EU Antitrust Hits Google Where It Hurts - Its Ad Business
Source: CNET

US tech giant Google is facing the possibility of another penalty from the EU Antitrust regulatory body, adding to the 8 billion euros in fines it has already incurred.

This time, the EU Commission is targeting the backbone of its business: ads.

Ads Make Up 80% of Google’s Revenue

Google’s ad services are incredibly profitable and important to the company’s bottom line. They accounted for a whopping 80% of its total revenue for the entire year.

Its reliance on its ad business could become a massive weakness for the US tech giant as regulators start to target it.

According to a Bloomberg report, the European Union is looking to file a complaint against the company regarding its advertising technology.

This follows a series of investigations the third-largest continent’s agency began in 2021.

The formal complaint, which is expected to be filed latest Wednesday, will highlight the EU agency’s investigation into Google’s monopoly in ad services as well as its anti-competitive practices in denying rivals access to users’ data for online advertising.

Google ADS
Source: FourweekMBA

The EU complaint will also showcase how Google has made it difficult for rivals to access these data for online advertising purposes.

Google’s advertising technology is a component of its Google Services offering, contributing up to $225 billion in sales revenue.

However, regulators believe that its significant stranglehold in the online advertising market results from stringent gatekeeping practices.

With Google ad services, advertisers are given access to direct user data to make targeted ads. It also provides ad space and the technology for advertisers to sell their ad space to publishers in need.

Nonetheless, this latest fine could make it one of the largest in the EU’s five-year mandate, according to sources familiar with the case.

Meanwhile, this is not the first run-in the US tech giant has had with the EU antitrust watchdog.

Previously, it was fined 4.34 billion euros for illegal practices employed with its Android operating system (OS). The tech company has since contended this claim, and the fine was reduced to 4.125 billion last year.

The company also faced fines of 2.42 billion euros for its comparison shopping division and 1.49 billion euros for its Google Adsense service.

This portfolio of charges has grossly seen Google battling with 8 billion euros (or $8.6 billion) in fines in total.

While there is no clear idea of how much this new fine on its advertising technology might cost, the EU Commission could impose a 10% fine on its global sales, although this is often not true for most companies.

Most likely, the EU regulatory body could require Google to grant access to its rivals to even the playing field.

The EU’s latest action follows a similar investigation trajectory by the UK’s antitrust watchdog and the US government’s effort in its domestic market.

The Commission initially intended to include Google’s partnership agreement with Meta for its Open Bidding program in its probe but decided to discontinue on that front.

Google Launches AI for Ad-tech

Despite facing legal challenges, Google continues to push forward.

In the wake of OpenAI’s artificial intelligence launch in November 2022, numerous tech companies have been striving to maintain their leadership in this rapidly growing field.

Google AI
Source: Forbes

Like many other tech companies, Google launched many AI tools across its entire service ecosystem to outpace the competition.

Despite ongoing scrutiny regarding its advertising technology, the company recently introduced an in-house AI specific to this service segment.

Dubbed Google AI, its objective is to multiply the impact of ads across its search engine ecosystem as it rolls out more updates on the Google Adsense platform.

Additionally, the company rolled out another AI tool called Vertex AI for business owners.

This tool encompasses various machine learning (ML) models, including text, image recognition, and several other functionalities, all in one spot.

As the AI wave takes over, this could become a requirement for several businesses looking to remain competitive in the market.

For context, the Vertex AI tool has the potential to radically reduce the number of developers needed to manage the software aspect of a business due to its immense functionality outlay.

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