On today's podcast episode, we discuss what’s going on with Google’s digital advertising technology antitrust trial, the Department of Justice’s (DoJ) case against them, Google’s best defense, and what happens if the DoJ wins. Tune in to the discussion with host Marcus Johnson, senior director of Briefings Jeremy Goldman, and our analyst Evelyn Mitchell-Wolf.

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Episode Transcript:

Marcus Johnson (00:00):

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Evelyn Mitchell-Wolf (00:19):

Changes that Google has made, seemingly for its own purposes, are being shoved down publishers throats and they don't have any recourse. They cannot advocate for themselves effectively to Google to make sure that their issues are being heard, especially because Google serves both sides of the markets.

Marcus Johnson (00:41):

Hey gang, it's Thursday, September 19th. Evelyn, Jeremy, and listeners, welcome to Behind the Numbers Daily, an eMarketer podcast. I'm Marcus. Today I'm joined by two folks. We start with one of our senior analysts who covers everything digital advertising and media, based in Virginia. It's Evelyn Mitchell-Wolf.

Evelyn Mitchell-Wolf (00:59):

Howdy everybody.

Marcus Johnson (01:01):

Hello there. And we also have our senior director of briefings based in New York City. It's Jeremy Goldman.

Jeremy Goldman (01:07):

Hello there, Marcus. Hey Evelyn.

Marcus Johnson (01:09):

Hello. So today's fact, the hottest and coldest temperatures in US history, according to the National Centers for Environmental Information, cited in an article written by Bruno Venditti of Visual Capitalist. Hottest temperature ever recorded in the country was which state?

Evelyn Mitchell-Wolf (01:28):

Texas.

Marcus Johnson (01:29):

No.

Jeremy Goldman (01:29):

Arizona.

Evelyn Mitchell-Wolf (01:31):

Oklahoma.

Marcus Johnson (01:31):

No.

Jeremy Goldman (01:31):

California.

Marcus Johnson (01:32):

California is correct. It was an inexplicable 134 Fahrenheit or 57 Celsius in Greenland Park, now reasonably known as Furnace Creek, in Death Valley, California, a few hours west of Las Vegas, July 10th, 1913. That's not even the crazy part. Close to 1000 people called Death Valley home. Come again?

Jeremy Goldman (02:01):

What?

Evelyn Mitchell-Wolf (02:02):

How?

Jeremy Goldman (02:02):

You probably don't have to entertain that often if you live there though. That's good. Like would you like to come over to a happy hour in Death Valley?

Marcus Johnson (02:10):

No. No, I would not. That's horrendous. The coldest temperature ever recorded was in which state?

Evelyn Mitchell-Wolf (02:17):

Alaska.

Marcus Johnson (02:18):

There it is. Indeed, it was Alaska. -80 Fahrenheit, -62 Celsius at Prospect Creek Camp, which is almost in the middle of Alaska, January 23rd, 1971. What are we doing?

Jeremy Goldman (02:35):

Wow.

Marcus Johnson (02:35):

You'll be shocked to learn though, folks that Prospect Creek Camp has no permanent residents. Thank God. Anyway, here's real topic. The second antitrust trial, has Google illegally monopolized the ad tech space?

(02:57):

All right folks, let's get into it. So Google faces trial in a second antitrust case that just started and will likely last several weeks where the US Department of Justice will challenge how the search giant monetizes advertising through a system prosecutors say harms news publishers, writes Jody Godoy of Reuters. This second trial follows a huge win for the DoJ in a separate case at the start of August where a judge found that Google illegally monopolized online search.

(03:24):

This second case, however, centers around Google's advertising technology and it's alleged monopolistic behavior over how ads are bought and sold on the internet. The Justice Department alleges that Google controls 91% of the market for ad servers where publishers offer ad space, over 85% of the market for ad networks, which advertisers use to place ads, and over half of the market for ad exchanges. Google says those shares are much, much lower. The DoJ is expected to argue that Google's dominance over placing ads online results in higher prices for advertisers and publishers and that it is hurting specific industries like news publishing folks. Google says it has been successful because it is the best ad system in the face of plentiful competition. Is that about what's going on? Evelyn, fill in the blanks.

Evelyn Mitchell-Wolf (04:13):

Yeah, I mean you covered a lot of the basics there.

Marcus Johnson (04:16):

Nailed it.

Evelyn Mitchell-Wolf (04:16):

Yeah. Well, I mean, did you mention that the trial started on September 9th and that it's moving very, very quickly?

Marcus Johnson (04:24):

I did not. That's a good-

Evelyn Mitchell-Wolf (04:25):

The DoJ anticipated needing three weeks to make its case and now it's estimating that it'll take about half that. That is, I think, an important piece of context in this case when we're contextualizing alongside the search case which took a lot more time. And then I think part of that is because the search case was more consumer-facing. Regular people know about Google search and Google search competitors, whereas ad tech is a lot more under the hood when it comes to the advertising industry. So that's definitely a difference here as well.

