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What would a Google advertising breakup mean for brands?

Amperity's Matt Hallett walks through the implications for competition and data privacy.

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A potential breakup of Google’s ad business is the topic of much debate in D.C. policy circles these days, but it’s also being watched closely by commerce and advertising companies.

The U.S. Department of Justice filed a lawsuit against the tech giant on Jan. 24. It aims to force Google to divest part of its $54.5 billion advertising business.

This brings to the courts longstanding criticism that Google advertising through search and YouTube gains an unfair advantage from its role as a buyer, seller and operator of an advertising exchange.

Through open bidding, compensation schemes for websites and acquisitions, Google set out to create an environment where it “would no longer have to compete on the merits; it could simply set the rules of the game to exclude rivals,” the lawsuit alleges.

While Google called the lawsuit unfounded, the potential for a breakup – whether horizontally or into vertical subcomponents – has many watching what will happen next.

Given Google’s place as one of the top two online advertising platforms, the move would have huge implications for the ad industry, and the brands that generate huge portions of revenue through digital marketing.

Matt Hallett, head of product solutions for customer data platform Amperity, recently outlined several of the changes such a move could bring.

Competition

A breakup of Google would increase competition among other platforms in the industry. That will not only extend to Meta’s juggernaut with Facebook and Instagram, but also Yahoo, Bing, The Trade Desk, Amazon and others.

“These companies would likely be able to increase their market share and profitability, and advertisers might see a reduction in costs for ads,” Hallett said.

For advertisers, the result will be lower costs and more returns, even if the market becomes more fragmented.

“With multiple companies vying for ad dollars, there would likely be more opportunities for advertisers to reach their target audiences through various channels,” Hallett said. “More competition could increase efficiency in ad spending and a better return on investment.”

The privacy factor

Shifts toward privacy that are well underway in the advertising industry may also be impacted by a breakup. While Apple and Meta have gotten the majority of the attention over the last year following the App Tracking Transparency feature of iOS 14.5, Google has power in this area, as well.

Google is one of the top collectors of consumer data. Chrome is also the last major browser provider to phase out third party cookies. A sunset date has been moved multiple times, and a breakup of Google’s advertising will only add more complexity, Hallett said.

“Google has telegraphed motion in the market to be more adherent and conscious towards consumer privacy. But navigating this need while maintaining the needs of their advertising clients is a tightrope,” Hallett said. “Google has continually kicked the can down the road on any firm progress in this space. Breaking up Google could additionally impact its movement in this area and delay progress in user privacy.”

A breakup is less likely to slow down one of the major shifts taking place in advertising: The growing use of first-party data. With these privacy-oriented moves, advertisers have gravitated toward first party data that is collected directly from consumers at purchase, and preserves privacy by keeping data within individual platforms.

“Cookies have been traditionally used in advertising to track user behavior and preferences over time and target ads based on that behavior,” Hallett said. “First-party data is an owned asset that brands have built on consent-based relationships with their customers. It is incredibly valuable and when used correctly, much more insightful and impactful than the black box of third-party data.”

In particular, this data is powering retail media networks that are proliferating as retailers recognize additional monetization opportunities, and brands see the power of targeting people at the point where they are shopping.

As a result, investment in first party data solutions is only increasing, even as Google keeps the third-party shift on hold.

“Experiences built on first-party data build trust with customers who are no longer subjected to confusing interactions,” Hallett said.

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