Google's seemingly unstoppable rise to domination of the online travel ecosystem in the last decade or so has not only profoundly shaped the travel industry, but it also has been routinely used by many industry players to justify - rightly or not - a string of negative financial results.
Meanwhile, the search giant's control over the back-end infrastructure of the ad tech industry has been less of a headline across the industry’s chatter.
Anticompetitive authorities seem to think differently. More than 80% of online display advertising is traded real-time on electronic trading venues, also called programmatic advertising.
A number of sequential actions happen at lightning speed between the moment an advertiser places a new ad and that ad being displayed to the user. It turns out that Google controls a significant share of each of those steps as the chart below illustrates.
To make things scarier, Google itself is one of the largest global sellers of ad space thanks to properties like YouTube or Gmail.
Fresh evidences listed hereunder, allows us to reasonably foresee that the U.S. Department of Justice (DOJ) will anytime soon file an antitrust lawsuit against Google that will most likely target the ad technology used to buy, sell and serve online and mobile display advertising:
- December 2019 - The United Kingdom’s Competition and Markets Authority (CMA) released an interim report concluding that Google has a dominant position in the global ad technology infrastructure. The final CMA report is scheduled to be published on July. 2.
- March 2020 - The Australian Competition and Consumer Commission (ACCC) launched an AdTech Inquiry to obtain views from market participants and interested parties on the key issues affecting the markets for ad tech services and digital agency service.
- May 2020 - Two former senior antitrust officers of the Obama administration published a paper titled “Roadmap for a Digital Advertising Monopolization Case Against Google” identifying 20 potential antitrust law violations.
- June 1, 2020 - Yale professor Dina Srinivasan published a report titled “Why Google Dominates Advertising Markets,” arguing that the advertising market operates similar to the financial stock exchange but lacks any sort of regulation in matters such as transparency and conflict of interest.
- June 3, 2020 - A new report titled “Competition in Ad Tech: A Response to Google” reacted to a Google paper submitted in the context of the ACCC AdTech inquiry, exposing “misleading arguments, factual inaccuracies and multiple omissions” in the argumentative thesis.
- June 5, 2020 - U.S. news outlet Politico published an article announcing that DOJ prosecutors are planning to file a case against Google’s ad technology monopoly, according to DOJ’s insider sources.
- June 16, 2020 - In an article about ongoing antitrust investigations into Big Tech, the Washington Post states: “DOJ leaders are expected to file an antitrust case against Google this summer, with a similar lawsuit to follow from state attorneys general who are also probing the search-and-advertising giant.”
What’s at stake for Google and the travel industry?
According to eMarketer, U.S. digital ad spending surpassed print and television in 2019 and is likely to account for two-thirds of all ad dollars by 2023.
Google and Facebook command more than half of that envelope, with Amazon ranking a distant third.
The market research firm also estimated that U.S. travel companies would spend about $13 billion on digital media in 2020, although the final envelope will be significantly lower after the COVID-19 industry collapse.
However, early signals of digital spending increases amidst the gradual travel recovery lead us to think that digital spending will bounce back quickly across online travel agencies and digital-savvy travel suppliers, desperate to get the sales machine running again.
What are the potential outcomes of a DOJ lawsuit for Google?
The CMA report last year outlined a number of possible governmental interventions, which can be summarized as follows:
Separation of Google's operation between buy-side and sell-side with three possible scenarios, from least to most intrusive:
- Operational separation or ring fencing, by ensuring a set of operational and governing practices rules are implemented, including arms-length commercial agreements
- Structural separation implying different legal entities and operational teams for each activity under a same corporate roof
- Ownership separation, which would translate into a partial spinoff of Google’s ad tech business unit
Establish a code of conduct in the ad tech market providing transparency for advertisers and publishers in critical subjects such as:
- Google’s transaction fee for connecting buyer with seller inventory
- Working mechanisms and bidding rules for the auction process to assess fairness and consistency
- Auditing capability by an independent regulatory body for ad verification and measurement
- Opening YouTube’s advertising inventory to third-party DSPs.
- Opening Google Analytics service to third-party intermediaries.
- Give third-party intermediaries access to Google data from its user-ending platforms.
- Define and implement a common transaction ID for all ad tech players allowing interoperability between platforms.
Which is the potential impact for the travel industry?
Today, travel advertisers are largely blind on how their data flows through the different layers within the ad technology stack owned by Google and similar platforms.
An effective implementation by U.S. antitrust watchdogs of some of the above listed measures might unlock a range of new opportunities for digital travel marketers:
- Understand how prices are determined in the buyer-seller auction process, allowing the development of more efficient investment strategies.
- Identify and curb fraudulent ad activity (according to a PwC study, 15 cents out of every ad dollar spent cannot be tracked and accounted for).
- Reduce transactional tech fees by unleashing competition among different intermediary ad platforms.
- Access user data collected by Google, opening a level playing field between tech giants and the rest of the travel industry.
- Improve programmatic advertising efficiency by managing unique campaigns across advertisement platforms thanks to interoperability between Google, Facebook and any other ad tech platform.
It remains to be seen if the recent chain of smoking-gun evidence will finally translate into legal action, and if so, how hard and fast U.S. competition authorities will be willing to strike against the search giant.
Expanding the possible antitrust investigation from display to search advertising will also play a crucial role for the travel sector.
Including the latter could potentially reshuffle the industry cards in the most important acquisition channels for travel: Google Ads and Google Hotel Ads.
Travel executives should not bet the farm on enjoying a sudden drop in the marketing cost within their P&Ls anytime soon, but a legal action against Google might certainly be a ray of hope to slightly tame Google’s march towards ultimate travel domination.