The Justice Department is wrapping up its presentation of evidence. Now, ad industry leaders say that Google will be hard-pressed to prove its case.
Google’s landmark adtech antitrust trial is growing more heated by the day.
The tech titan is battling the US Department of Justice (DOJ) over allegations that it operated a monopoly in the adtech market, wielding control over key components of the digital ad ecosystem, including advertiser networks, publisher ad servers and ad exchanges. The DOJ alleges that this regime has enabled the company to exert undue influence over the market, stifling competition and harming both publishers and advertisers.
The drama is playing out in a contentious trial that began in a Virginia courtroom on September 9.
It’s the company’s second major antitrust case this year. In August, a federal judge determined that Google’s search business violates competition law in the government’s biggest takedown of a US tech company in a quarter century (the last being the 2000 ruling that found Microsoft’s web browser business to be monopolistic).
A week and a half into the trial, advertising industry leaders say that Google has its work cut out for it.
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What are the central arguments of the case?
The Justice Department’s antitrust case against Google’s adtech business centers on several key allegations. At the forefront is the claim that Google has unlawfully monopolized the market for ad servers – a critical piece of digital advertising infrastructure. The DOJ argues that Google’s 2007 acquisition of DoubleClick solidified its dominance, making its ad server the default choice for publishers and leaving them with few viable alternatives. This control, the DOJ contends, has made it exceedingly difficult for publishers to switch to rival platforms.
Further, the Justice Department asserts that Google’s grip on ad networks has forced advertisers into a corner.
The DOJ also alleges that Google unfairly integrated its ad exchange with its ad server, gaining a competitive edge in the ad auction process. By manipulating auction rules and giving itself a ‘last look’ at bids, Google is accused of driving up costs for advertisers while cutting into publisher revenues. The government argues that these practices, combined with Google’s strategy of linking its publisher and advertiser tools, have created an ecosystem where both advertisers and publishers are compelled to rely on Google’s suite of products to stay competitive, thus further entrenching its market power.
From Google’s perspective, these claims are unjustified. The company argues that its adtech products are not monopolistic but rather promote innovation and help support a flourishing, competitive market.
Google’s integration of various adtech tools is a feature, not a flaw, designed to make digital advertising easier and more cost-effective for users, the company says. Even so, its tools are interoperable with rivals, the company says, pushing back against the notion that publishers and advertisers get unfairly locked into the Google ecosystem. And Google maintains that it operates in a fiercely competitive market, pointing to rivals like Microsoft, Amazon and Meta.
What’s more, Google disputes what it sees as an overly narrow market definition, asserting that the digital ad landscape is broader and more competitive than the DOJ suggests, encompassing areas like apps, retail media networks and connected TV.
“The main issue in the trial is around market definition,” says Derek Zolner, general counsel at digital advertising platform Basis Technologies. “The government contends that Google has a monopoly in the ‘open web display advertising’ market. Google contends that market definition is much too narrow and that the proper market is ‘digital advertising,’ which would include Facebook and other channels.”
The case will be decided by Judge Leonie Brinkema rather than a jury – a decision made in June after Google paid $2.3m to settle the DOJ’s monetary damages claim, according to a Reuters report.
What have been the milestone moments in the trial thus far?
Drama swirled around the trial before it even kicked off, with Judge Brinkema criticizing the company’s attempts to conceal internal discussions related to litigation. At a pre-trial hearing in August, she criticized a directive from Google’s chief legal officer, Kent Walker, instructing employees to turn on auto-deletion for chats about sensitive legal matters.
Then, the trial began with a bang on September 9, with DOJ attorney Julia Tarver Wood reportedly accusing Google of creating a “trifecta of monopolies” by controlling advertiser networks, publisher ad servers and ad exchanges.
Google, however, has said it invested billions in adtech to create tools that benefit advertisers and publishers while supporting market competition.
Over the course of the last week and a half, several key testimonies have shed light on how Google’s adtech practices affect the industry.
Tim Wolfe, an executive from Gannett, testified on the first day of the trial that the publishing company has little choice but to use Google’s ad products, even though Google takes a significant portion – about 20% – of the revenue from each ad placement. He said that of the $15m that Gannett spends on putting its ad inventory up for sale to advertisers annually, $10m is pocketed by Google. Switching to another ad server would be prohibitively costly and difficult, Wolfe said.
Stephanie Layser, a former NewsCorp exec, added that nearly every major publisher uses the company’s advertising platform for publishers, Google DoubleClick for Publishers – but not because the product is superior. Rather, they rely on the product because Google’s dominance in the market makes it indispensable.
Layser also spoke about Google’s auction manipulation practices, arguing that Google’s overwhelming control over advertiser demand prevented publishers from innovating around their own business models.
Andrew Casale of Index Exchange echoed these sentiments, describing Google’s outsized role in determining which ads win auctions and its control over the data publishers need to operate effectively.
Internal Google documents, introduced as evidence, further complicate the company’s defense. The communications suggest that Google was aware of the strategic advantages it gained from acquisitions like DoubleClick and the challenges competitors faced due to the high costs of switching ad servers.
In one particularly damning set of internal comms from 2009, David Rosenblatt, Google’s former president of global display advertising, compared Google’s control of the ad market to owning both Goldman Sachs and the New York Stock Exchange. In such a scenario, competition is effectively stifled, as one company acts as both a participant and the referee. He wrote: “If we execute…we’ll be able to crush other networks, and that’s our goal.” He also indicated that Google aimed to establish the same degree of dominance in the display advertising market as it had already secured in online search.
On the third day of the trial, Judge Brinkema questioned what might happen should Google be “blown apart.” In lieu of a “great, big, mega” Google, she pondered, would publishers be better or worse off? It was a striking moment to hear the judge consider a potential breakup aloud, according to Arielle Garcia, director of intelligence at Check My Ads, an adtech industry watchdog, who was in the courtroom.
