Google 1-startups 0: This INR2,000 crore ad war is set for a new twist

For the founders and startups operating in the Indian online consumer space, the last couple of weeks have been all about coming to terms with the latest Supreme Court judgment on Google Ads, and the way forward. On March 7, the apex court upheld the Delhi High Court’s 2023 judgment that usage of trademarks as keywords is not infringement and dismissed MakeMyTrip’s appeal, dealing a huge blow to the startup ecosystem. While such developments are par for the course, startups have taken this particularly hard for one reason. In 2022, after multiple companies dragged the search giant to court on the issue, the Delhi HC offered a brief respite. In the case of MakeMyTrip versus Booking.com and Google, the HC pronounced an interim judgment ruling that the usage of trademarked keywords is infringement, and in violation of the Indian Trademark Act. The euphoria that followed this ruling was, however, short lived. With the latest SC judgment, startups are preparing for a push back. Ravi Kumar, founder, udChalo, a Pune-based travel startup focused on defence personnel, said this was a huge blow and will impact smaller startups, as these will now need to spend a large chunk of their marketing budget just to protect their brand. He further added that the founders are exploring multiple ways to combat this, including taking the issue to the government and knocking on the door of the Competition Commission of India (CCI). To be sure, the judgment was in line with how most of the global counterparts have treated the issue. Courts in the US and Europe in multiple cases have held that use of trademarked keywords is not infringement. Yet, why is the industry so hell bent on keywords when things have not changed in more than a decade? ET Prime spoke to founders, analysts, and legal experts to decode the same. Why are Google ads a big deal?Let's assume that you are a ticketing platform “ABC”, and you want to market your product. A New Delhi-based startup founder said that the obvious way for people to discover new products and services is Google, given that it has a monopoly in the search-engine market. Google has 98% market share in the search-engine market in the country, according to market-intelligence platform StatCounter. 109411502Clearly, for any startup Google is the first place to go. That would mean you want to be listed on top of the search results when users are looking for “plan my travel”, your company name “ABC”, or “booking ticket”. For that to happen, you pay top dollar to bid on the above-mentioned keywords or more so that you are listed on top when these keywords are searched for. These are displayed with a “sponsored” tag on Google. Two founders ET Prime spoke to estimated that companies spend anywhere between 15% and 20% of their marketing budget on Google ads to drive traffic. For Google, this is a cash cow. According to data from business-intelligence platform Tofler, advertising revenue accounts for about 23.37% of the total turnover of the company. Google India revenue stood at INR9,439 crore in FY22. So far so good. But what if you have trademarked the word “ABC” and your competition “XYZ” bids on it so that when you search for ABC, the latter’s site comes on top? That is startups’ grouse against Google, where, through its ads programme, the startups allege the tech giant is aiding competition to infringe on the trademark and is fattening its own pockets in the process. Founders have been vocal about this issue for more than a decade. Making a case Murugavel Janakiraman, founder and CEO, Matrimony.com, has a long history with Google Ads (previously the Adwords programme). The online matchmaking platform spends about INR150 crore on marketing every year and a significant part of it goes to Google Ads, he told ET Prime earlier. Janakiraman had further elaborated that, “When competitors are bidding for your keywords, you are forced to spend money on your trademarked words, and the brands that you have built. Because if you don’t, the profit might go to competitors.” So, he sued Google and competitors for doing so in the Madras High Court, and he kept at it till it reached the CCI. Unfortunately for him, the Madras High Court ruled that restraining the use of keywords like Bharat Matrimony, which are commonly used for search, would reduce choices available for the competition and result in unfair monopoly for the word. When the matter went to CCI in 2021, it referred it back to the Madras HC, where it is pending. Since then, courts have seen multiple such cases. Startups fighting it out in courts have one question: Why should we bid on our own trademarks? This question is important given that digital advertising gains prominence. And courts’ answers so far have been divided. 109411506Startups at Indian courtsIn April 2022, a single-bench judge in the Delhi High Court in the case involving MakeMyTrip versus Booking.com and Google noted that bidding on trademark is infringement since that might result in monetary loss for the company, and hence in violation of Section 29 of the Trademarks Act. The judge further noted that unlike the users in the West, Indian users are not as Internet savvy and such ads could mislead them. This was appealed by Google in 2022. During the appeal, the two-bench judge of the Delhi HC overturned the judgment, and made the following observations:Using trademarks as keywords are allowed if they are offering similar goods and services.Such use was neither illegal nor infringement if the ads do not confuse or mislead the Internet users into believing that sponsored links or ads were associated with the proprietors of the trademarks.Unacceptable that a user will be misled into believing that the services offered by Booking.com are those of MakeMyTrip.While the startup community was disappointed, legal experts and industry executives shared that this isn’t an unfair statement by any means. A senior executive, who worked with startups that had filed such lawsuits, said that the question here is not whether such practice is ethical, but rather if it is legal or not. “It might not be ethical, and some companies choose not to do it, but from the legal lens, the courts have ruled that it is perfectly fine to use trademarked words to foster competition,” he added. A note from YES Securities on LinkedIn noted that “the high court's decision strikes a delicate balance between protecting trademarks and fostering competition in the digital advertising area.” It added that while brands like MakeMyTrip deserve protection, it is equally important that there is an “unbiased playing field” for advertisers as well, with necessary safeguards and without misleading the users. Google’s responseIn a statement to ET Prime, Google said, “Specifically on the use of trademarks in ads, we have a clear and stated policy that does not allow advertisers to use trademarked terms in the ad-text of an ad, except in certain pro-consumer and legal scenarios, such as resellers and informational sites. We investigate any reported misuse of a trademarked term in the ad-text and take prompt action to not only remove such ads but block that same advertiser from referencing the trademark in their ads in the future.” The statement added that the courts have “consistently upheld the existing Google Ads trademark policy of allowing keyword bidding on all terms, including trademarked terms, unless the resulting ad upon review is held to mislead users as to source of origin of the ad.” Startups on their part are worried about the ramifications of this judgment. Wide ramificationsApoorv Mangalam, founder, RoadGods, a D2C brand that sells outdoor gear, said that the company stopped bidding on Google Adwords recently and found there was a 30% dip in the month-on-month revenue. Ravi Kumar, founder, udChalo, who was quote earlier, said the company did not have its competitor use its keywords in the ads programme following the 2022 court judgment. However, that will all now change. The company usually spent 70 paise per search to bid for its trademarked keywords but with competitors using it, it will now have to pay INR14 or more per search to display in the google search. Both Kumar and Mangalam are also part of the founders’ group of 400 and exploring options including representation to the government and taking this to the CCI. Kumar has also floated a Change.org petition calling founders and small businesses to fight against the Google Ads ruling and a prompt action from the government. The final cutMake no mistake, the saga is far from over. Mohit Goel, senior partner, Sim and Sam, which represented MakeMyTrip in the case, said the start date for the hearing is listed for May. The case with udChalo has also been postponed in the light of the Supreme Court judgment and further steps will be notified on August 16. According to experts, these cases will take another couple of years to complete. But the question is: Will this judgment make any difference? While startup founders are alleging unfair practice, a former executive cited earlier says that the judgment accomplishes hardly anything. “Even if a company files a lawsuit and wins, how can anyone implement this at a large scale? It is not possible,” he added. As an industry executive points out, while these judgments could make brands cautious about bidding on competition’s trademarked words, without the protection of law, there will always be companies that will continue the practice what is beneficial to them. Neil Shah, partner and co-founder at Counterpoint Research, in an earlier interaction said that unless the judgements are formalised into a law, which is currently not the case, the instances will continue to happen. (Graphics by Mohommad Arshad)