Google Stock Could Fall If TikTok’s Digital Ad Share Rises

Does Google monopolize the advertising market?

The answer remains in limbo. The Virginia bench trial pitting the Department of Justice and some U.S. attorneys general against Google will resume next month when both sides present findings of fact and deliver closing arguments, according to the Associated Press. The judge could issue a decision in December, notes AP.

The parties disagree on Google’s market share. Last month, the DOJ alleged Google controls “91% of the market for publisher ad servers and 87% of the market for advertising ad networks,” AP noted.

Google countered — claiming, in part, the DOJ’s definition of the relevant market is outdated and overly narrow. Taking into account all online display advertising, Google controls a mere 10% of the market, argued Mark Israel, an economist who prepared an expert report on Google’s behalf, according to AP.

Competition in the nearly $300 billion search advertising market is heating up. Powered by artificial intelligence and social video, rivals like Amazon and TikTok are growing faster than Google as the latter’s share declines, according to the Wall Street Journal.

Will these rivals win digital market market share from Google? The answer is yes, if three things happen:

• More people search TikTok for items to buy online.
• Advertisers earn higher returns on TikTok ad spending than they do on Google’s.
• Google’s strategy to counter TikTok does not pay off for advertisers.

While the first one is clearly happening now, despite TikTok’s gains, Google still offers a higher return on ad investment and Google’s AI strategy and other measures could counter TikTok.

For now, the possibility of the Virginia judge breaking up Google could loom as a larger threat to investors.

A TikTok spokesperson responded to a request for comment by referring me to a release about the company’s Search Ads Campaign product. I have contacted Google and will update this post should I receive comment.

Does Google Monopolize Digital Advertising?

Judge Leonie Brinkema of the U.S. District Court for the Eastern District of Virginia will decide this question — probably this December — after both sides “summarize their cases in writing and deliver closing arguments” in November, according to the New York Times.

The DOJ charged Google with abusing control of its ad technology to violate antitrust law while Google countered — claiming the government ignored the intense rivalry in the digital advertising market, noted the Times.

More specifically, the DOJ alleged following the 2008 acquisition of advertising software provider DoubleClick, Google used the market power it subsequently gained to raise raising advertising prices and harm publishers by taking too large a commission on each sale, noted the Times.

Google’s arguments featured a stream of experts who claimed the search giant was competing against large rivals and created value for advertisers while taking a fair cut of digital ad revenues. These experts’ arguments included the following:

• Google does not take an unreasonable cut of ad revenues. Google’s 20% take rate on its marketplace for buying and selling ads is only slightly higher than the 16% average calculated by a DOJ expert, noted Judith Chevalier, a Yale professor of economics. She added “a number of exchanges, whose names were redacted, charged more than Google did,” reported the Times.
• Google increased transparency in ad brokering and helped publishers make more money. Google’s ad technology was aimed at responding to competitive dynamics and meeting publishers’ expectations, rather than at industry dominance, said Nitish Korula, a former Google Ads engineering leader, the Times noted.
• Google spent millions of dollars to fight spam and breaking up the company would reverse that battle’s progress. Google’s comprehensive ad platform — with its details about transactions — “can much more easily fight spam,” testified Per Bjorke, a Google director of product management, according to the Times.
• The DOJ’s definition of the market is too narrow. Digital advertising is broader than rectangular ads displayed when a desktop computer user surfs the web — which the DOJ defined as the relevant market, argued Israel. While such display ads accounted for 71% of ads in 2013, their share had fallen to 17% by 2022, he added. Moreover, advertisers now spend more on ads to reach consumers on social media platforms like Facebook and TikTok and online retailers like Amazon. Applying the broader definition of display advertising, Google’s share has declined from 15% in 2012 to 10% in 2022, concluded Israel, according to AP.

Will Google Continue To Lose Digital Advertising Market Share?

Google’s search advertising market share — while higher than Israel’s estimate — has continued to fall since 2018 as rivals have increased their market position, according to eMarketer. Here’s how much”

• Google’s estimated 2025 share of search advertising revenue: 48.3% — down from 60% in 2018, according to eMarketer.
• Amazon’s 2025 share estimate: 24.2% — up from 10% in 2018, noted eMarketer.
• Apple’s 2025 share estimate: 5.2% — up from 2.6% in 2018, eMarketer reported.

Amazon’s ad revenue is growing faster than Google’s. Specifically, in 2024 the etailer is forecast to enjoy 17.6% growth in advertising revenue to Google’s 7.6% growth, according to the Journal.

While Google has a large lead in search advertising and ample resources, advertisers are happy about the competition. “For the first time in probably 15 years, we will have viable alternatives to Google,” Nii Ahene, a veteran digital-advertising executive, told the Journal.

Competition is coming from TikTok, which recently allowed advertisers to aim ads based on users’ search queries. Meanwhile Perplexity, the AI search startup funded by Jeff Bezos, intends to make ads available under its AI-generated answers, the Journal noted.

The far larger Google — whose nearly two trillion searches a year exceed the 340 million queries Perplexity handled in September 2024 — began this month to offer advertising next to its AI-generated summaries, the Journal reported.

Google expects to generate revenue from these advertisements. For example, in response to the query “How do I get a grass stain out of jeans?” Google provided an AI response and showed a listing for a Tide pen available on the Albertsons grocery store website.

“We’re confident in this approach to monetizing our AI-powered experiences,” Brendon Kraham, a Google vice president overseeing the search ads business, told the Journal.

TikTok has a far smaller share of the U.S. ad market, yet its ad revenue is growing much faster than Amazon’s and Google’s. Specifically, the short-video platform provider’s share of the ad market is only 3.4% — yet its ad revenue is forecast to grow 38.1%, according to eMarketer.

One digital advertising agency has many clients moving ad budgets to TikTok — which said 23% of users search for something within 30 seconds of getting on the platform. Almost 24 clients of digital ad firm Tinuiti — in consumer electronics, apparel and beauty — are currently buying the new TikTok ads, noted the Journal.

“We are seeing performance on return on ad spending that sometimes rivals what we are seeing on Google,” Tinuiti President Jeremy Cornfeldt told the Journal. Given the low volume relative to Google, the real test is whether TikTok’s ability to compete will become clearer “when more advertisers compete for keywords and ad prices go up,” he added.

While Google has a big lead, the threat from TikTok and Amazon — abetted by Perplexity — could grow in the future. If Google can create a significant new revenue stream from AI summaries, the company could start to reverse that decline.

However, if Google’s ad tech antitrust woes result in a breakup of its advertising operation, Google investors could be in a world of hurt.