Last week, the Department of Justice, along with several states, filed a lawsuit against Google that could upend an advertising ecosystem that benefits publishers and advertisers and lowers prices, ignores the robust state of competition in the advertising space, and “largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court,” according to a Google spokesperson in Axios. 

Here’s what you need to know:

Ad tech is dynamic and competitive: Competition for advertising dollars is fierce and lawsuits like this misunderstand ad tech.

Competition for advertising spend is strong online and offline, and the space continues to evolve over time, explains CCIA President Matt Schruers. “Competition for advertising dollars is fierce both on and offline, growing even more so as the global ad market evolves with new competitors and technology. The governments’ contention that digital ads aren’t in competition with print, broadcast, and outdoor advertising defies reason.”

— Schruers also adds that this lawsuit is “unjustified” given vigorous competition in the ads space: “[T]his lawsuit and the radical structural remedies that it proposes [are] unjustified. Digital services are competing vigorously for advertising dollars on screens of all sizes, and the complaint appears to disregard these dynamics as well as the macrotrends of the global ad market.”

“SMBs report that diverse digital advertising providers and platforms compete fiercely for their advertising dollars,” shows research released by the Connected Commerce Council this year.

— Furthermore, a new Connected Commerce Council study found “SMB Advertisers use at least 11 digital ad platforms concurrently.”

The competitive online ads market provides small businesses with several options, states Beth Egan, Professor of Advertising at Syracuse University, in a Connected Commerce Council study. “The online ads market presents small businesses with several competitive options, all cheaper and more effective than offline ads. Google is an important player in the market, but certainly not the only one.”

Advertising occurs across a wide range of mediums—creating a myriad of choices for advertisers, explain Geoffrey Manne and Eric Fruits of the International Center for Law and Economics. “[D]igital advertising is just one kind of advertising, and advertising more generally is just one piece of a much larger group of marketing activities. According to the market research company eMarketer, about $130 billion was spent on digital advertising in the United States in 2019, comprising half of the total U.S. media advertising market. Advertising occurs across a wide range of media, including television, radio, newspapers, magazines, trade publications, billboards, and the Internet. An organization considering running ads has numerous choices about where and how to run them, including whether to advertise online or via other ‘offline’ media, such as on television or radio or in newspapers or magazines, among many other options.”

Online advertising is “far from the only advertising option for businesses,” explains Cato Institute’s Jennifer Huddleston. “Online advertising options like Google’s are far from the only advertising option for businesses and are far cheaper than many of the substitutes.”

Competition in online advertising is strong and “Google’s online advertising market share is at an all-time low,” tweets the Chamber of Progress. “Google’s online advertising market share is at an all-time low, and the tech and advertising sectors are hurting. The DOJ’s latest antitrust case doesn’t square with economic reality.”

The DOJ’s case “ought to be a hard sell in court,” explains Josh Withrow, tech and innovation policy fellow at the R Street Institute. “The government’s overarching argument that Google wields monopoly power in the digital ad industry ought to be a hard sell in court.”

Competition in the online advertising market continues to grow as Google’s market share has fallen, writes Taxpayers Protection Alliance Executive Director Patrick Hedger. “In the last five years, Google’s market share has fallen from 38 percent to 26 percent of the online advertising market. This is a 32 percent drop in just five years, and does not consider the broader advertising sector where Google competes with countless other media firms.”

In similar lawsuits, claims have been based on a “misunderstanding” of antitrust law or “the details of the ad tech market,” explain Geoffrey Manne and Eric Fruits of the ICLE. “[M]any of the most significant claims made against Google’s ad tech products are based on a misunderstanding of U.S. antitrust law, or of the details of the ad tech market itself.”

Damaging the current ad tech market will result in worse outcomes and higher prices for small businesses.

Small businesses would be hurt if digital ads (like Google ads) no longer existed, finds a new study from the Connected Commerce Council. “Sixty-nine percent of small advertisers say it would hurt them if digital advertising (like Google Ads) no longer existed, with 69% agreeing that starting and sustaining their companies would be near impossible without access to targeted ads.”

Breaking up Google ads will cost “small businesses money and customers,” writes Gabe Silverman, a digital marketing consultant who runs Gecko Designs in Missoula, MT. “If DOJ succeeds in breaking up Google Ads, I’m concerned it will undermine advertising and marketing effectiveness, costing small businesses money and customers.”

Breaking up Google’s ad-tech business will result in higher costs and less effective ads for small businesses, explains a Connected Commerce Council statement. “Breaking up Google’s ad-tech business will mean higher advertising costs, less effective ads, and less powerful analytics for small businesses, when small businesses are already faced with rising costs and a looming recession.”

“Today’s digital advertising market offers America’s small and medium-sized businesses (SMBs) more ways than ever before to reach potential customers, sell products, drive revenue, and succeed,” research released by the Connected Commerce Council this year finds. 

