Searching for New Tools to Break Up Google

A woman walks past the logo for Google at the China International Import Expo in Shanghai. [Ng Han Guan/AP Photo]

If you’ve been wondering why all your favorite journalists are now panhandling by the side of the road, a new class-action lawsuit might provide some answers.

Roughly a year ago, a handful of newspaper publishers filed suit against Google for seizing near-total control of the industry’s lifeblood — advertising revenue. Now, almost a year later, the number of plaintiffs in the antitrust lawsuit has grown to nearly 200.

The complaint, which is available online, is a fascinating look into how the tech giant managed to become media’s very own vampire squid.

Google’s bad news

In short, Google has taken near-total control of targeted digital advertising, extracting payments from both buyers and sellers while also setting the terms under which the entire marketplace operates. A former employee described the situation as “if Goldman or Citibank owned the New York Stock Exchange.”

The 173-page complaint is a detailed breakdown of how digital advertising works (TL;DR, it is “at least as complex as the most sophisticated financial markets”). It explains how:

Google squashed and colluded with competitors to eliminate ad market competition
The company allegedly deceives users by claiming to care about privacy while leveraging “intimate user data and personal information to broker billions of daily online ad impressions.”
Google struck a secret deal with Facebook — codenamed “Jedi Blue” — to ensure that both companies would maintain a stranglehold on selling and managing online ads.

While Google is famously opaque, this isn’t the first time that publishers have raised red flags. In 2016, the Guardian instructed its sales team to buy advertisements on its own publication to see what they got versus what they paid for. They found that publishers only received 30% of every dollar a company spent on programmatic advertising. The other “70% was taxed by Google, meaning that there’s something happening within the murky, unregulated advertising ecosystem,” noted Danielle Coffey, general counsel for the News Media Alliance trade association, which is involved in the suit.

If the case is decided in the plaintiffs’ favor, Google will be liable to pay for “past damages,” which will be determined on a case-by-case basis.

But we love newspapers!

Google, for its part, has maintained that it has done nothing wrong and that publishers in fact keep the vast majority of their ad revenue. In a statement to Axios about the ad tech suit, the advertising giant added: “We are one of the world's leading financial supporters of journalism and have provided billions of dollars to support quality journalism in the digital age."

And indeed, Google has given money to fund journalism – under duress.

In October 2020, after the Department of Justice filed a suit against Google for allegedly using anti-competitive tactics, the advertising giant announced that it would pay 200 news publishers (not the same ones involved in the ad tech suit) $1 billion over a three-year period for their news content.

But that money won’t change Big Tech’s role in killing off journalism. More than 2,200 local newspapers have closed in the past 16 years. During this period, the media advertising revenue that has long supported news fell from a peak of $49.8 billion to $8.83 billion (an 82 percent decline) while Google made $161 billion in revenue last year, mostly from advertising.

To be fair, the collapse of newspapers is not exclusively due to the digital advertising giants: Print subscriptions are falling as customers move online, and much of the industry is undergoing a wave of consolidation and privatization, as the Atlantic documented earlier this year in a terrific piece on Alden Global Capital, the “secretive hedge fund that is gutting newsrooms.” Still, these factors pale in comparison to declining advertising revenue.

Chamber of secrets

The ad tech case has come together quickly — the first complaint was filed by HD Media in West Virginia at the beginning of 2021, and it was consolidated with dozens of others into a class-action suit last fall.

When the case is tried in New York’s Southern District court, most likely in 2023, the jury will have to decide whether Google’s business practices qualify as anti-competitive and whether it has established a monopoly over the digital ad market. According to Coffey, the case represents the “first significant antitrust lawsuit in the U.S.” against the advertising giant.

But it’s not a slam dunk. Because so many of Google’s internal systems and operations are cloaked in secrecy, the case may come down to whether there’s enough evidence about how ad sales work to definitively prove wrongdoing.

“We knew there was smoke,” said Coffey, “and we found the fire.”