How Google tried to unravel the DOJ’s ad tech case

The Division of Justice simply wrapped up three weeks of trial the place it argued whether or not Google has created unlawful monopolies within the advert tech market. Throughout a lot of it, Google saved asking a extra elementary query: what is that market? 

The corporate has quite a lot of defenses to the DOJ’s accusations, starting from Supreme Court docket precedent to safety considerations. Certainly one of its largest, nevertheless, is that the company merely doesn’t perceive internet advertising. Google alleges that it’s slicing up the market in a manner that doesn’t make sense and that it downplays or ignores Google’s largest promoting competitors: social media.

Over the previous weeks, the DOJ has painted a really particular image of how internet advertising works. It’s involved with what it calls open net show adverts, higher referred to as the advert containers and banners you’ll see on numerous web sites (together with this one). It identifies a “trifecta of monopolies” right here: writer advert servers for promoting house on web sites, advertiser advert networks the place entrepreneurs purchase impressions, and exchanges that run superfast auctions to position adverts on websites.

This definition of markets issues for a few causes. The primary is that, when outlined on this manner, Google totally dominates: the DOJ estimates Google’s writer advert server, identified on this case as DoubleClick For Publishers (DFP), has about 90 p.c market share within the US. The second is that, in accordance with the DOJ, Google owes not less than a few of that dominance to tying its merchandise collectively. Witnesses testified again and again that publishers merely had to be on DFP as a result of it was the one solution to totally entry the massive base of advertisers in Google’s advert community by way of Google’s AdX trade. If we’re speaking about three totally different markets, that is likely to be Google leveraging its energy in a single market to knock out competitors in one other — a basic monopolist play.

Google says that’s unnecessarily complicated. Throughout its protection, it informed the courtroom we’re actually taking a look at one market with stakeholders on either side: patrons and sellers of digital promoting. From that perspective, Google is simply constructing one of the best single-market instrument that it might probably, connecting totally different elements to make it more practical. 

The corporate’s professional witness, economist Mark Israel, argued the DOJ’s definition “misses the forest for the timber.” The digital advert trade is simply “a enterprise about matches,” and moderately than posing a monopoly downside, Google’s built-in advert tech stack advantages its prospects. An all-in-one instrument might be cheaper than mixing and matching a number of totally different merchandise, Israel mentioned, since you don’t have a number of corporations every taking a separate fee.

Google is making an attempt to suit its case into the Supreme Court docket precedent referred to as Ohio v. American Categorical. That case was a couple of two-sided market within the bank card trade — with cardholders on one facet and retailers on the opposite. In a 2018 choice, the courtroom dominated that in this type of market, plaintiffs want to point out the anticompetitive hurt spans either side. 

If Google can show that there’s only one two-sided market moderately than three distinct ones, it makes the federal government’s case harder. The DOJ must exhibit that Google’s actions harmed each publishers and advertisers. That’s a tough proposition as a result of a selection that drives down the worth of publishers’ advert house might save advertisers cash, and a selection that drives up prices for advertisers may very well be a windfall for publishers. The mere indisputable fact that Google advantages, too, doesn’t make it illegal.

The variety of markets isn’t Google’s solely objection. The DOJ says open net show adverts are a definite phase of promoting with no sufficient substitutes. For those who don’t like Google’s product, you may’t get comparable outcomes by merely shopping for adverts some place else, like social media or video streaming companies, as a result of these adverts typically serve totally different advertising functions and require totally different design codecs.

Google says advertisers merely care about getting a return on their funding. In the event that they’re spending extra money than they’re making from an open net show advert, they will — and continuously do — transfer their finances to a different venue like social media, streaming companies, and cellular apps.

The DOJ needs to restrict the market definition simply to the open net: locations the place adverts might be purchased and offered with third-party instruments, in contrast to a “walled backyard” like Fb that has its personal ecosystem for purchasing adverts on its website. Google needs that record to incorporate a a lot bigger pool of issues we eat digitally, regardless of the scope of the ad-buying instruments. 

Inner Google paperwork confirmed it fastidiously watched opponents the federal government has outlined to be outdoors the related market, together with social media platforms like TikTok and Fb and retailers like Amazon, which it known as an “existential menace.” Since Google noticed it that manner, Israel mentioned, it did have a examine on its energy that will hold it from performing anticompetitively.

