How Google made the ad tech industry revolve around itself

Google’s ngo connection seems made to evoke lukewarm and fuzzy feelings astir however its products assistance everyone. “Our ngo is to signifier the world’s accusation and marque it universally accessible and useful,” Google says on its firm site. The institution utilized to person an adjacent much saccharine motto: “Don’t beryllium evil.”

But the decisions Google made successful increasing its monolithic advertizing exertion concern were cold-blooded and cautiously crafted to chiefly payment itself, the Department of Justice argued during the archetypal 2 weeks of its antitrust trial.

The DOJ finished arguing its case-in-chief connected Friday successful a Virginia national court, and present it’s Google’s crook to haul successful witnesses, including US authorities agencies that usage the company’s products. Its challenge: to explicate wherefore the authorities is incorrect to telephone it an amerciable monopoly and wherefore its decisions bespeak tenable concern judgments that it shouldn’t beryllium forced to change.

Over much than 9 days of witnesser testimony, the DOJ told US District Court Judge Leonie Brinkema that Google manipulated the advertisement tech manufacture to revolve astir itself. The authorities contends that done its dominance crossed the full advertisement tech stack, Google ensured rivals couldn’t vie and publishers couldn’t locomotion away. DOJ counsel Julia Tarver Wood enactment it this way: “The rules are acceptable truthful that each roads pb backmost to Google.”

A “slow and clunky” instrumentality dominates the online advertisement world

The government’s basal statement is that Google monopolized 3 markets: publisher-side tools (mainly steadfast advertisement servers, wherever outlets merchantability advertisement space), a subset of advertiser-side tools (where advertisers connection their ads), and the advertisement exchanges wherever auctions instrumentality place. While Google says it’s achieved a ample lawsuit basal by offering bully products, the DOJ argues it simply bought up competitors — similar the steadfast instrumentality DoubleClick — and tied its products unneurotic to fastener customers in. 

The upshot, the authorities claims, is that Google’s customers wage higher prices for clunkier tools due to the fact that the institution lacks existent incentives to bash better. Therefore, customers person nary capable alternatives to crook to.

The authorities brought successful witnesses crossed the manufacture to marque its case, including executives from publishers similar Gannett and News Corp, advertisement agencies, and executives from different advertisement tech companies, including immoderate that tried (and mostly failed) to motorboat competing products. They besides brought successful erstwhile and existent Google employees, including the CEO of YouTube, Neal Mohan, who joined Google erstwhile it acquired DoubleClick successful 2008. The DOJ enactment Mohan connected the antiaircraft astir different acquisition, Admeld, which it claims Google bought to termination an up-and-coming competitor. 

Google’s steadfast advertisement server (mostly referred to arsenic DoubleClick for Publishers, oregon DFP, successful the trial) holds a astir 90 percent marketplace stock successful steadfast advertisement servers, the authorities claims. Publishers and rivals who testified mostly could lone callback 1 oregon 2 publishers who utilized a antithetic system. That includes Disney, which created its ain alternate to tally bespoke ads — an undertaking fewer smaller media companies could fund, witnesses said.

Google’s DFP is “pretty overmuch a foregone conclusion” for astir media outlets, testified James Avery, cofounder and CEO of Kevel. That’s not needfully due to the fact that DFP itself is better; Stephanie Layser, a erstwhile News Corp programmatic advertizing executive, called it “slow and clunky.” It’s due to the fact that Google ties DFP to its monolithic AdX exchange, according to the government’s witnesses. Rejecting DFP would mean losing entree to information similar real-time bids from Google’s monolithic basal of advertisers, which is captious for an manufacture that moves successful milliseconds. When Kevel tried to motorboat a DFP competitor, Avery said, it failed to lure anyone distant from Google — publishers were excessively “deathly afraid” of losing that access.

Google recognized threats — and neutralized them

The DOJ argues that erstwhile Google was apical dog, it developed strategical and anticompetitive plans to fastener that dominance in. That included buying up young competitors and launching caller features to neutralize efforts astatine lessening its control. One of the DOJ’s main examples involves a strategy called header bidding, which publishers began adopting astir 2014.

Before header bidding, publishers sold advertisement abstraction done a “waterfall” method, offering the abstraction to 1 advertisement speech astatine a time, typically prioritizing whichever had antecedently offered the highest prices. But Google made it truthful that its AdX got “first look” entree done DFP by calling it to taxable a real-time bid earlier different exchanges got the accidental to instrumentality portion successful an auction. That meant AdX could bargain up immoderate inventory it wanted arsenic agelong arsenic it met the publisher’s level price, past walk the little desirable abstraction to different exchanges, according to the DOJ.

