The European Union has long been at odds with digital advertising business, AdSense.
Launched in 2003, Google’s AdSense service allows website publishers to serve and target advertisements based on site content and audience. The ads are sorted, administered and maintained by Google, and generate revenue on either a per-impression or per-click basis. AdSense is Google’s most popular advertising service, and a multitude of websites use the service to monetize their content.
The European Commission claims that AdSense contract conditions imposed on third-party websites break antitrust laws. The conditions in question include:
- Denying third-party websites the right to place ads from Google competitors.
Premium placement of a minimum number of Google search ads:
- Forcing third-party websites to display a minimum number of Google search ads and reserving the most prominent space on search result pages for Google ads. Competing search ads cannot be placed above or next to Google ads.
Right to authorize competing ads:
- Third-party websites must gain Google’s approval before any changes can be made to the display of competing search ads.
The Commission believes that the above conditions hinder vital competition. The conditions also suppress innovation and choice at the expense of the customer. The European Commission is accusing Google of monopolizing the digital advertising market, which obviously has a negative effect on all involved bar Google.
As mentioned above, this is not the first antitrust complaint the European Union has made against how Google conducts its various businesses, but the EU is yet to levy any fines or request any changes in business practices. Should the EU choose to enforce its complaints, Google could face a fine of up to 10% of its annual revenue, with a penalty limit of USD 7 billion.
However, forcing Google to change its business model would be even more damaging than a hefty fine. The company generated 90% (USD 19 billion) of its total company revenue through its ad business in Q4 2015. Google dominates the digital ad revenue market, claiming around 64% of all digital ad revenue in 2015.
It remains to be seen what action the EU will take against Google, and how the search engine giant will respond. It’s imaginable that the two parties would want to work together towards some long-term goals to avoid these kind of problems in the future, but the ever growing list of antitrust complaints against Google suggest it will be some time before these issues are resolved.
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