Antitrust suit against Google could significantly impact mobile advertising revenues
By Chantal Tode
May 5, 2014
Search on mobile
A new class action lawsuit against Google could have a significant impact on the search giant’s mobile search advertising revenues.
The suit alleges that Google gained unfair advantage in mobile search from agreements with handset manufacturers that tied their access to the Android operating system with requirements to include Google applications on devices. The suit has similarities to the pivotal case in the '90s against Microsoft that saw its browser share for Internet Explorer plummet after it was unbundled from the Windows operating system.
“Google licenses the Android OS with its apps and services for $0,” said Jeff Orr, senior practice director at ABI Research, Oyster Bay, NY. “Alternatively, mobile device OEMs can use the Android Open Source Project, which also licenses for $0, but has none of Google’s apps and services or Google Play store.
“The class-action suit that was just announced focuses on mobile device OEMs that license the full Android OS with Google services such as Samsung being forced to lock into using Google’s search tools, which the complainants see as strong-arming the end-user and removing choice, which has the side effect of increasing device prices,” he said.
“The likely outcome for Google, if the results are similar to Microsoft, would be to allow some other Internet search engine to be used in place of its own. Since a good part of Google’s revenues come from advertising, the financial ramifications could be massive.”
Leveraging Android’s dominance
Basically, the allegations are that Google is leveraging Android’s dominant role as a mobile operating system to gain a bigger role for its apps, particularly search.
Google today commands approximately a 90 percent share of the mobile and tablet search market, which has enabled it to derive significant revenues from the quickly growing mobile advertising space as more consumers conduct searches from the mobile devices instead on desktop.
The suit is viewed as paralleling the Microsoft Windows litigation in which the company was alleged to be engaging in anti-competitive activity by tying its Internet Explorer browser, which had a near monopoly at the time, to Windows OS.
Ultimately, Microsoft was fined and ended up giving customers choice and its browser share plummeted.
The Google case comes out of revelations made earlier this year that Google and some handset manufacturers have mobile application distribution agreements in place that require Android OEMs to provide Google applications on their devices.
However, the fact that the suit is being brought by a group of consumers rather than the Department of Justice or the Federal Trade Commission suggests it may be settled quickly.
“Consumer class action lawsuits like this get brought all the time,” said C. Graham Gerst, partner at Global IP Law Group LLC, Chicago. “They typically settle long before any determination on the merits.
“I anticipate it will settle without any impact on Google as far its behavior with Android,” he said.
Quickly evolving market
A suit brought by the government would have more teeth.
Regulators have been looking into the way that Google’s Motorola unit has been enforcing standard essential patents and if there are any antitrust implications.
While it is possible that they could turn their sights to Google’s agreements with Android OEMs, it seems unlikely at this point.
The government may not want to step in because the mobile market is still evolving.
“Maybe it is a reflection that there is a better understanding that this is a swiftly evolving market and by the time DOJ does anything, it could have evolved already,” Mr. Gerst said.
“Android, while it has a majority stake, there are two other successful operating systems out there,” he said. “There is a less of a market dominance than there was back then.”
Chantal Tode is associate editor on Mobile Marketer, New York
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