Google's monopoly on digital advertising comes under scrutiny
DOJ’s Google lawsuit: What it means for small businesses and startups
January 25, 2023
Peter Yeargin

Yesterday was a jarring news day for Google as the US Department of Justice announced an anti-trust lawsuit claiming allegations that Google has created a monopoly in the ad tech industry.

It’s the continuation of a strategy by DoJ to protect consumers and businesses from higher prices by attempting to break up some of the Google monopolies that control digital advertising spending and revenue on the Internet. 

Personally, I think this is a fantastic step to help small businesses and startups who have limited marketing budgets and need every opportunity they can get to optimize advertising costs for acquiring new customers to their businesses.

I think it’s important to dive into the details of what the issue is, how it impacts the business world, and what are the benefits of alternative options like search engine optimization (SEO).

What is the primary problem DoJ is trying to rectify?

If I were to simplify the argument greatly, the primary issue is that Google controls the large majority of the internet search market at ~89%. They use this huge market share to generate advertising revenue by running digital ads in just about every website location imaginable.

Here are just a few of those:

  • At the top of search results
  • In the sidebars of its ad tech company partners (these are called display ads)
  • On small business websites that receive a very small percentage of sales from ad clicks

Google controls search and, by proxy, the primary location where internet users can be found. Google, through its acquisition of DoubleClick in 2008, also controls the marketplace technology that is used to sell ads to advertisers and publishers of content.

As a small business owner, a startup, or any other business, you’re left with only a few viable options if you want to run paid digital advertising. Google is the option for search ads, and Facebook and its affiliates are the equivalent for social ads.

How does this impact both small business owners and startups?

The short answer to this question is higher prices. The less choice that small business owners and startups have to advertise their business online, the more money they have to spend. This is seen in the average cost-per-click (CPC) prices rising 22% in 2022 alone. It was a marked increase from the previous year. Prices in 2021 “only” increased 5% overall.

A higher cost-per-click results in higher lead-generation costs for companies That means each website visitor costs more to acquire, and each subsequent sale is more expensive for the business. Small businesses typically already operate at low margins. This means they can’t absorb this cost themselves and have to pass the increasing advertising costs onto the consumer, resulting in higher product and services prices.

Coupling these higher costs with recent consumer privacy efforts from Apple and Facebook is a 1-2 punch in digital advertising. The sharing of personal information, browsing habits, etc., informs all digital advertising strategies, and as consumer privacy advocates continue to push for less information sharing, digital advertising will become less and less efficient over time.

What does this mean for the world of SEO?

Digital advertising has always been a tremendous easy button to attract website visitors, assuming you have the budget. The potential of DoJ’s efforts to reduce monopolies and slow down the rising costs of CPC advertising is there, but how long will it take?

Additionally, the privacy measures in place will continue to impact the efficiency of online advertising negatively.

It’s an intuitive and proven point that paid advertising already converts at lower rates vs. organic traffic. Because organic traffic yields more engaged users, it tends to build trust as you’re teaching them something important or answering their questions. Maybe you’re connecting them directly to a product that solves their problem.

My general recommendation is, and remains, that digital advertising is a critical lead-generation engine for a website, but it needs to be complemented by a strong SEO and content marketing approach.

Relying solely on digital ads to bring in website visitors is both an expensive proposition and a risky endeavor. There is the opportunity cost of not running an organic strategy and leaving that option open for your competitors. But more importantly, it’s an opportunity missed to generate higher quality visitors to your website who recognize your brand, trust it, and share it with their friends.

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