EU's Google crackdown will only make search ads more expensive

In the past couple of years, the European Commission has really started to turn the heat up on Google for abusing its dominant position in online search.

Last week, it announced a fresh €1.5 billion fine relating to violations by the tech giant's AdSense product, taking the total fines against Google to just over £7 billion in the past two years.

The latest misconduct related to contracts for businesses that wanted to use Google’s search function: the terms prohibited them from placing ads from Google’s competitors on the website. This, in effect, allowed Google to muscle out its competitors and dominate the space.

But what does all of this mean for advertisers that are using AdSense through the Google Display Network?

For brands, it’s likely to result in increased cost per mille. If there is reduced inventory for Google, the cost of that inventory will have to increase to generate the same revenue and profit, and that is likely to result in increased costs for advertisers. Unless, however, Google looks to subsidise revenue from other business areas, such as its cloud platform or YouTube paid subscriptions.

This may, to some extent, be cushioned and built into the current price already; Google had ceased the illegal practice a few months after the European Union had issued a statement of objections in July 2016.

In terms of how Google will respond to the decision, it’s unlikely that it will have to allow competitors to use its inventory in a similar way to the 2017 decision on Google Shopping that ordered the company to allow ads from other comparison shopping services into the Google Shopping listings.

However, Google must be careful. It is also liable to face civil actions for damages that can be brought before the courts of inidivudal EU member states by any person or business affected by its anti-competitive behaviour.

Other search partners, such as Microsoft, will now have more opportunity to move in and place their search ads on business websites that use Google’s search feature. But it’s not yet clear how much success they will have, since Google AdSense will be well-entrenched within most sites that use it.

Worse still for Google's rivals, AdSense may well account for a significant proportion of some publishers' revenue, making them uneasy to up sticks and move to running ads through another search partner.

Looking towards the future, with a 70% share of online search in the European Economic Area and more than 90% market share in most countries, Google must ensure that business decisions can’t be considered to constitute an abuse of dominant market position.

Other products are now coming under the spotlight, in particular travel, hotel and restaurant searchers. According to a report by Reuters, the EC had sent out questionnaires to competitors that appear in local search to see if Google’s changes had adversely affected their business.

Even though the EU’s fine on Google is certainly justified for the abuse of its dominant position, it’s more than likely that advertisers will and may have already picked up the bill in terms of increased advertising costs due to reduced inventory.

With such a large market share in the EU and worldwide, even simple business decisions aimed at increasing revenue can constitute an abuse of its dominant position by the tech giant. Considering the EU's new-found interest in local hotel, restaurant and travel searchers, it looks like fresh fines might be on the horizon.

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Wesley Parker is managing director of paid search at Clicteq