Tech world – 2, Google – 0. That’s the score right now, as Google has lost its last two major antitrust lawsuits. Now, the company is caught up in yet another one, and this one centers around its ad business. It’s day four of the trial, and Google allegedly bullied publishers to force them to use its ad services.
At this point, information about this allegation and the case as a whole is still coming out. So be sure to stay tuned; this is a developing story.
First, let’s catch you up, what’s the case about?
As stated, this is the third major antitrust lawsuit against Google in the past year. The first one was about its dominance over the Android app market and the second (the big one) was about its search business. Hot off the heels of the second one, the U.S. DOJ (Department Of Justice) filed a lawsuit alleging that Google operates an illegal monopoly on the ad market. Both sides made their opening statements on Thursday.
Justice Department Attorney Julia Tarver Wood brought some concerns to light like the fact that Google has been buying out much of the competition in order to have its way with the market. One example of this is the fact that Google bought the ad company DoubleClick.
One thing about the situation is that, because of Google’s buyouts, the company has been able to control both sides of the ad buying and selling process. This allows the company to make its own rules in the ad market, and no other company could compete. “One monopoly is bad enough. But a trifecta of monopolies is what we have here,” Wood said.
In the U.S., Google owns 25.6% of the ad market while Meta owns 21.3% and Microsoft trails behind with 13.9% of the market. However, that’s just in the States. In certain regions, Google owns more than 90% of the ad market. This means that Google is the only option for many people and companies around the world.
Since this is an ongoing case that’s still less than a week into the woods, it’s going to be quite some time before we see a final verdict.
Google, allegedly, forces companies to use its ad platform
This case, like most others, led to some old emails and recordings being dug up and brought to the light. This time, we see an old meeting between Google and publishers being surfaced. Along with that, there were also some emails from the same year.
Starting off with the meeting, Google held a meeting with its publisher customers like The Wallstreet Journal and other major companies. During the meeting, it announced some new changes, and one of them was something called UPR (Unified Pricing Rules).
Previously, when companies would sell ad space on their sites, they’d have the freedom to set the price floor they wanted for different ad exchanges. They had the freedom to set the minimum price that they’d accept from different ad exchanges like Google’s AdX, PubMatic, and other companies. According to the report, publishers would set a higher minimum price for AdX than other providers. This would give other companies a chance to display their ads and reduce publishers’ dependency on Google’s ad business.
This is something that is a rarity in this world of monopolies and mega-corporations. However, it seems that Google had other plans for how it wanted to operate things.
Streamlining or bullying?
“We thought some publishers would be upset,” Rahul Srinivasan, Google’s former product manager for GAM (Google Ad Manager). The company was aware that publishers would be upset about this, and that makes the situation much worse.
Taking away the control ability to set different price floors means that other ad platforms would have to compete with the much larger Google on the same playing field. Not only that, but this would force them to be more dependent on Google’s ads. Publishers that were involved with Google had no choice but to stick with Google because there are no sizeable alternatives.
We’re talking about major publications that need some serious revenue to make a profit. So, it was unlikely that these publishers would take the massive dip in revenue by going to another company. They wouldn’t be able to gain full access to Google’s advertiser network either.
This is the definition of monopolistic behavior. The company was, allegedly and knowingly, depriving its customers of a choice that would benefit them in order to serve its own interests. In fact, that’s what Stephanie Layser said during her testimony earlier this week. She worked at News Corp in programmatic advertising. She said that it was, “in the best interest of Google and not in the best interest of their customers.” This pretty much sums up the situation.
Buttering up the publishers
During that very same meeting, Google tried to soften the blow to publishers by introducing a more favorable change. It was like the company was buttering up publishers so that they wouldn’t put up a fight. It introduced a first-price auction structure. Before the change, when a company won a bid on an ad space, it would pay the runner-up bid. This is called a second-price auction structure.
However, in switching to a first-price structure, the company would pay their bid rather than the runner-up bid. This is something that would lead to more money for the publications. While that’s a good thing to have, the publishers were still sore about what Google did.
Google felt the impact soon after
This should come as no surprise, but Google faced some backlash. According to some emails shared in May of 2019, an employee at Google pointed to some “difficult PR.” The publishers were not taking to the changes. The email was sent to Srinivasan, but he responded by saying that the company needed to do this to justify moving to a first-price structure.
Google’s defense
Google didn’t take this sitting down. “We introduced Unified Pricing Rules and other updates as a way to improve the transparency and fairness of the auction and help publishers achieve their goals,” said Google spokesperson Peter Schottenfels, “During the rollout, we made changes and introduced new features in response to publisher feedback. As we heard in court today and from the DOJ’s own expert yesterday, the result was that publishers saw increased revenue.”
Along with that, Google’s attorney retrieved an email from 2019 talking about the company having conversations with publishers and reporters. Also, according to an internal document, Google said that publishers saw “neutral to positive impact on revenue.”
But we can’t forget the elephant in the room
The fact of the matter is that Google eliminated a way for companies to reduce their dependency on Google. The company says that it’s looking out for the best interests of the market, but that’s not the most important part. Also, there’s the fact that publishers saw “neutral to positive impact on revenue” came from an internal document. So, it’s a bit tough to believe its legitimacy. It’s like saying, “Google’s change is helping the market because Google says so.”
Publishers are more dependent on Google, and this is just what the company wants. It makes it harder for other companies to properly compete with the mega-corporation. Competing companies have no choices other than fading to obscurity or being bought out by Google.
Are Google’s justifications enough to sway the court? We’re going to have to wait to find out.