And regardless that so many publishers use DFP, he mentioned, massive tech corporations like Amazon and Reddit have switched away from it to their very own in-house advert servers. The menace that even a number of massive prospects might swap may very well be sufficient to constrain Google’s energy, stopping it from jacking up costs.

Google additionally argues the DOJ is ignoring a key a part of its empire: its demand-side platform DV360. The place advertiser advert networks like Google Advertisements cater to smaller prospects, demand-side platforms (DSPs) are utilized by larger corporations that need extra customization. The DOJ has largely handled these as separate markets, claiming Google has a monopoly in advertiser advert networks however not in DSPs.

However Google has introduced witnesses and paperwork indicating that many massive advertisers use each. In doing so, it’s apparently chipping away on the declare that Google monopolizes a discrete, definable nook of internet advertising. If advertisers see the instruments as a part of the identical product, and the DOJ concedes Google faces actual competitors in a part of that product, can the entire package deal be a monopoly?

On cross-examination, DOJ counsel Aaron Teitelbaum chipped away at Israel’s credibility, portray him as a profession trial witness — and a questionable one, at that. Israel conceded that about 80 p.c of his work is being an professional witness, and he’s testified greater than 40 instances as such, although he’s by no means held a tenured tutorial place. In an train that resembled studying out imply tweets, Teitelbaum learn out essential feedback by judges in different instances, together with one which he introduced as exhibiting Israel misunderstood core elements of antitrust legislation. 

Teitelbaum argued in opposition to a declare that Google faces competitors as a result of corporations are spending more and more much less on show adverts relative to social media. He used the metaphor of a household that spends cash on each smartphones and dishwashers. As smartphones turn into extra ubiquitous, the household may spend a larger share of their finances on them, whereas the share of finances spent on dishwashers would decline as compared — however that doesn’t imply dishwashers are an alternative to smartphones. (We don’t know if that metaphor will win Choose Leonie Brinkema over, however she did name Teitlebaum’s metaphors a “nice change” from weeks of promoting jargon.) 

Teitelbaum additionally identified that regardless of what number of corporations are capable of swap a few of their advert spending to social platforms, publishers like The New York Occasions will nonetheless have show advert stock they should promote.

Leaning on metaphor once more, Teitelbaum in contrast Google’s strategizing to Costco’s infamously low-cost rotisserie chickens. Google and Costco, he argued, are each prepared to lose cash in a single space to make extra some place else. Israel conceded he hasn’t dominated out the possibility Google achieves worth from its huge information and scale, even when providing low costs is what will get prospects within the door.

And to handle the argument that corporations can merely shift cash round, the DOJ introduced again a single witness: DailyMail.com chief digital officer Matthew Wheatland. Wheatland shot down a suggestion by Israel that publishers might keep away from Google by directing customers to apps and promoting adverts inside that.  It’s “massively troublesome to transform an internet consumer to be a loyal app consumer,” Wheatland mentioned — actually, solely 2 p.c of the Each day Mail’s readership accesses it by way of the app. As for a suggestion that publishers merely negotiate direct offers with advertisers, Wheatland mentioned they’re already doing this as a lot as doable, and it’s a pricey endeavor that requires groups of salespeople and assist workers.

Choose Brinkema, who ushered alongside the extremely technical trial a lot faster than the unique six-week timeline, hasn’t executed a lot to tip her hand about who may win. Brinkema has remained attentive, however she’s requested solely occasional questions to tell her understanding of the case. On the trial’s ultimate day, nevertheless, she gave one small glimpse into her pondering.

Earlier than the federal government began its rebuttal, Google objected to the DOJ’s framing of a separate lawsuit the place it claimed Google used a distinct market definition, contradicting its place right here. Brinkema mentioned that “market definition is core to this case,” and it’s “considerably of an issue for Google to take one place in a single courtroom and considerably of a distinct place in one other courtroom.” However, she mentioned, she’d have a look at the “total combine” of proof in reaching her choice. When the events return to courtroom for closing arguments on November twenty fifth, she’ll have another likelihood to ask the attorneys what the boundaries of that market ought to appear like.