Google’s Data Monopoly at Risk: DOJ, Competition, and the Future of Digital Advertising

How antitrust action, AI innovation, and competition from tech giants like Apple, Microsoft, and Meta could reshape the future of Google’s advertising empire.

Hi everyone!

In the past few weeks, there have been significant developments in the digital advertising industry, particularly in light of recent earnings reports and antitrust news. Let’s dive into some of the key updates and their potential impact.

DOJ Pushes for Google to Sell Chrome to Break Search Monopoly

On November 18th, Bloomberg reported on a critical development in the antitrust case against Alphabet Inc. The U.S. Department of Justice (DOJ) is pushing for Alphabet to sell its Chrome browser in an attempt to break its monopoly on search.

Alphabet Inc.’s Chrome browser could go for as much as $20 billion if a judge agrees to a Justice Department proposal to sell the business, in what would be a historic crackdown on one of the world’s biggest tech companies.

The department will ask the judge, who ruled in August that Google illegally monopolized the search market, to require measures related to artificial intelligence and its Android smartphone operating system, according to people familiar with the plans.

Antitrust officials, along with states that have joined the case, also plan to recommend Wednesday that federal judge Amit Mehta impose data licensing requirements, said the people, who asked not to be named discussing a confidential matter.

If a judge agrees to this proposal, Chrome could be worth up to $20 billion, marking a historic action against one of the largest tech companies in the world. The DOJ, along with several states involved in the case, also plans to recommend additional measures concerning artificial intelligence and Alphabet’s Android operating system.

This move could significantly affect Alphabet’s business, particularly as the company faces increasing challenges in its advertising revenue model.

Google’s Advertising Business: A Data-Driven Model

Google's core business is based on collecting data from its users to deliver the best possible user experience and tailored recommendations. This has been its strength, particularly in advertising, where the company has used first-party data to maintain its competitive edge, even as privacy regulations have become stricter.

Google’s strategy to preserve its advertising dominance revolves around controlling as much of the user journey as possible. This is done through several key components:

1. Devices: Google owns a wide range of devices that serve as the entry points into the digital world. This includes acquisitions like Motorola (which gave them the Pixel line) and other products like Nest (smart home devices), Fitbit (health tracking), Chromecast (streaming), and more. These devices help Google collect data right from the moment a user engages with technology.

2. Operating System (Android): Android, with a 70% market share in smartphones, acts as a gateway to various digital platforms. In recent years, Android has also gained significant market share in the automotive industry, especially as electric vehicles have become more popular.

3. Tolls (Entry Points): The next stage involves "tolls" — access points that lead users to the actual platforms they engage with. Google controls two major "tolls" in this ecosystem: Chrome (for web browsing) and Google Play (for apps). These are essential for users to access content online and are central to Google’s data collection strategy.

4. Platforms: Finally, the platforms themselves (Google Search, Maps, YouTube, Drive, Workspace, etc.) are where users engage directly with content and services. By controlling both the entry points and the platforms, Google can collect a wealth of data that helps refine its advertising model.

The Impact of Removing Key "Doors" to Data

The DOJ's proposal to force Google to sell Chrome and possibly even Android would have a significant impact on its ability to collect comprehensive user data. When a user starts their day on a Google device, uses Android as their operating system, browses with Chrome, and then makes a purchase, Google is able to track the entire customer journey. This data is invaluable for delivering targeted ads.

However, if Google were to lose control of Chrome or Android, they would no longer have visibility into part of that journey. For example, without Chrome, they would lose access to a major channel through which they track user behavior. This would make their advertising business less effective because they wouldn't be able to connect the dots across the user's entire experience.

While Google’s user base across its 2 billion+ platforms may seem large, this data integration allows them to offer a superior user experience compared to their competitors. Removing these "doors" would gradually erode that advantage.

Chrome alone holds a 65% share of the web browser market across desktop and mobile. Losing this could mean Google loses access to a significant portion of user behavior data.