By Keach Hagey and Rob Copeland
The Justice Department has reached out to more than a dozen
companies in its antitrust probe of Google, including publishers,
advertising technology firms and advertising agencies, as the
company's online ad tools become a major focus of the
investigation, according to people familiar with the matter.
In recent months, the department has been posing increasingly
detailed questions -- to Google's rivals and executives inside the
company itself -- about how Google's third-party advertising
business interacts with publishers and advertisers, the people say.
That digital business was built largely on the company's 2008
acquisition of the ad-technology firm DoubleClick.
Many of the questions center around two moves that Google has
made in recent years that publishers and rivals say have helped
consolidate its power. The first was Google's integration of its ad
server, the leading tool for websites to put ad space up for sale,
with its ad exchange, the industry's largest digital ad
marketplace. The second move was Google's decision to require
advertisers to use its own tools to buy ad space on YouTube.
"They are zooming in on the right topics, and that's a good
thing," said Michael Nevins, chief marketing officer of Smart
AdServer, which makes a rival ad technology to Google's.
Google's ad-tech business consists of software used to buy and
sell ads on sites across the web. The company owns the dominant
tool at every link in the complex chain between online publishers
and advertisers, giving it unique power over the monetization of
digital content. Many publishers and advertising rivals have
charged that it has tied these tools together -- and to its
owned-and-operated properties like search and YouTube -- in
anticompetitive ways.
Google, a unit of Alphabet Inc., has argued that the ad-tech
industry is competitive and that moves it made to merge products
were aimed at creating a better experience for customers.
The probe's increasing emphasis on ad tech is one reason the
department's antitrust chief, Makan Delrahim, recused himself last
week, people familiar with the investigation said. In 2007, Mr.
Delrahim advised Google in its efforts to get approval from the
Federal Trade Commission to buy DoubleClick.
In addition to probing digital advertising, Justice Department
officials are examining other aspects of Google's business. Some of
the companies that have been interviewed are rivals hurt by the
dominance of its search and mobile businesses, such as Yelp, Duck
Duck Go and Oracle Corp., according to some of the people familiar
with the matter.
Wall Street Journal publisher News Corp, a longtime Google
critic, was among the publishers contacted by antitrust
investigators, along with New York Times Co., Gannett Co., Nexstar
Media Group Inc. and Condé Nast Inc., some of the people said.
Bloomberg earlier reported on contacts with some of the
publishers.
Meanwhile, state attorneys general who are pursuing their own
Google investigation met Tuesday with Justice Department officials,
a potential step toward closer coordination of the two probes. The
state officials sent out a subpoena to Google in the fall that was
dominated by questions about the inner workings of its ad-tech
products.
Much of the Justice Department's questioning has focused on the
"sell side" of Google's technology -- that is, products like
DoubleClick for Publishers, which connects online publishers to
Google's advertising exchange. Virtually all major news publishers
use that Google software. DoubleClick for Publishers and the
exchange, commonly known as AdX, were rebranded as a single product
called Google Ad Manager in 2018.
In the past two months, the department's outreach to advertising
agencies indicates it is also interested in the "buy side," the
people familiar with the matter say. The investigation puts the
agencies in a delicate spot, as many of them use Google's tools and
rely on Google as a major advertising client.
The growing regulatory scrutiny has prompted some Google
executives to discuss informally whether the company should
consider divesting its third-party ad-tech business, according to
people familiar with the situation. People close to Google say the
company is still responding to informational requests from the
Justice Department and hasn't begun to discuss any potential
changes to its business with the department.
Those who want to explore divesting the business note that it
has steadily declined in importance to Google overall since the
DoubleClick purchase, while units like search and YouTube have
soared. In part, this is because the legacy DoubleClick business is
focused on display advertising on desktop websites, and desktop web
traffic has stopped growing as web users have shifted their time
and attention toward mobile devices, the people familiar with the
situation said.
"We have no plans to sell or exit this business," Google
spokeswoman Julie Tarallo McAlister said. "We're deeply committed
to providing value to a wide array of publisher and advertiser
partners in a highly competitive sector."
Google's parent, Alphabet, doesn't break out financial results
for its third-party ad-tech business specifically. The unit is part
of Google's business of servicing its network of website partners,
which accounted for $21.5 billion in 2019, about 13% of the
company's overall revenue. That is down from 31% in 2008, the year
the DoubleClick deal closed. Google says it passes about 70% of
this revenue on to its network partners. Google's third-party ad
business represents a fraction of the revenue of its reported
Google Network Members unit, and has weighed on the profits of that
segment, according to people familiar with the business.
One difficulty in separating the business is that third-party ad
products are closely integrated with other Google technology, said
another person familiar with the situation.
The Justice Department and state probes have increased the
workload for employees in Google's ad-platform divisions, who have
had to produce a lot of documentation to explain their decisions
and business operations to investigators, according to people
familiar with the matter.
Attorney General William Barr said in an interview at The Wall
Street Journal's CEO Council in December that he wanted the Justice
Department to "fish or cut bait" on its probe into Google and other
Big Tech companies by the end of this year.
--Lukas I. Alpert, Brent Kendall and Suzanne Vranica contributed
to this article.
Write to Keach Hagey at keach.hagey@wsj.com and Rob Copeland at
rob.copeland@wsj.com
(END) Dow Jones Newswires
February 05, 2020 07:14 ET (12:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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