Google has been under a lot of heat recently, especially after a federal judge ruled that the tech giant is a monopolist. Google might have to pay over $100 billion to settle all the lawsuits filed against it. Advertisers have also queued up in line seeking monetary penalties from the tech giant. Advertisers are seeking payback for years of inflated charges. According to Bernstein analysts, the total amount of penalties that Google might be looking at from its competitors and advertisers could easily exceed $100 billion.
A senior analyst at Bernstein named Mark Shmulik told Fortune that the antitrust suit along with billions in penalties sought in possible future lawsuits might make the tech giant take a slower stance in progress at a time when generative AI is revolutionising its search business. He said, “The reality of an internet company is progress never stops. And if you’re going to be hampered, where maybe you’re fighting with one hand tied behind your back, it becomes a very difficult prospect to move as quickly as you’d like, and maybe as you need to.”
Google Benefited From Its Monopolist Position In Text Ads Charges?
The ruling determined that Google leveraged its dominance in text advertising to set “supra-competitive prices,” or prices that exceed what would be typical in a competitive market, thereby securing “monopoly profits” on text ads, such as those displayed prominently at the top of search results.
Despite the seemingly outdated nature of text ads, they represent 65 per cent of the broader search ad market, according to the ruling. In 2020, text ads accounted for approximately 80% of Google's search ad revenue. That year, the "Google search and other" segment generated $104 billion in revenue, as reported in an SEC filing.
The court found that Google exploited its monopolistic position to increase the prices of its search text ads by 5 per cent to 15 per cent in order to meet revenue goals without losing market share to competitors. Additionally, the ruling noted that Google did not consider the pricing of similar text ads offered by rival companies when determining its own rates.
When contacted for a response, a Google spokesperson referred Fortune to a prior statement by Kent Walker, Google’s president of global affairs. In the statement, Walker defended the company and announced that Google intends to appeal the decision.
Google Used Its Dominance To Unfairly Box Out Competitors
Earlier last month, a review and reservation company named Yelp alleged that Gogole used its dominance in search to unfairly box out competitors in the market for “local search services and for local search advertising.” A Google spokesperson, while responding to these allegations, said, “Yelp’s claims are not new.”
The spokesperson added, “Similar claims were thrown out years ago by the FTC (Federal Trade Commission), and recently by the judge in the DOJ’s (Department of Justice’s) case. On the other aspects of the decision to which Yelp refers, we are appealing. Google will vigorously defend against Yelp’s meritless claims.”
According to Shmulik, Yelp’s lawsuit is one of the first to emerge after the ruling. He added that it is possible that other competitors in search might also sue the tech giant soon. The list of potential entities that might sue Google now include Microsoft, the creator of rival search engine Bing, which has spent over $100 billion on search over the past 20 years.
Microsoft CEO Satya Nadella during the trial said, “[Microsoft] can argue that, ‘Well part of the reason [Bing] never broke through was because of all these illegal behaviors Google engaged in, and so we want ROI on all of that investment.’”