Google because our ad tech tools are simple, affordable and effective. Does Google have an argument there that people choose us because we're better?
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Evelyn Mitchell Wolf
I feel, and from all the reading and discussing I've done on this case, the publisher Ad Server piece, especially of this case, the DOJ litigated the heck out of it. It was a really, really tight case and Google did not. There was almost nothing Google could do to poke enough holes in that argument for it to fall apart. So it's interesting. I mean, I wouldn't expect Google to just say roll over and say, yep, yeah, you're right, we're a monopoly. So to a certain extent this response is to be expected. But I will be interested to see whether Google comes up with a stronger justification or stronger support for that argument than they presented at the original trial. Because clearly what they did at the original trial was not enough.
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Jeremy Goldman
It's also, Marcus, I think that we always caution people to say these are different cases that are going on at the same time, but at the same time that I think it's really important to say that. It's also important to say, like, how do you look at one of them in a vacuum versus the others? You know, like, is it true that Google offers publishers, as they claim, you know, superior products to some degree in order to, you know, operate and monetize? I would say yeah, like there is evidence that the publishers benefit. We don't know what the inverse would be. We don't know what the world would look like if Google didn't have such power. You know, would there be better tools out there on the market? That's just like an unknown. But what we do know is, you know, especially with AI Overview is, for instance, and this is where we get into the search standpoint is that we have seen publishers, we have data on this, that have seen less traffic from search, right. Which then makes you in some ways more beholden on, you know, like buying paid search, you know, which you're going to have to do through Google or relying on Google's ad tech in order to make up for the fact that you're not getting that organic search. So that's where I'm like, these things do, you know, kind of like there is interoperability in terms of understanding one of these trials. You do kind of have to understand the market power that Google wields in this other area.
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Evelyn Mitchell Wolf
Yeah, and it's interesting too that, I mean, the timing is really special here because Google is currently in the remedy trial for its search case and there's a good chance that the remedies in both of these cases will sort of be intertwined, or at least the remedy in the search case could influence what kinds of remedies and to what extent those remedies are explored in the AdTech case. One of the main proposals that's on the table in the search case is Google divesting Chrome to help sort of alleviate a key distribution point that Google Search has had that has excluded potential search rivals from getting in front of consumers in the first place. And if Google wants to save Chrome, it could negotiate to concede some of its ad tech assets instead. And so there will likely be, even if we don't get to witness all of this, maybe it's happening behind the scenes, but there will likely be some conversations there on Google's end of how they can appease the scrutiny overall, not just in each case individually.
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Marcus
Yeah, let's talk a bit about some of the potential outcomes from this ad tech case. So Trishla Oswald of adweek was saying that the ruling could potentially reshape the digital advertising industry. It was a Reuters article noting Google now faces the possibility of court orders to sell assets or change its business practices. Evelyn, what are the potential outcomes of this decision for Google?
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Evelyn Mitchell Wolf
I mean, the decision tree is like endless here, but I'll go over a couple of the bigger ones to be aware of first. I mean, the DOJ has recommended a forced divestiture of Google's sell side ad tech assets at a minimum. So that would be the ad server, which is known as DFP or DoubleClick for publishers, and Ad X, the Exchange component, which are collectively offered to publishers under the Google Ad Manager umbrella. So sometimes people will call that GAM or gam just to help with. If anyone else is confused about the terminology here, you are not alone. That's actually one of the. It has played a role in this trial. The confusing nomenclature and renaming of products and repackaging of products has been really confusing and hard to follow. So there's your little, I guess, glossary moment. But the divestiture there is one of the DOJ's primary angles and we'll see whether that actually comes to fruition. There has been some speculation as well that Google's buy side assets, including Display and Video360 or DV360 and Google Ads could be on the table. There hasn't been any evidence that that has been a formal consideration on the DOJ's part or anyone else's part. But that's out there on the interwebs as a consideration. And then there are also a number of behavioral remedies on the table. So behavioral quickly before you get there.
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Marcus
By divestiture, do you mean selling them off to other companies or do you mean decoupling?
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Evelyn Mitchell Wolf
Could be either. It sort of again depends on how these remedies come together. The specifics do matter quite a bit, which is why a lot of the reaction to this ruling has been awesome. Time to wait and see what the remedies are and see exactly what this future will look like.
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Jeremy Goldman
And by the way, Evelyn, I think that the. I know you have thoughts on this, but to me it's almost like going back to the drawing board and the restrictions on future acquisitions could be really interesting because this is almost in some ways regulators admitting that they didn't see that future that we're living in essentially now with Google having the ad tech monopoly that it does.
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Evelyn Mitchell Wolf
Yeah, well, I mean there is. Give me a second. I'm going to look up something from a report I wrote last year that is interesting about the DoubleClick acquisition. Google's 2007 acquisition of ad tech company DoubleClick has been of interest to US and EU antitrust regulators. At the time, the FTC approved the deal, but with one prescient dissenting opinion from Commissioner Pamela Jones harbor who said post merger the combined Google and DoubleClick entity will become a super intermediator with access to unparalleled data sources.
