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Google ad tech probe in Europe strikes at the core of company’s business model that makes up the bulk of its revenue

  • The European Union is investigating the opaque process of how Google automatically calculates and offers ad space and prices
  • The US internet giant has been under increasing antitrust scrutiny, but the latest probe targets how the company makes 81 per cent of its revenue

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A man takes a picture with his mobile phone of the Google logo as he visits the Vivatech start-ups and innovation fair in Paris on May 16, 2019. Photo: AFP
Bloomberg
Google faces a sweeping European Union probe into its advertising technology, a move that strikes at the heart of the tech giant’s business model.

The European Commission said Tuesday its new confrontation with the Alphabet Inc unit will focus on concerns the company may be illegally favouring its own online display advertising technologies, squeezing out rivals.

“This is probably the probe that many people were waiting for because it goes to the core of Google’s business,” said Aitor Ortiz, an analyst for Bloomberg Intelligence. The biggest risk would be an order for Google to separate from or restrict its online ads operations, which “could have a significant impact on the money generated through online advertising,” he added.

It’s the first time the EU has directly examined the black box of online advertising where Google automatically calculates and offers ad space and prices to advertisers and publishers as a user clicks on a web page. Earlier EU cases focused on shopping search ads, mobile phone ads and advertising contracts.

Alphabet shares fell 0.3 per cent at 12:25pm in New York. The company gets some 81 per cent of its revenue from online advertising, which amounted to US$147 billion last year.

Cookie phase-out

The investigation will also check if Google unfairly blocks competitors’ access to user data and will scrutinise privacy changes to phase out some cookies and data access for advertisers. Regulators want to examine YouTube’s strong position for online video too and how Google may use that to help its advertising tools.

“We are concerned that Google has made it harder for rival online advertising services to compete,” Margrethe Vestager, the EU’s antitrust commissioner, said in the statement. “Online advertising services are at the heart of how Google and publishers monetise their online services.”

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