U of Digital Newsletter - 9/11/24 (free)

Author

Shiv Gupta
September 11, 2024

September 5th-September 10th

Below is a roundup of last week’s notable industry news, with summaries and our opinions. The biggest case in digital advertising history started on Monday…

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Summary: Google's highly anticipated ad tech antitrust trial kicked off Monday with a who's who of industry veterans testifying about how the company's publisher ad tools and policies impacted their businesses. The case centers on Google's dominance in several key areas of the ad tech supply chain, including ad serving, ad buying, selling, and an ad exchange, and whether the company abused that control to give itself an advantage at the expense of competitors, publishers, advertisers, and consumers. The DOJ and a coalition of states that joined the case are looking to break up Google's ad tech operation, including a forced divestiture of its Ad Manager suite. There has already been plenty of spicy testimony.

The DOJ aims to show that Google amassed massive market power by buying companies like DoubleClick, which it says enabled Google to reach 91% market share for publisher ad serving. Google policies commonly locked in customers, the government says, such as forcing publishers to use Google's ad server in order to access its ad exchange. For example, former NewsCorp executive Stephanie Layser testified that the publisher would have lost $9M in revenue if it switched to another ad server and lost access to Google's ad exchange. When Layser started working at NewsCorp in 2017, more than half of its ad sales flowed through Google's ad exchange, increasing to 70-80% by the time she left in 2022.

Google will try to show that advertisers and publishers have plenty of options in a highly competitive digital ad industry. It claims that customers use its tools because they are superior and that the DOJ may stifle innovation and make it more costly for small businesses to advertise if it is successful in "picking winners and losers." But Google seems to be facing significant headwinds just a month after it lost another major DOJ antitrust lawsuit over its dominance in search; punishment in that case won't be decided until next summer. Last week, the UK's Competition and Markets Authority (CMA) also accused Google of anti-competitive practices in digital advertising, which could lead to a significant fine (10% of annual global revenue) if the company is found guilty. And on Tuesday, the EU upheld a $2.7B fine against Google for giving itself an unfair advantage through its price comparison shopping tool at the expense of its European competitors.

Below are some helpful resources that are providing regular, blow-by-blow coverage of the trial:

Opinion: Coming out of day 1, Ari Paparo of Marketecture broke down the DOJ’s case as follows:

The plaintiffs’ case tracks their original complaint but with a bit of refinement and simplification. Instead of a litany of code words and secret projects, the case boils down to four allegations:

  1. Monopoly on publisher ad serving

  2. Monopoly on the ad exchanges

  3. Monopoly in the advertising ad network market (e.g., AdWords)

  4. Illegal tying of the ad server and the ad exchange

They supported these arguments with both juicy quotes and eye-popping market share stats…

Market

US share

Global share

Publisher ad server

91%

87%

Ad exchanges

47%

56%

Advertiser ad networks

88%

87%

Google’s defense, shared on their blog, breaks down into four points:

  1. There are hundreds of ad tech competitors—including many big players.

  2. Ad buyers and sellers mix and match our tools with those of our rivals.

  3. Our ad tech fees are lower than reported industry averages.

  4. DOJ’s case could make it harder for small businesses to grow and hurt the quality of ads people see.

The main point Google is trying to make in court is that these “markets” (e.g. ad serving, ad exchanges, ad networks, etc.) should not be considered distinct markets at all, there’s no such thing as “open web ad tech”, and that all of these markets should be viewed as part of a larger digital advertising ecosystem, which includes spend on walled gardens like Facebook and TikTok. In which case, Google and its specific products would not be considered monopolistic. This argument, of course, seems silly.

We don’t know how this case will go down. Here are a few things we do know:

  • There is tons of bipartisan support, and public pressure, to reign in big tech. Google is the poster child for big tech. 

  • Google has already been found guilty in the search antitrust case.

  • There will be very little pro-Google testimony in this case from folks across the industry that work at advertisers, publishers, ad tech cos, etc.  

  • There is tons of damning evidence that has come forth already, which very much paints Google as an ad tech monopolist. There will be more.

None of this seems great for Google. More to come…

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