On Friday, Sen. and 2020 Democratic presidential candidate Elizabeth Warren unveiled a sweeping proposal to break up and regulate Google, Facebook and Amazon.
“Facebook has purchased potential competitors Instagram and WhatsApp,” she wrote in a Medium post. “Amazon has used its immense market power to force smaller competitors like Diapers.com to sell at a discounted rate. Google has snapped up the mapping company Waze and the ad company DoubleClick. Rather than blocking these transactions for their negative long-term effects on competition and innovation, government regulators have waved them through.”
The idea of a break up of Google’s acquisition of DoubleClick, as it’s still widely referred to despite being renamed Google Ad Manager, sent waves through the advertising and media worlds.
“If Google was forced to sell DoubleClick, the whole advertising ecosystem would reshuffle and reorganize around it — it would be an epic change similar to when AT&T was broken up,” said Ari Paparo, CEO of Beeswax and a former Google ad exec.
Google acquired DoubleClick 12 years ago for $3.1 billion, and the ad firm has been instrumental to the search giant’s rise. Google touches multiple parts of publishers and, increasingly advertisers’ business, and ad executives said that undoing that merger would leave them scrambling without an alternative.
“Google has architected an end-to-end stack that’s made it hard to say no to,” said Joanna O’Connell, VP and analyst at Forrester Research. “If you had to unwind that stack, in the short-term it would be completely messy and difficult. In the long-term, it does create opportunity for more competition and innovation.”
Google encircles publishers’ businesses
Most big publishers rely on Google Ad Manager to sell and serve ads. Ad Manager is baked into Google Analytics, which publishers use to track page views and create traffic reports; Google’s fast-loading article format Accelerated Mobile Pages (AMP); and platforms that publishers distribute content to, like Apple News.
“It could be the end of publishers,” said Jonathan Mendez, partner at Arkle Advisors. “There’s not the demand there for [DoubleClick] to go away and for publishers to replace it with another demand source.”
To be sure, Google’s massive data network benefits Google. But it also helps publishers, he said.
“Google has been building [technology] strategically to their advantage most certainly over the last decade, but if you start to carve off pieces of that and stop sharing data across those systems, it lessens the value,” Mendez said. “There’s so much data that they’ve been able to weave together that’s been to the benefit of publishers.”
Specifically, Google has rewritten the code of DoubleClick’s software into custom technology for Google products with the same tags. Some of those products like search ads belong to Google and would likely not be spun off because of regulatory concerns.
Within Google’s ad-buying platform, DoubleClick and Google are undifferentiated. Search advertisers can buy display and mobile ads and vice-versa. Google makes most of its money from search ads. Parent company Alphabet reported $137 billion in 2018 revenue.
If Google had to spin off DoubleClick, Beeswax’s Paparo predicted that a number of big companies like Facebook, Oracle or Salesforce would be interested in acquiring DoubleClick because it would become the largest source of digital ad inventory.
However, regulators would most likely want to avoid another such mega-merger and keep DoubleClick independent, he said.
In theory, an independent DoubleClick would need to build its own ad exchange backed by publishers.
A split would shake up advertisers, too
Splitting up DoubleClick and Google would be hard for advertisers, too, because DoubleClick tags are baked into all the products advertisers use.
Google places ads across the web for advertisers. Advertisers use its Display & Video 360 tool for ad buying, measurement, planning and creative that includes DoubleClick’s technology. It competes with ad-tech companies like The Trade Desk, Beeswax, and MediaMath.
Display & Video 360 is also the only way advertisers can buy YouTube ads programmatically, and a DoubleClick spin-off would require Google to find a new way to sell its video inventory.
Regardless of what happens with Warren’s proposal, regulators are likely to keep pressure on Google. In January, France’s data regulator fined Google $57 million for breaching Europe’s General Data Protection Regulation (GDPR) law.
“The pressure will continue to be there and will only be increasing over time,” Arkle Advisors’ Mendez said.