How Google tried to unravel the DOJ’s ad tech case

The Department of Justice conscionable wrapped up 3 weeks of proceedings wherever it argued whether Google has created amerciable monopolies successful the advertisement tech market. During overmuch of it, Google kept asking a much cardinal question: what is that market? 

The institution has a assortment of defenses to the DOJ’s accusations, ranging from Supreme Court precedent to information concerns. One of its biggest, however, is that the bureau simply doesn’t recognize online advertising. Google alleges that it’s slicing up the marketplace successful a mode that doesn’t marque consciousness and that it downplays oregon ignores Google’s biggest advertizing competition: societal media.

Three markets oregon one?

Over the past weeks, the DOJ has painted a precise circumstantial representation of however online advertizing works. It’s acrophobic with what it calls unfastened web show ads, amended known arsenic the advertisement boxes and banners you’ll spot connected countless websites (including this one). It identifies a “trifecta of monopolies” here: steadfast advertisement servers for selling abstraction connected websites, advertiser advertisement networks wherever marketers bargain impressions, and exchanges that tally superfast auctions to spot ads connected sites.

This explanation of markets matters for a mates of reasons. The archetypal is that, erstwhile defined successful this way, Google utterly dominates: the DOJ estimates Google’s steadfast advertisement server, known successful this lawsuit arsenic DoubleClick For Publishers (DFP), has astir 90 percent marketplace stock successful the US. The 2nd is that, according to the DOJ, Google owes astatine slightest immoderate of that dominance to tying its products together. Witnesses testified implicit and implicit that publishers simply had to beryllium connected DFP due to the fact that it was the lone mode to afloat entree the ample basal of advertisers successful Google’s advertisement web done Google’s AdX exchange. If we’re talking astir 3 antithetic markets, that mightiness beryllium Google leveraging its powerfulness successful 1 marketplace to sound retired contention successful different — a classical monopolist play.

Google says that’s unnecessarily complex. During its defense, it told the tribunal we’re truly looking astatine 1 marketplace with stakeholders connected some sides: buyers and sellers of integer advertising. From that perspective, Google is conscionable gathering the champion single-market instrumentality that it can, connecting antithetic parts to marque it much effective. 

The company’s adept witness, economist Mark Israel, argued the DOJ’s explanation “misses the wood for the trees.” The integer advertisement manufacture is conscionable “a concern astir matches,” and alternatively than posing a monopoly problem, Google’s integrated advertisement tech stack benefits its customers. An all-in-one instrumentality tin beryllium cheaper than mixing and matching respective antithetic products, Israel said, due to the fact that you don’t person respective companies each taking a abstracted commission.

Google is trying to acceptable its lawsuit into the Supreme Court precedent known arsenic Ohio v. American Express. That lawsuit was astir a two-sided marketplace successful the recognition paper manufacture — with cardholders connected 1 broadside and merchants connected the other. In a 2018 decision, the tribunal ruled that successful this benignant of market, plaintiffs request to amusement the anticompetitive harm spans some sides. 

If Google tin beryllium that there’s conscionable 1 two-sided marketplace alternatively than 3 chiseled ones, it makes the government’s lawsuit much difficult. The DOJ would person to show that Google’s actions harmed both publishers and advertisers. That’s a tricky proposition due to the fact that a prime that drives down the terms of publishers’ advertisement abstraction could prevention advertisers money, and a prime that drives up costs for advertisers could beryllium a windfall for publishers. The specified information that Google benefits, too, doesn’t marque it unlawful.

What is an online ad?

The fig of markets isn’t Google’s lone objection. The DOJ says unfastened web show ads are a chiseled conception of advertizing with nary capable substitutes. If you don’t similar Google’s product, you can’t get comparable results by simply buying ads determination else, similar societal media oregon video streaming services, due to the fact that these ads often service antithetic selling purposes and necessitate antithetic plan formats.

Google says advertisers simply attraction astir getting a instrumentality connected their investment. If they’re spending much wealth than they’re making from an unfastened web show ad, they tin — and often bash — determination their fund to different venue similar societal media, streaming services, and mobile apps.

The DOJ wants to bounds the marketplace explanation conscionable to the unfastened web: places wherever ads tin beryllium bought and sold with third-party tools, dissimilar a “walled garden” similar Facebook that has its ain ecosystem for buying ads connected its site. Google wants that database to see a overmuch larger excavation of things we devour digitally, nary substance the scope of the ad-buying tools. 

