Google Defends Its Ad Business: Success Isn’t Illegal

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Does Google have a monopoly on the online advertising business? A high-stakes trial to determine whether that is the case kicked off this week in a federal court in Virginia.

The lawsuit behind the trial was filed in January 2023 by the U.S. Justice Department and attorneys general from eight states—Virginia, California, Colorado, Connecticut, New Jersey, New York, Rhode Island and Tennessee. They said the tech behemoth has too much control over digital advertising because it owns the tools used to buy, sell and display ads, and has manipulated both market prices and the services that ad buyers need to use.

In her opening statement on Monday, CNN reported Justice Department lawyer Julia Tarver Wood said Google has a “trifecta of monopolies” to control digital advertising: its ad server business for publishers, advertising exchange AdX, and its advertiser ad network. “The rules are set such that all roads lead back to Google,” Wood said.

Google argues that its services have made it successful, but that isn’t illegal. It also has made the case that other big players—including Meta, Amazon and Microsoft—have similar digital ad tech suites. The Washington Post reported Google attorney Karen Dunn said in her opening statement that Google has pushed forward online advertising in general through its R&D and investments. “We are a big company among many others, intensely competing,” Dunn said.

The trial comes on the heels of major decisions against Google’s dominance in other areas. A federal judge ruled last month that Google violated antitrust laws to maintain a search engine monopoly. The judge has not yet issued a penalty for the company’s conduct. In December, Google also agreed to pay $700 million and make changes to payment options on its mobile app store to allow users to make purchases using a non-Google billing system.

A ruling against Google’s advertising business has the potential to dramatically change the company’s revenue picture. Analysis firm eMarketer predicts Google will make $77.49 billion from digital advertising this year, representing about a quarter of the total market share. And while Google’s parent company Alphabet has a wide variety of other revenue streams, advertising drives the vast majority of its income. As last month’s search engine ruling shows, judges are not afraid to rule against Google—meaning the digital search and advertising landscape could look vastly different in coming years.

Digital video advertising has recently been taking off, with the IAB seeing a 16% year-over-year increase in spending this year. I talked to Peter Day, CTO of digital advertising company Quantcast, about why digital video has seen so much success and what the future holds. An excerpt from our conversation is later in this newsletter.

IN THE NEWS

The Justice Department last week unsealed an indictment accusing the Kremlin of pouring at least $10 million into an unnamed Tennessee-based online content creation company as part of an operation to push pro-Russia propaganda and disinformation on social media. While the company is unnamed, its description matches Tenet Media, which describes itself as a “network of heterodox commentators that focus on Western political and cultural issues.” Tenet Media is known for promoting conspiracy theories, giving a platform to extremists, and had downplayed the Jan. 6 attack on the U.S. Capitol. Key personalities on its website include Benny Johnson, Tim Pool, David Rubin, Matt Christiansen, Tayler Hansen and Lauren Southern.

Following the indictment, Tenet Media’s YouTube channel was taken down because it “violated our Community Guidelines.” Tenet’s TikTok account also is no longer visible online. Its accounts on Facebook, Instagram, X and video platform Rumble all are still online, but no posts have been made since the indictment was unsealed.

BRANDS + MESSAGING

Swiss upstart sneaker brand On is moving up, quickly becoming a global force. Forbes senior contributor Pamela N. Danziger writes about the brand, which first launched in 2010 and has achieved 24% year-over-year growth so far in 2024—an impressive figure, considering the brand tallied 47% growth in 2023 and a 70% revenue increase in 2022, its first full year of being publicly traded. On has seen success so far emphasizing innovation with a sustainable edge, long-term collaborations with athletes and celebrities and a team-focused corporate culture, Danziger writes. The company recently announced a new three-year strategic plan that focuses on building on its core competencies with performance-targeted innovations that also reduce material waste and CO2 emissions, global expansion, and apparel.

ON THE CAMPAIGN TRAIL

Weeks after Donald Trump shared an AI-generated fake image of pop phenomenon Taylor Swift urging people to vote for him, she responded with an Instagram post endorsing Vice President Kamala Harris that could be summarized with one of her song titles: “Look What You Made Me Do.” Swift, whose endorsement accompanied a photo of her holding one of her cats (signed “Taylor Swift, Childless Cat Lady”), wrote that the fake image made her realize she needed to be transparent about how she felt about the election. “The simplest way to combat misinformation is with the truth,” she wrote.

Swift is the latest celebrity to weigh in on the election. She joins Harris backers that include Matt Damon, Lin-Manuel Miranda, George Clooney, Barbra Streisand, Spike Lee, Charli XCX and Mark Cuban. Trump’s celebrity endorsements include Hulk Hogan, Kid Rock, Roseanne Barr, Amber Rose, Steve Wynn, Jason Aldean, Jon Voight and Elon Musk.

ON MESSAGE

Quantcast CTO On Digital Video Advertising’s Growth And Future

So far this year, digital video ad spend is up 16%, and is expected to add up to $62 billion by year’s end. I talked to Peter Day, CTO of digital advertising platform Quantcast, about what is driving the increase in spending, how digital video advertising is being used today, and what the future looks like. This conversation has been edited for length, clarity and continuity.

