Google takes up to 42% cut of online ad spending, lawsuit reveals

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

Google takes between 22% and 42% of all online ad spending that they facilitate on behalf of advertisers and publishers – up to four times as much as its rivals, a newly unredacted lawsuit reveals.

The bombshell legal filing, unsealed Friday in the U.S. District Court of the Southern District of New York, sheds new light on the scale of just how dominant the company’s stronghold over advertisements really is. 

‘[T]he analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange],’ one senior Google employee said, according to the lawsuit. 

The revelation of the contents of the lawsuit comes as the Attorneys General of 16 states, led by Texas, and a string of companies accuse Google of utilizing its stranglehold over search engine marketing and the buying, selling and serving of online advertisements to increase profits for itself. 

In this amended, unredacted version of the suit, the states claim that Google has taken actions to ‘lock in’ advertisers and publishers, leaving companies little choice but to use Google’s own ad serves, as the tech giant controls the dominant tool for placing ads online and runs the primary platform that links consumers and sellers. 

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

In one search example included in the lawsuit, a query for ‘plumbers in Denver’ shows how a Google ad is prominently displayed upon search and the organic result is ‘well below the fold’

Google generates hundreds of billions of dollars of revenue a year by selling ads that appear along with its search results, in addition to ads that appear on sites across the internet.  

And as the primary gateway for users surfing the web, the suit alleges, Google has comprehensively – and purposely – limited the ability of other companies to reach consumers.

The suit further alleges that the company has used its monopoly to benefit itself, while simultaneously harming consumers, advertisers, publishers and the free market. 

‘Google, moreover, cannot establish business justifications or procompetitive benefits sufficient to justify its exclusionary conduct in any relevant market,’ the suit states.

The suit also adds that by paying billions of dollars per year to companies like Apple, as well as web browsers and mobile carriers, the company successfully captures and keeps a stranglehold on key distribution channels.

The suit reasons that the company’s monopoly over the market stems from its overwhelming influence over internet searches: 90 percent of internet searches in the United States use Google. 

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

‘This presentation increases the importance of paid placements, particularly on mobile devices that have much smaller screens,’ the suit states. Figure 2 in the filing shows subsequent search pages as a mobile user scrolls down, noting there are no organic results

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

This depicts the relationship of how specialized vertical providers advertise to attract consumers, which includes ‘going directly to their sites and bypassing general search, through search engines other than Google and through new forms of discovery,’ according to the suit

The investigation is the latest challenge for major tech companies, which are under fire from both federal and state antitrust enforcers, as well as from Congress, over concern about whether a handful of huge companies have too much power and are using it to illegally stifle competition and harm consumers.   

, Google takes up to 42% cut of online ad spending, lawsuit reveals, The Today News USA

Google takes a cut of between 22-42% on ad transactions on the website’s marketplace when compared to competitors, the lawsuit stated.

The company also makes it so that it wins a massive 80% of auctions hosted on its own exchange, meanwhile having served 75% of all online ad impressions in the U.S. in the third quarter of 2018, according to the lawsuit.  

The contents of the filing also reveal the stark differences between what Google says publicly, and what the company acknowledges to be true and says behind closed doors.

‘Google concedes that an electronic exchange such as its own should not normally be able to extract such high fees in the market,’ the document reads.

It then notes that Google execs even acknowledged that ‘an exchange shouldn’t be an immensely profitable business’ during the federal investigation, which has been going on for the past two years.

The lawsuit further reveals that ‘when rival exchanges attempted to gain market share by lowering their prices in 2017, Google’s exchange maintained or even increased prices’ – and still managed to bolster its own position at the top of the market.’ 

The filing then adds: ‘Competing exchanges have not been able to meaningfully increase their market shares,’ as a result of Google’s monopoly over online ad space – even with rivals ‘cutting their take rates by half.’  

The case claims to have uncovered internal memos in which Google is shown to have wanted to discuss ‘competition’ and ‘ways we can work together’ with other tech giants. 

One quote mentions their goal to ‘collaborate when necessary to maintain status quo.’ 

Republican Texas Attorney General Ken Paxton initially announced the probe in front of the U.S. Supreme Court building in September 2019, joined by 15 other Attorneys General from other states. 

The unredacted filing on Friday comes after a federal judge ruled last week that the sprawling antitrust suit could be unsealed. 

In all, 48 states are part of investigations of the Alphabet Inc. subsidiary, as well as the District of Columbia and Puerto Rico.

Google’s alleged monopoly has shed a light on troubling concerns for businesses and consumers, according to a bipartisan group of attorneys general representing almost every state who launched an antitrust investigation of the search giant Monday.

Google has disputed the charges and called the lawsuit flawed, saying it collects lower fees for ads than the industry average.

‘Google’s services help people, create more choice, and support thousands of jobs and small businesses across the United States,’ Kent Walker, a senior vice president for global affairs at the company, said in a blog post last week.