Google could be forced to sell parts of its advertising business

Google's parent company Alphabet could be forced to sell part of its advertising business by the European Union, according to a Reuters report on the matter. Reuters claims that the information comes from a "source with direct knowledge of the matter".

The European Commission could issue a formal complaint against Google this week, according to Reuter's source. Google paid billions in fines in the past already, but this had not affected Google's dominant position in the online advertising industry.

Most of Alphabet's earnings come from advertising. In the first quarter of 2023 alone, earnings amounted to $54.55 billion and Alphabet's total earnings to $69.79 billion. Google is the dominating player in online advertising, with a market share of about 28%.

Meta, parent company of Facebook, comes in second. In 2022 in the United States, Google captured 28.8% of digital ad revenue and Meta 19.6& of the digital ad revenue. While the situation is changing, as new players, such as Amazon and TikTok, are increasing their share of the market, it is changing slowly only.

The European Commission is dissatisfied with Google, as the company failed to address the concerns of competitors, according to Reuter's source. Competitors argue that Google is using its dominance in the advertising market, as well as its web browser dominance, to gain control over key advertisement technologies in the coming years.

Google has been working on pushing a new advertising system, which it calls euphemistically Privacy Sandbox, into Chromium, the core of Google Chrome and most other browsers. Privacy Sandbox will replace third-party cookies support in Google Chrome in 2024. Third-party cookies are used widely today in advertising, to track sales but also track users.

The removal of third-party cookies support moves the tracking directly into the browser. Tracking, according to Google's plan, will happen directly in the browser, which Google more or less controls. While the new technology offers some improvements for users, like the moving from individual user tracking to group-based tracking, it is clear that users will still be tracked when they are on the Internet.

The European Union is not alone when it comes to addressing the dominance of Google and Meta in the online advertising market. In the United States, a bipartisan group of lawmakers aims to "tear down the wallet gardens" and break up the advertising arms of the two companies.

Depending on if and how this progresses, it could shake up the entire online advertising market. For users, it could lead to more user-friendly technologies being implemented in Chromium, as that part of Google might no longer have any interest in weighting advertising interests against user interests.

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Google could be forced to sell parts of its advertising business