It seems like Google has spent more time in court this year than ever, as the company is fending off its third major antitrust trial. Late last year, the company was sued for its dominance over the Android app market and earlier this year, the same happened for its dominance over the search engine market; and it lost both of them! Now, Google is in the hot seat for its advertisement business. What’s going on in this case? The answer is: A LOT. Here’s a rundown of the Google ads antitrust trial.
At the time of writing this article, the trial is still going on, and it will be for some time. As such, the article will be updated as notable events happen. So, feel free to check back to see the latest news and updates.
Why is Google being sued?
It’s one thing to be the biggest player in a market, but it’s another entirely to BE that market. This is something that Google is being accused of in this case. The U.S. (DOJ) Department Of Justice is suing Google because the way it operates its ad business could be seen as anti-competitive. It’s such a large ad provider that it essentially controls all three sides of the ad-buying/selling process.
Because of Google’s formidable size and influence over the ad market, the company is able to write the rules of how online advertising should be conducted. One company with that much control over such a large market is bound to be under the eye of regulators. Google’s ad business has grown to the point where the competition couldn’t possibly catch up. According to a report from eMarketer (via The Washington Post), Google owns 25.6% of the ad market in the U.S. with Meta owning 21.3% and Microsoft trailing behind with 13.9%. That’s just as a whole; in certain regions, Google owns more than 90% of the ad market. In these regions, Google is pretty much the only option.
The fact that Google is big isn’t the only reason why it’s being sued. Essentially, the prosecution accuses it of buying its way to the top. Google allegedly bought out several ad companies so that it could have control over them. This is a move that many large companies pull in order to have more control over a market.
If Google loses this case, then it might have to break up its biggest moneymaker. The company thrives on ads, so if its ad business is disrupted, it could cost the company greatly.
News publishers are in Google’s shadow
One of the industries being propped up by Google’s ad business is journalism. Google surfaces links to news sites, and the traffic generated from that helps the sites earn ad revenue. Google takes its cut of the ad revenue and gives the rest to the news sites. This symbiotic relationship has been keeping news sites along with other sites afloat for years.
The thing is that publishers are pretty much locked into a single ad ecosystem. Firstly, Google’s search engine is the biggest one surfacing the website. Not only that, but they’re pretty much forced to use Google’s ads because it’s the biggest online ad company.
So, if Google decides to make changes to how it displays ads, its pricing, or anything else, then pretty much the entire industry has to roll with the punches. One company can decide the fate of most of the news sites on the web. If you start a news company today, it would be basically impossible for it to succeed without Google’s influence.
Diminishing returns
This symbiotic relationship is starting to turn parasitic, as one side is benefiting more than the other. The money that publishers are getting from ad revenue has been going down over the years. In 2022, Google made $224.47 billion from ads (including all sources like YouTube, AdSense, Google Network, Google Ads Manager, etc.) and it made $237.86 billion in 2023. That’s a 6% increase year-over-year.
However, the amount of money that news sites earn in ad revenue has been diminishing. This is something that doesn’t make sense, and it’s causing the journalism industry to suffer. One unfortunate case has to do with a company named Gannet. This is a massive news organization that owns outlets such as USA Today. Since 2019, it’s had to shutter more than 170 news businesses. That’s hundreds of jobs lost. It sued Google last year because of the diminishing ad revenue.
Gannet has been scorned, and its senior vice president of revenue, Tony Wolfe, testified in this case.
High prices
One thing that caused the court to really turn an angry eye to Google was the exorbitant fee that the company charges for ad transactions. We found that Google takes a 20% cut of each ad transaction. This is a pretty large chunk, and it’s unfortunate to hear because the ad revenue that publishers are getting is going down. Google is showing no leniency to publishers.
What makes it worse is the fact that Google knew that this fee was ridiculous. According to some emails uncovered during the trial, even some of Google’s own executives acknowledged that the fee was too high. One person remarked that it was “not long-term defensible.” Johnathan Bellack, a Google ad executive admitted that the price was above market prices.
This sort of blatant knowledge of outlandish practices completely ruins the company’s case. The higher-ups at the company knew that it was putting a chokehold on the publishers who relied on it, and it chose to keep going down this path because there was really no competition. It was either Google or Bust for most of the publishers on the market. Since it’s such a big player on the field, it’s able to make these malicious moves with no consequences.
Google begs to differ
The company stated that the fee was “transparent and in line with industry rates.” It also argued that users keep the vast majority of their revenue, which is up to 70% of the revenue.
There are just a few things about Google’s argument that don’t add up. Firstly, the company said that the fee is in line with industry rates, but its own executives acknowledged that the 20% fee was higher than market prices. So, there’s a pretty big contradiction there.
Second, Google said that people keep the vast majority of their revenue… That’s not saying much! We sure hope that they keep the majority of their revenue. Otherwise, there’d be no reason to advertise in the first place. Google just stated that it’s doing the bare minimum of what selling ads is supposed to do.