Marcus Johnson (05:00):

Yeah, on that point, there's a Vanderbilt Law School antitrust professor, Rebecca Haw Allensworth, who says, "The case involves a highly technical market with lots of complicated tools and processes that most regular consumers, likely including the judge don't encounter every day. And so for that reason, a lot of it's going to come down to who's the best storyteller." Fair?

Evelyn Mitchell-Wolf (05:22):

Yeah, that definitely seems to be how it's going so far. And market definition is playing a huge role. It's one of the pieces that Google is really going after, but we'll get into the DoJ's argument and Google's counter arguments in a second.

Marcus Johnson (05:37):

All right, so to summarize in short what we're talking about here, Kendra Barnett of the Drum was writing the DoJ is levying four major claims against Google. Arguing that Google unlawfully leverages market position to, one, monopolize ad servers. Two, monopolize ad networks. Three, monopolize or attempt to monopolize ad exchanges. And four, unfairly tie together its publisher and advertiser tools. Prosecutors allege that Google's practices have enabled the company to maintain a, what they call privileged position as the middleman in the digital ad ecosystem and unlawfully dominate the market.

(06:11):

All right folks, so I've asked Evelyn and Jeremy to pretend to be lawyers for each of the respective positions and present the for and against arguments for each. Evelyn is going to be representing the DoJ's case against Google. Jeremy is then going to be offering what Google's defense is most likely to be. Evelyn presenting the DoJ's case. What will they argue?

Evelyn Mitchell-Wolf (06:35):

Well, you kind of outlined the DoJ's case a couple of times already. So the DoJ is seeking to prove that Google has monopolies in three ad tech markets, and importantly that there exists three separate markets in these different spaces. So the first is the publisher ad server market. For anyone that needs a little bit of a deeper dive into what that means, ad servers manage ad inventory, facilitate direct deals, track and analyze the results of campaigns. They do a lot for publishers and they're really sticky. It is a giant pain to change ad servers and it's not really practical for a publisher to have more than one ad server. So those elements have been explored by the DoJ witnesses so far. The second market is the ad network market. Google's product in this space is Google Ads. It's Google's general ad buying platform, and the third market is the ad exchange market that sort of sits between the other two markets. Ad exchanges aggregate supply from the sell side and demand from the buy side to facilitate real time bidding transactions. Google's ad exchange is known as AdX.

(07:47):

So the DoJ is making the case and many of the witnesses that the DoJ has called so far agree that Google has made demand from Google Ads exclusive to its ad exchange, AdX and then gave publishers access to AdX exclusively through its ad server, which is sometimes called DFP, which is short for DoubleClick For Publishers. Sometimes it's called GAM, which is short for Google Ad Manager. The acronyms in this case are absolutely wild, so apologies if it gets a little off the rails here. I'm going to do my best. You all can keep me honest.

Jeremy Goldman (08:20):

You didn't talk about RTP. That's another one.

Evelyn Mitchell-Wolf (08:22):

No, and there's-

Marcus Johnson (08:24):

I feel bad for the judge going through this. Every time they say something, one second, one second, hang on. Checklist, checks list. Okay, keep going. Keep going.

Evelyn Mitchell-Wolf (08:30):

Yep. Oh, and the emails too. The Google's internal emails where they just put HB to mean header bidding. I mean it's a lot.

Marcus Johnson (08:40):

I feel [inaudible 00:08:40].

Evelyn Mitchell-Wolf (08:39):

I do feel for the judge. I mean I feel for anyone that's trying to keep up. Myself, I mean, I'm not there witnessing these things, but it is a lot to parse. But anyways, the DoJ contends that all of those relationships between Google's ad products, it's textbook anti-competitive tying where a seller makes the sale of one product conditional upon the purchase of another. For publishers, they cannot access Google's massive amount of demand, ad demand without using Google's ad server or they risk access to that demand if they were to use a competitive product.

(09:18):

The DoJ also accuses Google of acquiring its way to a dominant position in the market. So rather than developing an innovative ad server product to compete on its merits, it bought competitor DoubleClick in 2008 and then that acquisition laid the groundwork for its later anti-competitive conduct across the ad tech industry wherein Google used its end-to-end view of the market to win more auctions, thus increasing publisher reliance on Google. And the DoJ has brought a lot of emails to the surface, a lot of ad tech participants and experts to talk about how that came to be and the effects that it has had on publishers. Not so much the advertiser side of things, mostly on the publisher side of things. Yeah, it's been dramatic.

Jeremy Goldman (10:05):

And I have 17 different responses as Google's chief counsel here. So put me in, coach.

