Google and the US Department of Justice believe that each other desperately wants one thing: control.
“Control is the defining characteristic of a monopolist,” DOJ counsel Julia Tarver Wood said in opening statements in the federal government’s second antitrust trial against the search giant, which began Monday in Alexandria, Virginia. Governmentally, Google exerts excessive control over every step of the way publishers sell advertising space online and how advertisers buy it, resulting in a system that benefits Google at the expense of almost everyone else. others.
“Control is the defining characteristic of a monopolist”
For Google, the government is seeking control of a successful business by treating its rivals on more favorable terms, ignoring the value of its investments in technology and the unique efficiencies of the integrated its tools together.
At the end of the trial, which is expected to last several weeks, US District Court Judge Leonie Brinkema will be left to decide which side is exercising too much control — and ultimately, whether Google illegally monopolizes the market for advertising technology.
Markets is an important word, because one question raised on day one was how many monopolies Google might actually have. (A federal court in DC said at least one, as it recently ruled Google a search monopolist.) The DOJ argues that Google has monopoly power in three different ad-related markets : those for publisher ad servers (where websites have ad space. ), ad exchanges (which facilitate ad transactions), and advertiser ad networks (where advertisers to buy ad space). They also argued that Google illegally combined its publisher ad server with its ad exchange to maintain its monopoly power.
“A monopoly is bad enough,” Wood said in opening remarks. “But a trifecta of monopoly we have here.”
“A trifecta of monopoly we have here”
Google claims that it is not a monopolist, and in fact there is only one market: a two-sided market consisting of buyers and sellers of online ad inventory. In opening arguments, its lawyer said the government is ignoring relevant Supreme Court precedent that says this is the best way to look at such a market. The company also argues that regulators have carved out the field for terms like “open web display advertising,” which Google calls manufactured. What the government really wants here, Google says, is to require it to deal with its rivals — something the Supreme Court has said is not really the job of the judicial system.
After opening statements, the DOJ began calling its first witnesses, focusing on the tools publishers use to monetize display ads. These are the ads that typically appear at the top or side of the page on news websites and blogs, leading through very fast auctions that run as the page loads. During an auction, an ad exchange helps match publishers and advertisers based on things like subject matter and price without the active intervention of a human. The process is called programmatic advertising, and it is used by The Verge’s parent company Vox Media among many others. (Vox Media president of revenue and growth Ryan Pauley was on the list of potential witnesses but was not called today.)
Google tools play a key role in the process, some of which hold nearly 90 percent of the market, according to the government. Google has a publisher ad server called Google Ad Manager (formerly DoubleClick for Publishers, or DFP), which helps publishers sell ad space. It operates an ad exchange, AdX, which facilitates transactions. And it owns an advertiser ad network, rounding out its trifecta of major products in various parts of the ad world.
Four industry players testified Monday, representing a publisher (Tim Wolfe, SVP of revenue at Gannett), an ad exchange (Andrew Casale, president and CEO of Index Exchange), a marketer (Joshua Lowcock, president of media at Quad), and a publisher ad network (James Avery, founder and CEO of Kevel). Throughout the testimony, the government tried to establish that programmatic display advertising is not something publishers can easily replace with other types of advertising, including direct deals with advertisers or ads on social media sites. And it introduces the idea that moving away from Google’s tools isn’t an easy decision, even though there may be some reasons to do so.
In testimony, for example, both Wolfe and Avery make it clear that publishers are largely reluctant to switch to Google Ad Manager. They say it’s because Google packages it with access to AdX, and losing that package deal would mean giving up a significant amount of revenue — even as rivals offer to take a smaller cut. for facilitating each ad sale. Wolfe testified that when Gannett received one such offer, that reduced acquisition rate didn’t move the needle, because it couldn’t offset AdX’s benefits.
Ad server company Kevel started out by targeting traditional publishers, but Avery said competing with Google proved too difficult. He recalled publishers asking how his company would replace the revenue they earned from AdX, something Kevel couldn’t manage. After trying to contact Google twice about ways to connect Kevel’s ad server to AdX, Avery testified, his efforts were rebuffed. Kevel pivoted to facilitating things like sponsored listings for retailers instead.
Speaking from an ad exchange perspective, Casale testified that moving ad servers is a big step up on a technical level, so publishers rarely do it. Making something new is “very complicated and expensive.” In the ad exchange market, Casale said competing with Google’s AdX is “extremely difficult,” and in experiments, reducing fees has had almost a “nominal” impact on the ability to get more business. Given the enormous network impact required to get an exchange off the ground, as well as the fact that it only gets visibility on the ad impressions it wins, “I can’t imagine anyone starting a new exchange right now,” he said.
Google’s lawyers poked at the arguments and credibility of witnesses during cross-examination, pointing out ways that players like Avery would benefit if the court forced Google to share access to its tools. Google will call its own witnesses to counter the DOJ in the next trial.
“I can’t imagine anyone starting a new exchange now”
This trial covers different ground from last year’s antitrust battle in the District of Columbia. But on the first day of court, both sides spoke of their previous battle. The Justice Department noted in opening statements that another court has already ruled on the question of Google’s search monopoly, referring to a ruling Judge Amit Mehta handed down just over a month ago. And while Mehta usually rules against Google, the tech giant cited one piece of ruling that went in its favor. The subject? A DOJ argument that Mehta interpreted as a requirement for Google to cut deals with competitors — and, accordingly, was dismissed.