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Jeremy Goldman
We have to hire her.
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Evelyn Mitchell Wolf
I mean just as a, as I guess a piece of context there where somebody knew it could happen. But you know, to the regulators, sort of credit is not the right word. But I guess the rationale there was again like Brinkama ultimately decided they can't make determinations on the legality of mergers and acquisitions based on behavior that could happen. They have to look at the resources in front of them. And maybe, I mean that would be a shift in sort of M and A enforcement activity more broadly if they were to sort of anticipate that getting to a certain market penetration would inherently be anti competitive. There's a lot of legal theory that we probably shouldn't get into here. That could be shifting there. But at the time that's not how they were operating.
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Marcus
So you were saying, sorry, behavioral remedies as well.
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Evelyn Mitchell Wolf
So the behavioral remedies this is where the decision tree can get especially complex because there's sort of a lot of different ways to approach this. For anyone that needs a little bit of background there, a behavioral remedy would be Google promising to stop doing something or start doing something to compensate for or correct for the anti competitive effects of their behavior previous to this ruling. So a couple of options here. Again, there are a lot that I can't review all of them, but I'll give you a couple just for discussion's sake. So one of the things that could happen is Google Ads demand could be made available on other exchanges. And if publishers can access that demand through alternative paths that are not Ad X, they might become less reliant on dfp, the ad server side of things, which would just sort of break open the interoperability that Google has historically relied upon. That also has some benefits to efficiencies in the marketplace, which was Google's argument. Another behavioral remedy that could happen giving ad tech players access to Google's auction data. That's a really interesting one. And there are obviously a lot of different shades that that could sort of take on if that's one of the things the court chooses to pursue. But with more information about why certain bids win in an auction, publishers would be able to optimize their monetization strategies more efficiently and other ad tech players might be able to fine tune their algorithms to better compete. So Google's sheer size isn't as much of an advantage.
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Jeremy Goldman
And just to echo what Evelyn said in less words and far less smart data sharing with competitors, this is something that could be really big for Google, obviously really big from the competitive playing field and obviously would have repercussions in terms of what the average advertiser is paying. Because there's going to be greater knowledge across a greater number of competitors.
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Marcus
People are going to reference other big monopoly breakups and how they've gone. A lot of times folks refer to the Microsoft case in 98 where you had the last kind of big tech related government antitrust case and that was looking at whether it was abusing its position by bundling Internet Explorer browser, hugely popular at the time with the near ubiquitous Windows operating system. And the district court said yes, split it in two, got overturned on appeal, and then they settled. DOJ and Microsoft settled, but by saying that they will basically decouple them. But then Google came along, you know, tiny startup Google, and now we have Google. And I think we found it was interesting Scott Rosenberg of Axios was suggesting that maybe ChatGPT maker OpenAI stands to be a key beneficiary of this legal conflict because of that. But there's another example as well where you're intending to break up the monopoly and create competition, but it doesn't always work out that way. Two of them, Steve Law of the New York Times. Standard Oil, founded by Rockefeller in 1870, broken up by the Supreme Court 40 years later into 34 entities. But now you have the descendants of that, which are ExxonMobil, Chevron and ConocoPhillips. So you have three other giants based out. And then the 1969 IBM case, they're accused of monopolizing the computer market. So it unbundled its hardware and its software, treating them as separate businesses priced independently. And that helped ignite the rise of commercial software industry, which Microsoft became the biggest winner in. So I can't see any cases in history where this has gone well, where they've achieved what they were trying to achieve.
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Jeremy Goldman
I don't know. I mean, I think it's a really tricky thing because I think it is true that like major actions have unintended consequences, you know, but it is also true that, for instance, if we're going to say that the Microsoft antitrust trial led to the rise of Google, well, I think most people would agree that there is some good that comes from Google existing. There's a lot of innovation that Google has created. You know, whether or not it's monopolistic, it's certainly not like for us to decide. But I think that solving a problem and making things a bit better and then as a result it has an unintended consequence and something else that has to be addressed over time. It's not the end of the world. You know, like, of course, we have a capitalist society where there's a lot of ecosystems that we're going to. They're going to keep on reinforcing themselves over time and maybe companies are going to wind up having too much power. But it doesn't mean that you don't attempt to solve the problems just because you know that it's going to create something in the long run.
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Evelyn Mitchell Wolf
Yeah, I mean, that's exactly. I mean, just I guess further that markets like these are cyclical. Right. So we have the. Just to zoom in on this century. The Microsoft case was settled in 2001 and then we have the rise of Google. It is very likely that whatever the specific remedies in this case, that there will be one, maybe two, maybe three companies that sort of really take the like, let's hope that there is a revitalization in competition and really take that and run and gain market share. And we will probably end up back here in another 20 years, probably sooner than that, based on how quickly things are evolving right now in technology. But, but that doesn't mean we should not correct for some of the fingers on the scales that are making it hard to move past the current state.
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Marcus
So let me close with this. It's hard to know because as you said, the decision tree basically of all the potential outcomes is kind of endless.
