DOJ’s new suit threatens Google’s ad business.

The US government’s latest legal assault on Big Tech is asking a court to order Google to sell the giant and its incredibly profitable digital advertising business.

Why is it important? The Justice Department’s new lawsuit against Google, filed Tuesday, brings to light an antitrust campaign against the tech giant that has consumed Washington and Silicon Valley for half a decade — and it may take a long time for the courts to resolve it.

Yes, but: There is no guarantee that this latest case, even if the DOJ wins it all, will end or limit the company’s dominance of the online advertising industry.

In numbers: The Google ad machine the DOJ wants to see includes the company’s “network” advertising business, which sells ads on other items. That category contains approx 12% of parent company Alphabet’s total revenue.

• Taking out key parts of a company’s ad-tech infrastructure would be difficult and would hurt revenue and growth potential. But it does not mean “breaking up” Google, as some have described the government’s goal.
• Just as important, the case — like every big, complex antitrust trial — could take years in court, and in that time Google could find ways to shore up its ad business to protect itself from harmful distractions.

Grab it fastGoogle bought advertising pioneer DoubleClick for $3.1 billion in 2007, and over the years DoubleClick’s services became Google Ad Manager, which the government now wants Google to use.

• The DOJ alleges in the lawsuit that the acquisition and Google’s behavior gave the company significant power to illegally foreclose competitors in the online advertising market and worsen the experience for advertisers and consumers.

What they say: In a statement to reporters today, Attorney General Merrick Garland said, “Google engaged in anti-competitive behavior that weakened, if not eliminated, competition in the ad tech industry.”

• “First, Google controls the technology used by nearly every major website publisher to sell ad space. Second, Google controls the primary tool advertisers use to buy that ad space. Third, Google controls the largest ad exchange associated with publishers. For every ad space sold, advertisers receive one They’re on,” Garland said.
• “Because of this plan, website creators will earn less and advertisers will pay more.”
• The suit seeks to force Google to divest itself of the ad manager suite. It also seeks unspecified monetary damages and an injunction barring Google from continuing to engage in the alleged anti-competitive practices.

On the other side: Google argued that the DOJ’s lawsuit “attempts to pick winners and losers in the highly competitive ad technology sector.”

• Google’s ad programs “help publishers monetize their websites, apps and videos — giving Internet users access to a wide range of free content,” Google’s VP of global ads, Dan Taylor, wrote in a blog post.
• “We’ve spent years building and investing in our ad technology business to support a brighter, more open web. We’re aggressively contesting attempts to disrupt the tools that work for publishers, advertisers and people across America.”

Between the lines; Because of all the money involved in digital advertising, the case is more compelling than some of Google’s antitrust cases, and that makes it “a more direct antitrust case, more central to market competition,” Charles F. “Rick” Rule, a former DOJ official and chairman of the antitrust law firm Rule Garza Hawley, told Axios.

• “This case is a little different than a lot of monopolization cases historically because the DOJ is coming in with an idea of ​​what kind of resolution it wants,” Ruhl said.
• “They are designing a roadmap that I’m sure will be part of the debate,” he added. “I think they’re going to push very hard for some kind of structural solution and they’re not going to settle for anything less than what they think is satisfactory.”

Be smart. The new DOJ suit is similar to a 2020 lawsuit by state attorneys led by Texas Attorney General Ken Paxton. This gives Google the defensive start it’s been building for two years.

The big picture: The lawsuit comes as Google struggles to stay afloat in a sluggish ad market.

• Advertising accounts for the largest share of Alphabet’s $256 billion in annual revenue (for 2021), or 81 percent.
• Alphabet posted a 27% year-over-year profit drop in the third quarter of last year, due to a dramatic slowdown in ad sales and will report fourth-quarter earnings next week.

What to watchThe lawsuit will push Google to shift its focus beyond advertising to other fast-growing parts of its business, such as AI and Google Cloud.