In response to the hypothetical, Jed Dederick, chief revenue officer at demand-side platform The Trade Desk, said the biggest hurdle would be finding a strong alternative to Google’s ad server. Viable rivals to Google’s ad exchange, however, already exist – and publishers would ultimately be able to manage, he said.
In another major moment on the stand, Brian O’Kelley, CEO of Scope3 and former CEO of AppNexus, appeared in a video deposition on Monday, September 16. He testified about Google’s dominance in the digital ad market, particularly regarding user data and competitive practices. O’Kelley detailed how Google used its influence to block the integration of Prebid, a tool designed to help publishers increase revenue, into the IAB Tech Lab, an industry standards-setting body. Despite Prebid’s potential to foster competition, Google, the IAB’s largest financial contributor, objected, forcing Prebid to operate independently as a nonprofit.
This point, notes Check My Ads’ Garcia, “highlights how things that are a mere footnote to the trial can be … important in terms of understanding the breadth and depth of Google’s power over the industry.”
In his testimony, O’Kelley also suggested that part of Google’s significant advantage in the adtech sector is its vast access to user data – and insights from that data help the company dominate digital ad auctions. His perspective highlighted how Google’s control over both market demand and user data may enable it to suppress competition and limit options for publishers and advertisers.
Much of the back-and-forth in the courtroom has, as experts predicted, centered around the question of market definition. Offering an analogy, Basis Technologies’ Zolner says: “Google’s position is like someone who owns all of the car dealerships arguing that they don’t have a monopoly because they are competing with buses, subways, trains, taxis and other ways for people to get around town. Sure, people may use those modes of transport in lieu of a car, but none of them is a like-for-like substitute. The judge may follow the line of thinking that while there may be competition for advertiser dollars, Google has monopolistic control of one specific channel of advertising – open web display advertising.”
Google has continued to oppose the DOJ’s market definition, however, arguing that it reflects an outdated and limited view of today’s digital advertising ecosystem.
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It appears likely that the DOJ’s case in chief, or presentation of evidence, will wrap soon. In Garcia’s telling, the DOJ has done a “masterful” job in spelling out its case, from defining key concepts to demonstrating the real-life impacts of Google’s practices.
Other industry leaders agree with the assessment. “DOJ is proving its case and [demonstrating], ‘How did we allow such an abusive marketplace to ever surface in this way with so many blatant conflicts of interest?’” says Jason Kint, CEO of Digital Content Next, a digital media trade body.
While Google will soon have the opportunity to respond to the DOJ’s barrage of evidence, Kint doesn’t expect much from the company’s witnesses. “Mainly, we expect them to be small, conflicted businesses from Google’s astroturf groups professing the efficiencies of Google for their businesses and Google-funded experts attempting to confuse the market analysis.”
Google did not immediately respond to a request for comment.
What kind of outcome should we expect?
Considering the centrality of market definition in the case, it’s likely to be a determining factor for Judge Brinkema. “If the judge accepts the government’s market position, I believe she will find that Google is a monopoly,” Zolner says.
And at this point in time, many industry players suspect that the DOJ may have the upper hand.
“The mood seems cautiously optimistic among those advocating for a more competitive landscape,” says Jeremy Haft, chief revenue officer at adtech firm Digital Remedy.
Others, like Kint, are more bullish still. “This is DOJ’s case to lose at this point,” he says. Not only will Google need to “mount a defense that hasn’t been evident to date,” but it will also need to make the case that internal communications about the case that were found to be deleted, per instructions from the company’s chief legal officer, wouldn’t have made a meaningful difference. “Hard to do at this point in the trial,” Kint says.
The DOJ’s aim is to break up Google’s adtech business – particularly its Ad Manager platform, through which advertisers and publishers buy and sell ads (though a variety of other remedies may be proposed outside of, or in addition to, a divestiture of Google Ad Manager).
A mandated breakup would not only dismantle Google’s digital ad empire, but also reshape the broader ad industry, opening the door to new competitors, potentially driving down costs for advertisers and boosting revenues for publishers.
The Trade Desk, in particular, would be well positioned to cash in on a Google adtech breakup, considering that it already operates one of the most popular demand-side platforms and could easily slurp up a larger share of the market.
Google, for its part, warns that a breakup could backfire, harming small businesses that rely on its tools for affordable and effective digital advertising.
Regardless of the outcome, this case could set a precedent for future regulatory action; should the DOJ prevail, we may reasonably expect to enter an era of stricter oversight and regulation for other tech giants – especially those with significant market power in areas like media, journalism and digital advertising.
In the words of Amelia Waddington, global chief product officer at Captify, a search advertising platform, “Regulators have historically struggled to legislate and enforce rules across adtech due to the complexity and opaqueness of the technology,” she says. Without knowing the outcome of this case, she anticipates that lawmakers will move to “address the structure of the market” in the near future, and “remove the ability of any company to own an end-to-end supply chain … letting market dynamics deal with pricing.”
The sentiment is echoed by Haft, who says the trial may “serve as a bellwether for broader efforts to address anticompetitive practices across the [ad] industry.”
The case is part of the Biden administration’s broader efforts to address competition in the tech industry. In particular, the Federal Trade Commission, under the leadership of Lina Khan (a Biden appointee), has aggressively challenged a number of tech companies – including Meta and Amazon – in the last three years.
As the industry waits with bated breath to see how Google’s defense will hold up under scrutiny, the stakes are high. A ruling in favor of the DOJ could not only break apart one of the largest adtech businesses in the world but also redefine how digital advertising is bought and sold.
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