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Jeremy Goldman
Especially when you factor in compromises they might be making on the search side.
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Marcus
Absolutely. But could, I mean, could you take a stab at leaning one way or the other in terms of how big of a deal is this for Google? And on one side of the coin you've got yes, it's a big deal because Google has the largest slice quarter of the $300 billion US digital ad market. It's got half of the search market. And so this is going to be a big deal just because they're such a key player. On the other side, you can argue no. Google's anti tech business, $30 billion in revenue last year. It's about a tenth of its overall sales. This isn't going to really affect it that that much because it has YouTube, it has search, it makes a ton of money there and it might, as Axios ask Reading was saying, like it might affect the top line where they're going to have to recalibrate some spending because that money they get from ad revenue affects how much they invest in AI and cloud, all the rest of it. But ultimately this isn't going to affect Google that much. Do you lean one way or the other, Evelyn?
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Evelyn Mitchell Wolf
I mean I have always been of the opinion that Google would survive pretty much any outcome in this ad tech case. The search case would be a little bit more dire, I think, for Google, especially given the size of its search business and the fact that it remains cash cow. But on the ad tech side, like you mentioned, ad tech is not as important to Google's business as it once was. It has already offered to sell at least its sell side ad tech or at least adex in an attempt to appease in the eu. To appease EU regulators and sort of, I guess reduce scrutiny. And that carrot was not taken by EU publishers. But clearly if Google is willing to put that out there itself, then it believes that it will march on. Even if it's ad tech business, it's not as strong as it has been historically. So I think it's not to say that it's not a deal to Google. Maybe it's not a huge, huge deal. And I do think that Google will continue to be one of the biggest forces in digital advertising despite this ruling, although there are plenty of larger consequences that are sort of that underlie the increased antitrust scrutiny overall.
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Marcus
Right, Jeremy?
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Jeremy Goldman
So not quite the question you asked, but the odds, I think, of them getting out of the ad tech like the remedy, like totally unscathed, I would put it at about 1 in 20. Like, meaning something is happening here. Oh yeah, yeah. And I think that's really important to note just in terms of the amount of pushback that they're putting on the ad tech side in relation to how much of the revenue is for the overall company. Because let's not forget you've got a very lucrative cloud business, you know, business and selling to educators, all of the productivity tools and so on, workspace. So all of that stuff, advertising is obviously really important. But to Evelyn's point, you know, you're making so much of it on the search side. I can see them making major concessions, bigger than some people might think, within the ad tech remedy portion of this in order to more or less escape close to unscathed on the search side. So essentially giving up more here in order to protect more on the, you know, for the other case. And that's why I say that these two things are definitely linked and then Google winds up being okay and maybe it inspires some innovation. And obviously it just means that Google has tighter margins because they don't have one or two things that were pretty high margin for them.
- [30:11]
Marcus
I want to close with something from one of our colleagues, Daniel Konstantinovich, who is saying Google and Meta may remain the two largest players, but four sell offs would represent multibillion dollar opportunities for competitors to seize market share, creating a far less centralized ad ecosystem. He was also saying that the familiarity with Google's ad products could mean that advertisers choose to continue spending on its platforms even if there is a partial breakup or sell off. However, advertising grumblings about unfair practices and transparency issues at Google could drive interest in competing offerings from other tech giants or from comparatively smaller players like the trade desk. That's what we've got time for for this episode. We'll be talking a lot more about this and the other Google trial going forward, so stay tuned for that in part because this is going to take time. In Evelyn New, you were quoted in one of these pieces. I think maybe it's Daniels saying that if Google and Meta lose these cases and the appeals, the ad landscape could be unrecognizable five years from now. The key part of that sentence being five years.
- [31:15]
Evelyn Mitchell Wolf
Yeah. It's going to take a while for this to all resolve.
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Marcus
Yeah. I don't know if this is going to be a good thing either for Google because Scott Rosenberg of Axios was also saying delays also extend the period during which Google because execs and employees are distracted and demoralized by the process. So I don't know if these appeals and this being drawn out is going to be positive for them in the long run.
- [31:34]
Evelyn Mitchell Wolf
Google could settle at any time. Yeah.
- [31:37]
Jeremy Goldman
That's a good argument for settling.
- [31:38]
Marcus
Yeah. Well, thank you so much to my guests for hanging out with me today. Thank you so much to Evelyn.
- [31:43]
Evelyn Mitchell Wolf
Thank you, Marcus. This was super fun.
- [31:45]
Marcus
Yes, indeed. Thank you to Jeremy.
- [31:47]
Jeremy Goldman
This was fantastic as always.
- [31:49]
Marcus
Thank you. Thank you. Thank you to the whole editing crew, Victoria, John, Lance and Danny Stewart, who runs a team of Sophie does our social media. Thanks to everyone for listening to behind the Numbers, the marketer video podcast made possible by Connected media by United Airlines. You can hang out with Sarah on Wednesday if you would like for the April edition of the eight most interesting retailers of the month.
- [32:06]
Evelyn Mitchell Wolf
Listen.