Search Distribution

How the Google Antitrust Trial Could Finally Open the Door to Search Innovation

Dustin McManus
June 5, 2024

When there’s no room to innovate, it seems the only option is to litigate. With closing arguments in the Department of Justice’s antitrust case against Google wrapped up, all eyes are on Judge Amit Mehta who is expected to deliver his verdict in the coming months. His decision will cap a landmark trial that could fundamentally disrupt the status quo of the search advertising world.

Search advertising has been in a state of stagnation for years thanks to Google’s veritable monopoly in this space. With its predominant search engine inextricably tied to its search ads business, competition in this market has been all but snuffed out. In turn, no real or impactful search innovation has occurred in over a decade. 

The result of this has been diminishing returns for advertisers and a poor consumer search experience with less relevance. The implications will be huge, no matter which way the case ultimately plays out. Judge Mehta previously indicated he has no idea which way he’ll rule when the evidentiary phase of the case concluded in November of last year.

During closing arguments on May 3, Mehta expressed skepticism over Google’s claims that vertical-specific search from brands like Amazon counted as direct competition. However, he also pushed back on the DOJ’s claims that competing with Google is too costly for other companies. Questions around a trade-off between search quality and privacy also arose, highlighting the many considerations that will undoubtedly factor into Mehta’s decision.

At adMarketplace, we have a solid hypothesis for how the case could ultimately be resolved, and the ramifications this result would have for the search advertising industry. But first, let’s contextualize where we are today before gazing into our crystal ball to predict what’s likely to happen in the near future.

DOJ v. Google: Antitrust Battle Royale

The crux of the DOJ’s antitrust trial against Google is whether or not the search giant broke antitrust laws to leverage and maintain a monopoly in search results to stifle search innovation while extracting a “tax” from third-party competitors like Apple’s Safari in the browser market.

This dominance funnels over 90% of user searches to Google’s Search Engine Results Page (SERP), preventing competing browsers from innovating or discovering the true market value of their search asset by competing against Google to directly sell to advertisers. In turn, advertisers are left with a frustrating lack of transparency into the third-party search ecosystem.

As evidence was delivered throughout the trial, many observers and scholars agree that it is increasingly likely Google will be found liable for antitrust violations under Section 2 of the Sherman Act. This prohibits acquiring (or attempting to acquire) or maintaining monopoly power only through improper means.

Where the perceived impropriety comes into play for Google is the company’s own self-admittance to paying upwards of $26 billion in 2021 alone to maintain its position as the default search engine across various devices and platforms. During closing arguments, it was revealed Apple received a staggering $20 billion from Google in 2023.

“What happens to your search input from the moment you input it is right now exclusively locked up 91% of time by Google,” Adam Epstein, Co-CEO and President of adMarketplace, told Digiday back in October. “And they’ve prohibited Apple or anybody else who might have some AI features they’d want to bring into the search or the browser bar,” he added, highlighting the dampening effects of Google’s practices on search innovation.

Many posit that it’s a slam dunk case for the DOJ to establish and prove that Google has violated antitrust laws to maintain a monopoly in search. What’s less clear is what set of remedies the court may impose to resolve this.

3 Potential Remedies of the DOJ/Google Antitrust Trial

  1. A Wholesale Google Breakup

Some observers pointed to the prospect of a wholesale break up of Google during trial proceedings back in November. In legal terms, this would be known as a “structural remedy.” However, Eric. A. Posner, a former DOJ lawyer and antitrust expert who spoke at adMarketplace’s annual IMPACT conference last year, doesn’t believe this is a likely remedy.

“I think it’s quite unlikely that Google will be broken up. Breakups are more likely to the extent that the businesses can be separated from each other without destroying their value. That’s something the court will look at, but only if that’s responsive to a particular argument,” Posner said.

So, what does the separation of those “businesses” look like as a potential remedy…

  1. Unbundling Google’s Distribution of Search Results from Its Search Ads

Breaking the tie between Google’s search results business and its search advertising business is the most likely remedy, according to Epstein. It would force Google to compete with others for ad space, creating fair price discovery and compelling the company to innovate. 

Given a remark from Google’s search boss Prabhakar Raghavan at a recent all-hands where he urged employees to move faster given search’s “new operating reality,” it appears Google could already be gearing up for this possibility. 

On top of that, this remedy would open the door for other companies and startups to disrupt the search advertising industry with new technologies and innovation, creating greater competition in the field.

As Epstein told Adweek, “Apple has never been able to sell a single click from their search result page. This could potentially give Apple the ability to sell ad space to marketers and establish pricing based on market dynamics.”

  1. Ending Google’s Exclusivity Restrictions Over Third-Parties

In line with the above potential remedy, the court could also order Google to end exclusivity restrictions over third-parties who distribute Google’s search results and search ads, or who provide inputs to Google’s search results.

Enabling search engine interoperability could allow browsers to choose which search engines they funnel results through on a query-by-query basis.

“When you move the auction from being run by Google to being run by the browser, that’s a sea change shift from how things are now,” Epstein told Digiday following the trial’s closing arguments. “It really moves the locus of control from Google to the browsers themselves and opens up a tremendous amount of competition and tremendous amount of experimentation — and that’s been missing.”

This remedy would also unleash a new wave of market competition and empower browsers to bring consumer search into the age of AI, and to discover the true value of their search queries directly from advertisers who would be able to purchase search ads transparently and measure their true value accurately.

“If you did break the exclusivity, if you did allow for innovation in search in the browser bar for Apple [or others], we would look back on this and say, ‘That was the moment when a new era of AI was brought into search,’” Epstein said. “And maybe it’s 5 to 10 years later than it would’ve been had these exclusive deals not existed.”

As the search advertising landscape stands on the cusp of irrevocable change, the possibility of Google’s unchecked dominance in this space ending is greater than ever before. While change of this magnitude will most likely be disruptive, the opportunity and potential for real search innovation and increased market competition is resoundingly advantageous for advertisers, publishers, and consumers alike.