Google plans to split its ad-tech business

Google divides the cake, but keeps all the pieces. Due to the various lawsuits it faces in Europe and the United States, Google has raised with the US Department of Justice the possibility of creating a new company to handle its ad-tech business.

According to The Wall Street Journal, the United States Department of Justice (DOJ) will file a new lawsuit against Google focused on its ad policy. Going forward, Google plans to split its ad-tech business under its Alphabet company. Google sources told the US media their intention to resolve all "concerns", clarifying that they have "no plans to sell or get out of this business."

The separate entity would likely include Google's DSP, SSP and its mobile ad platform, as well as Google Ad Manager and possibly Google Analytics, although some industry observers speculate that these entities could be further divided into separate companies.

This lawsuit will take place two years after this same body filed charges against Google for monopolistic practices in the markets for search services and search engine advertising. And months after the start of investigations by the European Commission and the UK Competition and Markets Authority (CMA).

Why is Google the "owner" of our searches?

In the last decade, digital advertising has become the most important channel in which advertisers spend their media budgets.

The first half of the 2010s was a time of fast adoption of these technologies, but little real understanding of how they worked. It was here that Google, capitalizing on its multibillion-dollar spending from the previous decade, became the most powerful group in media.

Parallel to this gold rush, government authorities scrutinized the use of users' personal data by the marketing industry, giving rise to laws such as the EU General Data Protection Regulation.

That Google divide advertising business is good or bad?

Without a doubt, it is a decision that generates great repercussions for the digital advertising industry.

On the one hand, there is some skepticism about the results of Google breaking up its ad-tech business, doubting that Alphabet will be truly independent if it remains part of Google.

Eliminating a single cross-ecosystem entity with a massive market share could spur more competition, said Jeffrey Hirsch, PubMatic's chief commercial officer. “Actions like this could make the buying and selling of digital ads more transparent and, ultimately, fairer” “Clearly, a company that owns and operates most of the components of a supply chain has the data and the means of influencing the results.”

There are clear winners and losers if Google split its advertising business from the rest of its operations.

For example, smaller publishers that rely heavily on Google or YouTube ad technology for revenue stand to lose heavily because they rely not only on Google's infrastructure and assets, but also on demand from Google's DSP. 

Another speculated consequence is if the spin-off ends up having a negative effect on CPMs and cost per click, it could result in a resurgence of private market deals and a shift towards buying traffic instead of buying audiences.

The biggest winners may be independent ad tech companies and their investors.

What does seem inevitable is that Google will have to separate its advertising business from the rest of its operations. And in this framework there is not much that advertisers can do. One measure they can take is to try to be aware of such relevant business changes. That is why it is always advisable to have the support of professional experts in digital marketing such as Rocket Lab.