Market News

DOJ to Sue Google (NASDAQ:GOOGL) Over Ad Market Dominance

Story Highlights

The U.S. Department of Justice is set to file a lawsuit against Google regarding the search giant’s dominance over the digital ad market.

The U.S. Department of Justice (DOJ) is suing Alphabet’s (NASDAQ:GOOGL) (GOOG) Google over dominance in the digital advertising market, Bloomberg reported. The lawsuit could be filed in federal court as soon as Tuesday, marking the second one filed by the DOJ against the tech giant.

The first antitrust case was filed by the DOJ against Google in 2020 regarding the company’s monopoly in the search market. This case is scheduled to go to trial in September.

DOJ’s second lawsuit focuses on Google’s ad business, which accounts for 80% of its overall revenue. According to research firm EMarketer, Google is the market leader in the $627 billion global digital ad market. Alphabet’s ad operations are projected to generate $73.8 billion in ad revenue in 2023 from the U.S. market. Note that the U.S. accounts for the biggest piece of the global ad market.

Advertisers and website publishers have often complained that Google does not reveal how much ad dollars go to publishers and what cut the company takes. The tech giant has made several acquisitions, including DoubleClick and AdMob, to bolster its dominant position in the online ad world. Google is also the subject of lawsuits filed by State attorneys general alleging violation of antitrust law in online search, ad market, and apps on the Android mobile platform.

In its defense, Google has argued that the digital ad market is competitive and has pointed out rivals like Amazon (AMZN), Meta Platforms (META), and Microsoft (MSFT). It’s worth noting that while Google continues to lead the U.S. digital ad market, its share of the market revenue came down to 28.8% in 2022 from 36.7% in 2016, per Insider Intelligence estimates.   

Is GOOGL a Good Buy?

Despite the impact of the ongoing macro pressures on the ad market, Wall Street remains bullish on Alphabet stock based on 31 unanimous Buys. At $126.33, the average price target implies 26.6% upside. GOOGL stock has advanced 13% so far this year.  

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