As Google faces aggressive scrutiny from the Department of Justice—with the search trial moving to the remedies phase and the ad tech trial moving to closing arguments—there’s an elephant in the room that many antitrust watchers are failing to see: YouTube.
With the platform’s presence on our phones, the part it plays in our online searches, its rapid invasion of our living rooms, and the volume of advertising it serves us, YouTube is an increasingly unavoidable part of our lives. We and other observers have called it “the third leg of the stool that supports Google’s monopoly.” Separating the video giant from the rest of the Google behemoth makes sense as one of the remedies for Google’s decades of monopoly behavior and would reshape the digital landscape for the better—ultimately benefiting consumers, shareholders, and smaller companies in a market newly opened to competition.
Judge Amit Mehta is currently considering what remedies to impose after ruling against Google in August in its landmark search engine antitrust trial. Requiring divestment of one or more business units, like YouTube, is one of his options. A second big antitrust trial, with the government alleging Google illegally controls the advertising technology market, is already underway; and here, too, if the government prevails, divestment would be an option. In the interest of market competition and consumer choice, YouTube—which is intimately bound up with Google’s domination of both sectors—should be among the Google units to be spun off.
Google dominates search with more than 80% of the market, giving it an effective monopoly on the flow of internet information. But YouTube by itself has been recognized as “the world’s second-largest search engine,” handling an estimated 3 billion searches per month. As one commentator noted, after YouTube was founded in 2005, it was “purchased just over a year later by none other than Google, giving it control over the top two search engines on this list.” Another commentator noted recently in the New York Times that, “The gargantuan video site is a lot of things to a lot of people—in different ways, YouTube is a little bit like TikTok, a little like Twitch and a little like Netflix—but I think we underappreciate how often YouTube is a better Google. That is, often YouTube is the best place online to find reliable and substantive knowledge and information on a huge variety of subjects.”
Especially for many younger people, who increasingly prefer video content, YouTube is already the search engine of choice. For these reasons, the European Union recently classified YouTube not only as a large online platform, but a large online search engine. And because YouTube is so tightly integrated with Google Search, it doesn’t represent true competition.
Right now, Google faces little pressure to innovate because it dominates nearly every business it’s in; and when it does innovate, it does so with an eye toward further cementing its complete control of the internet. Google’s recent “innovations” have significantly degraded the Google Search experience, as the company increasingly curtails linking to external sites and instead imposes a “walled garden” strategy that keeps you interacting only with Google’s own content instead of the content you really want. The collateral damage is vast, not only to consumers, but also to content publishers, news organizations, and a variety of other third-party businesses that depend on Google traffic for revenue.
Separating YouTube from the rest of Google would shake up the search, ads, and video markets, and—freed from the market imperatives of a giant corporate parent—could take YouTube development in new directions, with the scale, resources, and user base to challenge Google to compete on features and quality. This would yield more diverse content that better meets user needs, and new opportunities for smaller players to enter the market and innovate.
By owning supply (ad inventory) and setting the terms of demand, Google has been able to charge inflated prices for online advertising while funneling disproportionate revenue to itself and YouTube. Internal communications confirm Google knows their ad fees are roughly double the fair market rate, which one employee admitted is “not long term defensible.” But when you own the entire market, you can charge whatever you want, and Google’s vertical integration has killed competition and put the squeeze on advertisers and publishers. Numerous companies have blamed Google for putting them out of business; new startups that try to break into the business find it tough going.
An independent YouTube would enable the new video company to go head-to-head with Google and negotiate its own deals with advertisers. This would likely lower the fees that Google charged advertisers, increase transparency in how digital ads are bought and sold, create more opportunities for advertisers to effectively reach more target audiences through more platforms, and also open up space for smaller ad tech companies to thrive.
All of this would unlock significant new shareholder value. An independent YouTube’s unique market position and strong brand identity would make it a highly attractive investment, pushing its valuation higher than it is today; analysts have speculated that it could be worth up to $400 billion on its own. Its video-based business model is sufficiently different from Google’s core business of search, so it could attract a different class of investors with different expectations, allowing it to grow more independently and with greater strategic flexibility. And a smaller and more nimble Google would likely provide better returns to its own shareholders.
In short, it’s time to face the elephant in the room, and require Google to spin off YouTube into an independent entity positioned to be a market counterweight. This would be a win-win-win-win: for advertisers, publishers, competitors, and consumers. And it would kick one leg out from under the stool that props up Google’s internet monopoly, which has done too much market damage in too many ways for way too long.
Emily Peterson-Cassin is the Director of Corporate Power at Demand Progress, a national grassroots group with over nearly one million affiliated activists who fight for basic rights and freedoms needed for a modern democracy.