Marcus Johnson (10:12):

Do it Jeremy, what's the retort from Google?

Jeremy Goldman (10:15):

Okay. I mean, so there are so many different places that we can begin, but I think one of the most important places is with market competition and innovation. Google operates in a highly competitive ad tech market, includes a lot of other players. Ultimately it's making most of its money off of advertising and it's competing with players like Meta and Amazon and TikTok in that area. There are also DSPs and SSPs. We talked about all those acronyms and that's a perfect example. I mean the growth of display advertising and programmatic tools in the market definitely shows that Google is not monopolistic. Again, this is me being paid to represent Google here, I'll just say. And I also think the other thing that's worth noting is Evelyn brought up-

Marcus Johnson (11:05):

Hang on a second.

Jeremy Goldman (11:05):

What's that?

Marcus Johnson (11:05):

Who's paying you? Dammit Victoria, stop promising people money we don't have.

Jeremy Goldman (11:11):

But the choice for publishers and advertisers, contrary to the DoJ's claim, I would say that publishers and advertisers have broad choices in the ad tech market. You have Google Ads and AdX and other Google services. They're optional and there are viable alternatives to them. There's pre-header bidding that allows publishers to bypass Google's ad stack if they prefer.

(11:38):

And I think one thing that Evelyn talked about before, there's so many different things we could talk about here, but the lack of clear market definition to me is a really important one here. The DoJ's whole case is based off of a vague and kind of narrow market definition. Display advertising encompasses many channels beyond just Google's offerings like social media, retail media, mobile and app ads. So how are we really defining this here? And it doesn't... I think that narrow definition fails to account for the broader ad ecosystem that we're all living in these days.

Marcus Johnson (12:17):

Evelyn, what does the DoJ say in response to that?

Evelyn Mitchell-Wolf (12:21):

Yeah, I mean, the DoJ has brought witnesses to sort of attest to the fact that advertisers don't really budget according to Google's view of the ad ecosystem. And Amazon is not a perfect substitute for programmatic open web display is sort of the term that folks have been using during this case.

(12:43):

It's not the same thing as Meta ads. They serve different purposes for advertisers. There's been a lot of discussion about the funnel and the consumer journey and where different ads come to play. And also for publishers, there is a long tail of publishers that for whom programmatic display, so the ads on web pages that do not have the advantage of walled garden technology and walled garden status in the ecosystem. They all depend on Google essentially, and they have been locked into Google's ecosystem because without Google, they have no way to monetize that inventory effectively because of the amount. I mean, there's just so many...

(13:28):

You see how the dominoes fall here, right? Google has so much scale, it has so much data and it has... I mean there's been some really great quotes coming from DoJ witnesses where publishers feel like changes that Google has made seemingly for its own purposes are being shoved down publishers throats and they don't have any recourse. They cannot advocate for themselves effectively to Google to make sure that their issues are being heard, especially because Google serves both sides of the market. So there's a conflict of interest there.

Jeremy Goldman (14:00):

Even though that's true though, it's important to mention in terms of who does Google serve, and I would argue that one of the most important people to serve in the end is the consumer and Google's investment and tech, like real-time bidding, the RTB I was referring to before and dynamic allocation, those were groundbreaking innovations that benefited publishers and advertisers alike, increased transparency. Those are the kinds of things that actually benefit the consumer in the end. And it's worth noting that if we're going to say that, okay, well there's a whole antitrust here, this case, I feel like an underlying thing is that Google can just acquire its way to the top and not necessarily double down and invest. And there are a lot of different cases where Google has invested to create a better ecosystem, even though yes, it has grown. I mean, nobody's going to argue Google is a small little thrifty startup at all.

(14:57):

But I mean, I think that you also... If you look at it, there are rivals here in this ad tech market, so this whole entire... There's insurmountable barriers argument. I mean, when you look at rivals like Annex's, The Trade Desk, there are smaller players that continue to innovate and succeed to some degree. So I think we have to be careful about punishing my client just for being really good at what it was tasked to do, which is to create a vibrant ad ecosystem that worked for a number of different players for years.

Marcus Johnson (15:34):

So I want to look ahead a little further down the road to what happens if the DoJ wins because Dr. Erik Hovenkamp, professor of law and the director of competition policy research at Cornell Law School was saying the DoJ is in a powerful position to come out on top saying, "This strikes me as the strongest of all the big tech antitrust cases brought by antitrust agencies in recent years. The allegations are serious and compelling and there are no obvious justifications that might excuse all of the misconduct being alleged." So Evelyn, if you win, if the DoJ does win in this case, what are the likely outcomes?

