Publishers Are Likely to Pay More for Ad Costs If Google Spins Off Its Adtech

The Department of Justice’s antitrust trial against Google’s ad tech business is set to begin this week. Owing to Google's size, a win for the DOJ is sure to spur huge changes in the programmatic industry, particularly in the short term. If Google is forced to sell its publisher adtech business, it could eventually increase competition in the market. However, given the tangled nature of adtech, disrupting the balance between Google’s sell-side tech and publishers’ business models could lead to some wild uncertainties, complications, and chaos in the short-term, according to publishers—particularly around changing the level of demand and incurring publisher costs. "Even in short-term pain, there's still winners and losers," said Scott Messer, founder of consultancy Messer Media. "The winners are going to be those who have premium offerings and can command the attention of buyers, and the losers are going to be the long tail of the web with relatively undifferentiated supply and lower-quality inventory." The DOJ alleges that Google’s dominance in products across both publisher and advertiser products has harmed publishers and publisher-focused adtech firms, accusing the company of anti-competitive practices to fuel its adtech growth over the past decade. This trial follows Google’s recent loss in a major antitrust case targeting its search business where the U.S. is considering a breakup of Google to address search monopoly, the New York Times reported. More competitive, and premium, ad server tech Google has been able to offer its popular ad server tech within is supply-side platform Google Ad Manager—which also houses its ad exchange AdX—at a relatively low cost because of the money it makes from publishers via AdX, a higher-margin business. GAM's pricing structure roughly includes a flat fee of $1,500, with a CPM fee starting at $0.043 for up to 50 million impressions. Lower CPMs are typically offered as impression volume increases, per industry estimates. If split up and sold, a new owner could take on GAM, the server, and exchange. But it likely won't be as cost-effective for publishers, said Messer. “There's a tremendous amount of data storage underwritten by Google, or is only achievable because of the scale of their sales and internal network storage business,” said Messer. “Nobody else has that, unless it’s Amazon. Whoever’s going to pay for all this data storage, it's going to be expensive.” Other ad servers, which for years haven't been able to entice more publishers to them, could emerge to help publishers manage their ad businesses. That could be through features like better yield management across direct and programmatic, more cross-platform capabilities like audio, display, email, video, and social, and improved reporting, according to a senior publishing exec who spoke on background to discuss industry relations freely. SSPs could also compete in the ad server space to get even closer to publisher inventory. These improved ad servers would ultimately come at a higher cost but would be a better solution. Publishers struggling with thin margins, however, might be stretched to meet higher ad server fees. Speaking with roughly five top publishers on a call last month, a second senior publishing executive—who spoke on the condition of anonymity to maintain industry relations—noted the publishers all thought that breaking off GAM would lead to increased costs to publishers. Open web demand in short-term flux A non-Google GAM, which isn't relying on the network effect of Google, will likely lead to more competition at the SSP level, two publishers note. Demand from Google's demand-side platform DV360 would likely get routed through other SSPs, elevating their viability. Because of that, AdX would likely have to compete more on pricing to publishers, resulting in a more competitive revenue share for publishers, the first publisher source said. Google currently charges a 20% rev share for transactions made via AdX. “If Google’s SSP is no longer dominant, it could lead to more competitive take rates and revenue shares,” Messer said. “Publishers then have a reason to build stronger relationships with partners and rewrite the supply chain.” However, another consideration is that if Google no longer gets its AdX rev share fee of 20%, it could be less financially incentivized to send demand to the open web, and more likely to funnel it to its own Google Ads environments, said the second publisher source. That could reduce the demand flowing to the open web. “This would make things even worse for open web publishers as a huge source of demand just disappears,” the second publisher exec said.

Programmatic

Publishers Are Likely to Pay More for Ad Costs If Google Spins Off Its Adtech

There’ll be some short-term disruptions to open-web demand, but, publishers hope, a more competitive market long-term

Subscribe to keep reading

$20

MONTHLY DIGITAL

$17

ANNUAL DIGITAL

$21

ANNUAL DIGITAL & PRINT

Trishla Ostwal

Lucinda Southern

About

Subscriptions

Events

Publications