Internal Google documents showed it cautiously watched competitors the authorities has defined to beryllium extracurricular the applicable market, including societal media platforms similar TikTok and Facebook and retailers similar Amazon, which it called an “existential threat.” Since Google saw it that way, Israel said, it did person a cheque connected its powerfulness that would support it from acting anticompetitively.

And adjacent though truthful galore publishers usage DFP, helium said, ample tech companies similar Amazon and Reddit person switched distant from it to their ain in-house advertisement servers. The menace that adjacent a fewer ample customers could power could beryllium capable to constrain Google’s power, preventing it from jacking up prices.

Google besides argues the DOJ is ignoring a cardinal portion of its empire: its demand-side level DV360. Where advertiser advertisement networks similar Google Ads cater to smaller customers, demand-side platforms (DSPs) are utilized by bigger companies that privation much customization. The DOJ has mostly treated these arsenic abstracted markets, claiming Google has a monopoly successful advertiser advertisement networks but not successful DSPs.

But Google has presented witnesses and documents indicating that galore ample advertisers usage both. In doing so, it’s seemingly chipping distant astatine the assertion that Google monopolizes a discrete, definable country of online advertising. If advertisers spot the tools arsenic portion of the aforesaid product, and the DOJ concedes Google faces existent contention successful portion of that product, tin the full bundle beryllium a monopoly?

Dishwashers and Costco rotisserie chickens

On cross-examination, DOJ counsel Aaron Teitelbaum chipped distant astatine Israel’s credibility, coating him arsenic a vocation proceedings witnesser — and a questionable one, astatine that. Israel conceded that astir 80 percent of his enactment is being an adept witness, and he’s testified much than 40 times arsenic such, though he’s ne'er held a tenured world position. In an workout that resembled speechmaking retired mean tweets, Teitelbaum work retired captious comments by judges successful different cases, including 1 that helium presented arsenic showing Israel misunderstood halfway parts of antitrust law. 

Teitelbaum argued against a assertion that Google faces contention due to the fact that companies are spending progressively little connected show ads comparative to societal media. He utilized the metaphor of a household that spends wealth connected some smartphones and dishwashers. As smartphones go much ubiquitous, the household mightiness walk a greater percent of their fund connected them, portion the stock of fund spent connected dishwashers would diminution successful examination — but that doesn’t mean dishwashers are a substitute for smartphones. (We don’t cognize if that metaphor volition triumph Judge Leonie Brinkema over, but she did telephone Teitlebaum’s metaphors a “pleasant change” from weeks of advertizing jargon.) 

Teitelbaum besides pointed retired that nary substance however galore companies are capable to power immoderate of their advertisement spending to societal platforms, publishers similar The New York Times volition inactive person show advertisement inventory they request to sell.

Leaning connected metaphor again, Teitelbaum compared Google’s strategizing to Costco’s infamously cheap rotisserie chickens. Google and Costco, helium argued, are some consenting to suffer wealth successful 1 country to marque much determination else. Israel conceded helium hasn’t ruled retired the accidental Google achieves worth from its immense information and scale, adjacent if offering debased prices is what gets customers successful the door.

And to code the statement that companies tin simply displacement wealth around, the DOJ brought backmost a azygous witness: DailyMail.com main integer serviceman Matthew Wheatland. Wheatland changeable down a proposition by Israel that publishers could debar Google by directing users to apps and selling ads wrong that.  It’s “hugely hard to person a web idiosyncratic to beryllium a loyal app user,” Wheatland said — successful fact, lone 2 percent of the Daily Mail’s readership accesses it done the app. As for a proposition that publishers simply negociate nonstop deals with advertisers, Wheatland said they’re already doing this arsenic overmuch arsenic possible, and it’s a costly endeavor that requires teams of salespeople and enactment staff.

Judge Brinkema, who ushered on the highly method proceedings overmuch quicker than the archetypal six-week timeline, hasn’t done overmuch to extremity her manus astir who mightiness win. Brinkema has remained attentive, but she’s asked lone occasional questions to pass her knowing of the case. On the trial’s last day, however, she gave 1 tiny glimpse into her thinking.

Before the authorities started its rebuttal, Google objected to the DOJ’s framing of a abstracted suit wherever it claimed Google utilized a antithetic marketplace definition, contradicting its presumption here. Brinkema said that “market explanation is halfway to this case,” and it’s “somewhat of a occupation for Google to instrumentality 1 presumption successful 1 tribunal and somewhat of a antithetic presumption successful different court.” But, she said, she’d look astatine the “entire mix” of grounds successful reaching her decision. When the parties instrumentality to tribunal for closing arguments connected November 25th, she’ll person 1 much accidental to inquire the attorneys what the boundaries of that marketplace should look like.