Evelyn Mitchell-Wolf (16:12):

Well, in this case, we do have, the DoJ has asked for a particular remedy, which is that Google be forced to divest some components of its ad tech stack, particularly on the sell side of things. So that's certainly on the table and it is a potential reality that Google also faces in the search antitrust case that it just lost. So that could be an interesting sort of dynamic to see what happens between the two cases. Being short of divestment, there are also behavioral remedies that the government would be tasked with overseeing and enforcing things like if Google were to try and make a change to its publisher ad server, the government could come and inspect it and make sure that it wasn't verging on anti-competitive. That can get... It's hard to predict exactly what kinds of conduct would be on the chopping block or would be subject to scrutiny, but that is one of the levers that the government could look to pull to reduce Google's anti-competitive tendencies.

Marcus Johnson (17:18):

Yeah, a victory for the states and the DoJ could mean, as you were saying, that US District Judge Leonie Brinkema could order a breakup with the company. Jennifer Elias of CNBC, also noting that Google could see a flood of litigation from advertisers seeking monetary rewards if the DoJ is successful. She says, "Bernstein analysts think Google could face up to $100 billion in lawsuits."

(17:42):

Jeremy, how significant do you think this could be for Google if they lose in this regard? Because Professor Allensworth, who I cited before of Vanderbilt was saying this kind of one two punch, referring to the first case, the antitrust case against Google, and them paying to be the default search engine on different devices, losing that... Basically they were saying, professor Allensworth saying that Google still licking its wounds from having just lost that antitrust case, and it would be bad for it to lose this one as well. How much do you think losing the pair of them back-to-back could harm Google?

Jeremy Goldman (18:16):

I mean, is it better to lose them with more space in between them? Technically, sure. But I think that the bigger deal here, first off, I think that this case could have broader implications, much broader, even though to the average consumer, they might not get it as much, to Evelyn's point before. But when you think about things like restrictions on self-preferencing, when you think about maybe having ongoing regulatory oversight, obviously the fines and compensations part for harm parties like advertisers, and then also by the way, prohibitions on tying arrangements that Google's had before with its ad server and ad exchange. All of those things are in worst-case scenario for Google, this is the end of Google as we know it and have known it for decades. So this is so huge where it to be a worst-case scenario for Google, that it doesn't matter if the search thing happened earlier this year instead of just in the last few months. I think that this is, I don't want to overstate this, but this is one of those things that actually it's hard to overstate the worst-case scenario.

Evelyn Mitchell-Wolf (19:27):

Yeah. Another thing I think that could be interesting too is that in this case, and the last case, Google has been accused of obstructing evidence, of obfuscating evidence, deleting evidence of anti-competitive behavior. And because it's happened, these two cases have been stacked on top of each other, and both judges in both cases have sort of had to slap Google on the wrist. It could be interesting to see how the government approaches that kind of oversight as well for big tech entities trying to make sure that they are not covering their tracks before they have a chance to investigate them for antitrust reasons.

Jeremy Goldman (20:05):

And that point shouldn't be undersold just because this is, I think, a more technically complex case. And I think that's the kind of thing that just frankly makes you look a little bit more guilty and makes... If I'm a judge, I'm looking at this much more thoroughly and through a different lens when I see some of the things that Google's done to obfuscate here.

Marcus Johnson (20:29):

And then also, I mean, a lot of the time you look at what's going on across the pond and you take that legislation applied to the US. In this case, it seems as though people across the pond, European friends, might be looking across the pond, this direction towards the US to see how this trial plays out. Because the UK Competition and Markets Authority said to believe Google was abusing its dominance in the ad tech industry by self- [inaudible 00:20:55] its own ad exchanges and overcharged advertisers as well. And the EU has hit Google with a similar antitrust charges over ad tech back in July. So we've got those cases to watch, similar cases to watch across the pond for Google.

[NEW_PARAGRAPH]That is all we have time for for this episode though. Thank you so much folks for helping me understand, and also the listeners understand this case a little bit better. Thank you to Evelyn.

Evelyn Mitchell-Wolf (21:16):

You're welcome. Just scratching the surface here.

Marcus Johnson (21:18):

I know, unfortunately.

Evelyn Mitchell-Wolf (21:19):

But check back for more hot takes from us on this.

Marcus Johnson (21:21):

Definitely will be [inaudible 00:21:22] again very, very soon. Thank you to Jeremy.

Jeremy Goldman (21:24):

It's a pleasure as always.

Marcus Johnson (21:25):

And thank you to Victoria who edits the show, Stuart runs the team and Sophie who does our social media. And thanks to everyone for listening in. We hope to see you tomorrow for the Behind the Numbers Weekly Listen, an eMarketer video podcast that you can watch on YouTube. And now you can watch the video version on Spotify. If you play the Weekly Listen on your Spotify app, a video will pop up on the screen so you can follow along to the charts, the data that we use and see our faces. Or you can, of course, just use Spotify, Apple Podcasts or any other podcast player to listen to us the usual way.