What are some of the advantages and complexities that digital video ad spend brings?

Day: The big advantage of that world is distribution and measurement. Rather than broadcasting, which is really expensive and you only get a few goes at it, one of the big reasons that internet companies outpaced everyone else is because they could measure and test and learn. Rather than releasing one version of a product, you could release two versions of a product and see if one did better. The same should be true in advertising. You don’t have to get billboards put up. You don’t have to have one ad shown to everybody. There’s not a huge production process necessarily in place. You should be able to test and learn. That starts with measurement. As soon as you can do things at a more granular level, you can measure things more accurately, so you can iterate. So the big promise of the digital age, particularly in advertising is one of better measurement, better optimizations, making your dollars work a bit harder.

Advertising does all sorts of different things for us in terms of ultimately helping us ship more units—but a lot of what we do with these high-impact and very expensive formats is shift awareness and consideration of our brands and products. The way that we measure that is necessarily different. There’s some complexity because of the way that we’ve done this. It took us three years to work out how to measure some of the impact of things like connected TV advertising on consumer perception.

The more complex stuff is that to really embrace this digital era, you need to transact differently. A lot of early technologies in place haven’t necessarily delivered for advertisers what they’ve promised in their marketing materials in terms of measure everything, optimize everything. Part of that’s been technical innovation. Part of that has been legacy buying patterns, selling patterns, being forced onto digital channels.

Digital video has been important to the retail sector recently. What are some things they are doing that are working?

If you really want to drive the bottom of your funnel, a really compelling value proposition, discounts are always going to work. We see some targeted ads around things like that. I advise retailers to look at how some ticket sales companies are doing this, because they’ve done a really good job. Also, in regions where it’s allowed, sports betting companies: It’s an immediate transaction, [and] I think the way that they frame value propositions has worked really well.

The best KPIs we’ve seen, and the best optimization towards KPIs, tend to go through those immediate value propositions. They use all the tricks around making sure that it’s in some way time-bound, a value offer out there. [Ticket sellers, sports betting and event sales companies] have the advantage that it’s event-driven, so they’ve got some of those psychological things already at their disposal. They’ve also used things like dynamic creative pretty well around the events: Making sure that you can get tickets in my city for something that’s coming up, or there’s a sports game on and there’s certain odds or certain offers in-market.

The D2C brands who are on the lower funnel metrics are causing intrigue. They’re very hot on product capabilities and driving site visits, and then getting them to convert with more considered purchases. It is not necessarily about getting your high-impact formats to do all of the work for you, but at least getting people to your site, and maybe signing up for discount codes, and then nudging them to complete the purchase with cheaper channels—things like display ads—works really well. D2C brands who are doing a really good job are using video to get that initial touch point with the customer, then using other cheaper formats to nudge them along that conversion journey.

When consumer spending is tight, brands want to get the most effective messaging out there. Assuming things change for the better in the next couple of years, how do you see companies using digital video?

It’s inevitable that we’ll end up with a proper bidded model. We see this with every programmatic channel. It took years for display budgets to go beyond the remnant they couldn’t sell to being the vast majority. That’s more to do with publishers, content owners moving away from the relationship-driven sales to the biggest brands to the bidded model. With that comes a need for transparency, in terms of what household is my ad going to appear in, so that people can bid more rationally.

We are a big believer in [the] need to be accessible to a broader set of advertisers. Economic systems work better when there’s more people participating on both sides of it. We need smaller brands to be able to show ads in premium environments. That’s good for the publisher because it drives up competition for their inventory, which ultimately drives up prices. And it’s good for advertisers because they can compete with some of the big guys in terms of where they appear.

It’s probably going to take another couple of years to really get there. It’s technical advancement, but most of it’s going to be trust from advertisers, but, more importantly, publishers.

FACTS + COMMENTS

The Barneys New York brand is back this month in the form of a pop-up shop partnering with Hourglass Cosmetics.

2020: When the permanent Barneys New York stores closed, following a 2019 bankruptcy filing

40: Number of designers whose products are in the pop-up, including Thom Browne, Marc Jacobs and Khaite

‘We wanted to honor the authenticity, integrity and magic of what Barneys was’: Hourglass founder and president Carisa Janes told Forbes senior contributor Sharon Edelson

STRATEGIES + ADVICE

Walmart uses consistency in its internal and external communications to convey a strong message. Here’s how you can make that tactic work at your company.

In order to keep employees and have them working at their best, they need clear and consistent feedback. Here are some ways to give it to them.

VIDEO

QUIZ

A PR plan for a potential news event was leaked online and went viral last week before it was confirmed to be an elaborate prank. What is the event?

A. Beyoncé retires from the music business

B. NBC cancels Jeopardy

C. Taylor Swift and Travis Kelce break up

D. Elon Musk pursues an IPO for X

See if you got the answer right here.