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REUTERS/Carlo Allegri/File Photo (REUTERS)
REUTERS/Carlo Allegri/File Photo (REUTERS)

Google’s ad engine may be the next antitrust target

  • The question before multiple authorities, including those in the US, is whether Google is using its dominance across the digital ad ecosystem, where, in some instances, it is the buyer, seller as well as ad auctioneer, to stifle competition and charge unfair fees

NEW DELHI: The US department of justice (DoJ) has launched antitrust action against Google for alleged monopolistic behaviour in web search and there are indications that digital advertising is next in line, which will have deep implications for India.

Roughly 65-70% of India’s digital ad market is controlled by just two companies, Google and Facebook. In the thriving mobile app-driven digital ecosystem, there are effectively two ways to make money: either charge users for services or host ads. A proposed slice for Google in the former, dubbed the “Play Store tax" by a group of Indian startups, has recently led to a firestorm of protests.

However, Google also takes a cut on the latter. The search giant has admitted to regulators in other jurisdictions that the average share that accrues to the company from ad revenues is roughly 30%, about the same as the proposed Play Store fee. In effect, whether free or paid, Google takes a 30% cut. In the digital ads space, for both buyers (brands) and publishers (apps and websites), it is almost impossible to bypass Google and avoid paying the cut, experts said.

“Almost every ad that appears on every free app (on the Android ecosystem) has to essentially pass via Google," said Anupam Manur, who studies platform economics at Takshashila Institution, a think tank. “Google has a near-monopoly on apps that run on Android," Manur said.

The question before multiple authorities, including those in the US, is whether Google is using its dominance across the digital ad ecosystem, where, in some instances, it is the buyer, seller as well as ad auctioneer, to stifle competition and charge unfair fees. Reports indicate that DoJ investigators have been in talks with third-party ad marketers in the US at least since early 2020. The UK and Australia are also looking at Google’s dominance in digital advertising.

Ads have become a central driver of the internet economy. They are also the main source of Google’s extraordinary profitability, with the company earning a reported $116.3 billion in advertising revenue (85% of overall sales) last year.

“In both (web) search and search advertising, Google is clearly a dominant player in India. This is an issue that has already been decided by a case before the Competition Commission of India, in which Google was fined (in 2018)," said Smriti Parsheera, a tech policy researcher with the National Institute of Public Finance and Policy (NIPFP).

“The question is whether it is using this dominance in anti-competitive ways," Parsheera said.

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