Google’s advertising business is under scanner once again. This time it's the European Union that has accused Google of favoring its own online advertising technology to the “detriment of competing providers”.

The European Commission—the EU’s executive arm—said on Wednesday that it has found that Google is “throttling competition by leveraging its position as the region's most dominant provider of ad-buying tools for advertisers and ad-serving tools for publishers.”

According to the EU regulator, Google has since at least 2014, favored placing bids with its own ad exchange-AdX-over rivals during the automated ad bidding process which has allowed the exchange to charge higher fees from buyers.

The EU’s charges could also lead to a fine of about 10% of Google's annual global turnover. Its 2022 advertising revenue amounted to $225 billion, roughly 80 % of its total revenue.

The EU’s move comes on the heels of a proposed legislation in the United States, called “Competition and Transparency in Digital Advertising Act”, that was put to the Senate last year and has bipartisan support. The law proposes that companies processing over $20 billion in digital ad transactions will face restrictions on owning multiple parts of the ad ecosystem.

Google, which controls nearly 70 percent of the digital advertising business globally, owns all three aspects of the programmatic advertising business: the DSP (demand side platform), the SSP (supply side platform) and the Ad Exchange.

“Google's dominance in the entire digital advertising ecosystem, coupled with the dominance of its other products such as Search and YouTube in their respective domains, gives the tech giant an unbridled influence on how ads end up on websites and apps around the world,” an ad executive told e4m.

Digital advertising experts around the world, including those in India, have been raising questions over Google’s digital advertising business for a very long time.

The EU’s move has further raised concerns in the ad industry, especially among Indian marketers who increasingly put money on digital advertising, industry experts told e4m.

Google India didn’t respond to a query shared by e4m in this regard.

In India, Google’s ad revenue reached Rs 25,000 crore in 2022. However, the Indian watchdog has so far not taken any measures to address these concerns though it has imposed a hefty fine on Google for abusing its dominant position in the android ecosystem.

“A monopoly simply means that any entity that enjoys absolute control over a system can (and most likely will) exercise unfair advantage in the course of business,” says Dr Sandeep Goyal, veteran adman and MD of Rediffusion.

Asif Mulla, Business Director of Publisher's Internationalé echoes the sentiments.

It's noteworthy that Indian marketers have already started using other DSPs and SSPs to reduce their dependence on Google, industry leaders say. Offerings are available from multiple DSPs such as Amazon, Walmart, Verizon, Mediamath and Flipkart etc. and SSPs such as PubMatic, Magnite and Hivestack.

Paras Mehta, Business Head of Matterkind, a Reprise network company, says, “The availability of multiple options has prompted media planners to propose 5-6 available options to advertisers apart from Google’s DV 360. Some marketers approve 3 or 4 of them.”

What is the controversy?

The digital ad industry works on an automated ad buy-sell mechanism. Publishers, such as those who run websites or mobile applications, offer ad inventory. Advertisers purchase these inventories through a bidding process.

To automate these processes are various adtech platforms: publishers plug into SSP where they can offer their inventories and set minimum bid prices. Advertisers, on the other hand, access the DSP.

And bringing it all together are ad exchanges, which work much like stock exchanges.

Industry experts say, “Google provides several adtech services that are intermediate between advertisers and publishers. While it operates two ad buying tools - “Google Ads'' and “DV 360”, it also has a publisher ad server “DoubleClick For Publishers ", and an ad exchange-AdX .”

The European Commission’s preliminary findings say, “Google abused its dominant positions by: 1) Favouring its AdX in the ad selection auction run by its ad server DFP by, for example, informing AdX in advance of the value of the best bid from competitors which it had to beat to win the auction. 2) Favouring AdX in the way its ad buying tools Google Ads and DV360 place bids on ad exchanges. For example, Google Ads was avoiding competing ad exchanges and mainly placing bids on AdX, thus making it the most attractive ad exchange.”

“The Commission is concerned that Google's allegedly intentional conduct aimed at giving AdX a competitive advantage and may have foreclosed rival ad exchanges. This would have reinforced Google's AdX central role in the Adtech supply chain and Google's ability to charge a high fee for its service,” the EU statement reads.

The commission’s preliminary findings suggest any behavioral remedy would be ineffective and that “mandatory divestment”—i.e. selling a part of its business—may be the only way to resolve the competition issues.

The press release includes an example of a potential remedy, which involves splitting and selling off Google’s ad selling and exchange branches while allowing it to retain the ad buying units.