The Connected Commerce Council research also finds:

— Digital advertising is an imperative source of revenue for SMB Publishers. “92% of SMB Publishers say digital advertising revenue contributed to the company’s overall bottom line more,” the research finds. “Without the revenue generated by selling digital ads, 74% of SMB Publishers say their entire business model would be negatively impacted.”

— More than two-thirds of SMB Advertisers “agree they would not have been able to launch/sustain their business without digital ads that allowed them to target people interested in their product/service.”

Forcing Google to divest their sell-side tech could ultimately negatively affect publishers
“by forcing Google’s buy side to become even more insular,” warns Paul Bannister, Chief Strategy Officer, Cafe Media. “Google being forced to divest their sell-side tech would likely not be as good for independent ad tech as independent ad tech thinks it would be. It’s also not clear that any of this would help publishers much. Perhaps it would create a more competitive ecosystem, but it could also have negative effects by forcing Google’s buy side to become even more insular and spend more money into their O&Os, which would be bad for publishers in general.”

The ad tech space is crowded, competitive, and new entrants are fiercely competing for the future of digital advertising.

Competition and growth in online advertising remains strong as “more and more companies enter and invest in building their advertising business,” writes Google Vice President of Global Ads Dan Taylor. “And it’s been well reported that competition is increasing as more and more companies enter and invest in building their advertising businesses. Last year, Microsoft acquired Xandr – an advertising platform that, like Google and many of its competitors, has a full ad tech stack that serves advertisers and publishers. This acquisition enabled Microsoft to sign a landmark deal to build Netflix’s advertising business. The government did not challenge this acquisition.”

TikTok has “built itself into a digital advertising juggernaut,” explains the New York Times. “TikTok was once best known for viral dance videos and pop songs. But in recent years, the app — which is owned by China’s ByteDance — has also built itself into a digital advertising juggernaut, selling access to its growing internet foothold to brands and developing products that make it easier to advertise on the platform. This year, TikTok is on track to make nearly $10 billion in ad revenue, more than double what it generated last year, according to estimates from the research company Insider Intelligence.”

— TikTok is considered a fierce competitor by companies like Snap and Youtube, the Times goes on to explain. “Snap recently called TikTok one of its ‘very large and very sophisticated competitors.’ YouTube, which last month reported its first decline in ad revenue in at least three years, recently began placing ads in Shorts, its TikTok challenger.”

Retailers with direct consumer interactions are ramping up their advertising venues, reports the Wall Street Journal. “Marketers also are confronting a proliferation of advertising venues from retailers and other businesses with direct consumer interactions, often incorporating their own customer data. Walmart lets advertisers use its data to target ads to shoppers across the web, for example. DoorDash, Kroger, Marriott and CVS Health run data-driven ad networks as well.”

— Retail media advertising revenues are expected to grow to more than $55B in 2023, the Journal continues. “Net ad revenues from such retail media advertising in the U.S., which exclude some costs involved with traffic acquisition, will grow to more than $55 billion in 2024 from $37 billion this year, Insider Intelligence estimates.”

Streaming companies are expected to accelerate their presence in digital ads, reports the Wall Street Journal. “Insider said Roku Inc., Walt Disney Co.’s Hulu, Paramount Global’s Pluto TV and Paramount+, Fox Corp.’s Tubi and Comcast Corp.’s Peacock accounted for about 3.6% of U.S. digital-ad spending last year. The trend is expected to accelerate now that the streaming industry’s two-largest players, Netflix Inc. and Disney+, have launched ad-supported versions.”

Recent developments in AI technology are expected to give brands new tools to reach ideal customers at the right place and time, explains Manshoor Basha, chief technology officer at Stagwell Marketing Cloud. “I predict that as AI technology continues to change everything around us, consumers will have more time to be engaged through new forms of media. This will give brands the opportunity to leverage more pointed advertising to reach their audiences. AI will find brands’ ideal consumers and reach them in the right place at the right time, especially as augmented reality and virtual reality inch further into mainstream culture.”

Legacy retail companies like Walmart are also making major gains in the advertising business, reports ModernRetail. “Walmart’s nascent yet fast-growing advertising business Walmart Connect made big gains this past holiday season. For the fourth quarter of 2022, ad spend through Walmart’s various sponsored ads units jumped 31.5% compared to the same period in 2021, according to the latest report published by e-commerce software platform Pacvue. Additionally, click-through rates more than doubled year-over-year.”

The DOJ suit is mainly a rehashing of Texas Attorney General Ken Paxton’s suit from 2020, which just saw many of its claims dismissed.

The DOJ lawsuit “largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court,” states a Google spokesperson in Axios. “‘Today’s lawsuit from the DOJ attempts to pick winners and losers in the highly competitive advertising technology sector. It largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow,’ a Google spokesperson said in a statement.”