Header bidding was fundamentally a mini auction that ran earlier advertisement abstraction was passed disconnected to an exchange. Publishers enactment codification connected their websites to solicit pricing bids from respective exchanges astatine once, putting these exchanges connected much adjacent footing successful hopes that this contention would pb to a higher price.

But Google moved rapidly to reestablish AdX’s power. It created a rival to header bidding called “Open Bidding,” which fto Google instrumentality an other chopped of revenue. And nether the adoption of header bidding, Google’s AdX yet got a “last look” vantage erstwhile publishers chose to provender the winning header bid into their steadfast advertisement server — which astir often was Google’s DFP. That’s due to the fact that AdX’s advertiser buyers would past person the enactment to bid arsenic small arsenic a penny much than the winning header bid to unafraid the astir charismatic advertisement space.

Google’s attorneys said the institution was simply trying to make a amended online experience, raising concerns that header bidding facilitated fraud and slowed down leafage load times. But interior institution documents showed that executives understood the entreaty of header bidding to publishers and feared it could erode Google’s control. The alleged effect was that other, perchance innovative, caller exchanges couldn’t run connected adjacent footing, and publishers ceded much and much power implicit Google due to the fact that they felt locked in. 

The DOJ claims this wasn’t the lone clip Google saw a menace and clawed backmost control. Publishers started mounting a higher level terms for AdX than for different exchanges, hoping to diversify wherever they sold ads. Google was aware, according to interior documents, that publishers were trying to lessen their dependence connected AdX. It responded successful 2019 with Unified Pricing Rules, oregon UPR, which mandated 1 terms for each exchanges — neutralizing the attempt. 

Layser says publishers felt that UPR “took power retired of our hands” and made it look similar Google was “holding america hostage.” And Google executives anticipated the blowback. “We fearfulness this whitethorn make pushback from publishers who whitethorn presumption the determination arsenic america taking distant functionality they are alternatively attached to and see captious to their business,” one enforcement wrote. But it went up with UPR anyway, and witnesses told the tribunal that publishers had small prime but to stay connected the platform.

This was mostly possible, the DOJ claims, due to the fact that Google owned products crossed each sides of the market. It could leverage its dominance successful DFP to acceptable policies astir AdX that publishers couldn’t reject. And erstwhile different merchandise seemed threatening, Google could usage the well-worn tech elephantine strategy of simply buying it. Google argues this made the full strategy amended by letting it tally much efficiently — but the DOJ claims the institution was conscionable nipping contention successful the bud. 

The authorities is besides raising an contented that’s travel up successful different Google cases: the company’s penchant for liberally labeling concern documents arsenic attorney-client privileged and avoiding a insubstantial way with off-the-record chats. The DOJ is seeking an adverse inference against Google for destroying evidence, asking Brinkema to construe immoderate alleged missing documents arsenic damaging. Google has disputed that it intentionally hid its operations, saying it has “produced millions of documents including chat messages and documents not covered by ineligible privilege.” But respective Google witnesses failed to plausibly explicate wherefore their missives deserved a “privileged and confidential” statement — allowing the DOJ to reason that it was due to the fact that they hinted astatine Google’s imaginable monopoly power.

What’s next

Google is presently presenting its broadside of the story. The institution is calling connected witnesses that see advertisers from the national authorities to assistance explicate the worth of its products. Its counsel says it expects to remainder its lawsuit by Wednesday oregon Thursday, followed by a rebuttal from the DOJ. Closing arguments volition beryllium scheduled for aboriginal — followed by a ruling from Brinkema.

Google’s halfway statement is that simply having a big, palmy concern isn’t illegal. It argues that tying its services unneurotic and buying competitors has allowed it to connection amended products. And it raises what it hopes volition beryllium a sidesplitting stroke for the DOJ’s case: that according to the Supreme Court, companies can’t beryllium forced to chopped deals with competitors. 

This case, however, follows 2 important antitrust losses for Google: 1 successful a DOJ lawsuit implicit its hunt engine and different successful a backstage suit implicit Android’s Play Store. Google is connected the antiaircraft — and inactive awaiting rulings connected however those monopolies could beryllium busted up.

Internal documents suggest executives were good alert of Google’s overwhelming powerfulness successful advertising. In 1 2016 email, erstwhile enforcement Jonathan Bellack likened Google’s advertisement tech stack to Citibank oregon Goldman Sachs owning the New York Stock Exchange, musing astir whether there’s “a deeper contented with america owning the platform, the exchange, and a immense network.”

Bellack said during grounds that helium was lone trying to fig retired wherefore publishers seemed truthful attracted to cutting Google retired of their business, wondering if the “structure of Google’s concern [was] unacceptable to them.” Several of them person testified successful tribunal that it was — and present it’s up to a justice to determine who’s right.