Floating average
Boston University economics professor Timothy Simcoe presented findings that the market average fee for SSPs (Supply Side Platforms) was about 16% while Google was charging around 19.8%. This showed that Google was a bit above the market.
However, Google presented some other findings that might turn the tides of the case. According to ADWEEK, Yale University economics professor Judith Chevalier testified in favor of Google. She said that Google had actually charged less than the competition at times.
One thing that makes this case complicated is the fact that several sources are giving contradicting numbers. Several anonymous sources have come forth with different numbers. One said that 20% was about the average while another one said that the average was about 15%. Not only that, but a 2022 study found that it was about 23%.
Losing to the competition
A presentation from Google made back in 2019 noted that the company was actually losing ground in the “US Display market overall and to key competitors (FB & TTD),”. FB and TTD refer to Facebook and The Trade Desk. The presentation revealed that, while the market overall had grown 14% to 20% between 2018 and 2019, Google’s share had only grown 8% in the same time period.
This could be significant because if the company was worried about the competition, and if its rate of growth was slower than the market, then it couldn’t be a monopoly. If the competition is gaining ground, then it could mean that there’s actual tangible competition to challenge Google. That’s the company’s defense.
Playing all sides
What’s also fueling this lawsuit is Google’s massive influence over the add-buying and selling process. If you’re looking to sell ads, buy ads, or be connected with either side of the ad-selling/buying process, you’re most likely going to have to go through Google. The company controls all parts of this process, and this gives it the ability to bring whatever changes it wants to the market. Any company with that much control over an industry is much too big.
Imagine having to buy items from Walmart because those are the only supermarkets in your town. Then, trying to sell that item at a pawn shop, only to realize that all of the pawn shops in your town are owned by Walmart. Also, knowing that the app you used to search for that pawn shop was developed by Walmart. This means that one company can control how much money you pay and how much money you’re paid when you sell an item. So, if that company wants to make a change to any side of the process, it can.
Google runs an ad-buying and ad-selling business, and it also has a business that connects buyers and sellers. “One monopoly is bad enough. But a trifecta of monopolies is what we have here,” Attorney Wood said in her opening statement.
There’s so much truth to this statement. Just like with the search engine market, Google pretty much embodies the online ad market. The fact that Google has so much control over the market doesn’t bode well for its case.
The 2019 publishers meeting
Just like most large trials, we’re seeing a bunch of information coming to the surface that was long-buried. One bit of unearthed media is a recording of a 2019 meeting that Google held with its publishers. The meeting involved major publishers such as The Wall Street Journal.
During the meeting, Google announced a change to its business that would put other companies that Google was competing against at a huge disadvantage. It announced something called UPR (Unified Pricing Rules).
Before this change, if a company wanted to auction off ad space on its site, it would have the ability to set the price floor (the lowest price it would accept from a company to place its ads on its site). This means that it could set a higher price floor for one company than another.
One thing that publishers would do is set a higher price floor for Google than other companies. This is a move to make it so that they’re not as reliant on Google’s ads as others. Also, smaller ad exchanges would have a better chance to display their ads.
No company wants to depend on one source of income too much, as it gives that source more control over the company. Also, if something happens to that source, it could put that company in jeopardy.
Well, during the meeting, Google announced that publishers will no longer be able to set different prices. This means that all exchanges would need to pay the same minimum amount of money to display their ads. Smaller ad exchanges were put onto the same playing fields as the behemoth Google, making their offers less effective. Allegedly, it was Google’s way of bullying publishers into needing to use its service more than others. Publishers are more reliant on Google’s service, and this is something that it wants.
Google’s response
Google knew that some publishers would be upset by this news. The company’s former product manager for GAM (Google Ad Manager), Rahul Srinivasan, said, “We thought some publishers would be upset,” in a statement during the trial. In order to soften the sting of this news, the company decided to try to butter up the publishers by announcing something positive along with it. That’s a pretty sad move.
During the trial, the company made its stand on the subject. Srinivasan testified that bringing the UPR was actually beneficial for the overall experience. It allowed the company to streamline the ad auctioning process. He said that publishers would set hundreds or even thousands of rules specific to each buyer, and it would filter out good bids, according to ad exchange. It would muddy the waters and make the whole ad-buying process more complicated than it should be.
Along with that, he mentioned that this would over-complicate the buying process as well as the selling process. He gave the example of Criteo and how it would get several calls for the same ad inventory from different vendors. This caused the company to throttle queries. For those unfamiliar with the terminology, it boils down to making the ad-buying and ad-selling process extremely complicated.
Along with that, Google’s former VP of product for display and video ads received an email from Srinivasan three months after the 2019 meeting. It read that market perception “improved over the last 3 months due to continued dialogue with publisher partners and the press, and incorporation of some publisher feedback into product changes.”
Streamlined
So, Google made a solid case that UPR streamlined the whole process. However, the fact that it knew that publishers would be upset would rub people the wrong way. Google knew that it was taking something away that benefitted publishers.
This case is still going strong, and it’s going to continue to rage on for months. Be sure to check back as more information gets added.