Less than two weeks from now, the Department of Justice and Google will square off in a district federal courtroom in Alexandria, Virginia, over allegations that Google operates and maintains an illegal monopoly in the digital advertising market.
Starting last week and into this week, hundreds of court-filed declarations, emails, depositions and other documents were unsealed in the lead-up to the trial – and it’s a bonanza.
Some of the documents have been heavily redacted, and other evidence is still under seal. But what is available provides a fascinating look at how Google talked about its own products when no one else was watching – especially tools to counteract the rise of header bidding.
The trial begins on September 9 with Judge Leonie Brinkema presiding, and here’s a peek at what’s on the docket.
‘Why first look is crucial’
One of the main accusations in the government’s complaint is that Google manipulated auction dynamics to insulate itself and deprive rival ad exchanges of the scale they’d need to compete.
Header bidding is a primary example. It was first introduced roughly a decade ago by publishers as a partial workaround to circumvent the chummy relationship between Google’s ad server and its ad exchange.
To neutralize header bidding, which Google saw as a serious threat, it began testing a product called DFP First Look that allowed publishers to give certain preferred buyers access to their inventory ahead of reserved inventory in their ad server.
Google positioned it as better for publisher revenue and better for open exchange win rates. But really, according to Google’s own internal documentation, it was mostly better for Google.
One exhibit entered into evidence is a slide from a Google presentation about DFP from April 2015 entitled, “Why first look is crucial.”
The slide states: “First look allows access to the most valuable cookies, hence the highest-paying impressions. Without first look, we are left with inventory that other buyers have had a look into and didn’t want to pay for.”
Last look ‘creates a big advantage’
As time ticked on, Google continued making moves to declaw header bidding.
It started beta-testing a tool called open bidding (OB) in 2016 (previously called exchange bidding in dynamic allocation) that allowed publishers to use their own demand to bid on impressions in AdX.
Google portrayed OB, which was fully rolled out in 2018, as an enhanced and more publisher-friendly version of header bidding that would maximize demand. But, according to the DOJ, it was really a Google-friendly attempt to handicap rival exchanges by impairing their chances of winning impressions.
Because although Google eventually gave up its first look advantage, it continued to operate a second-price auction in AdX. This meant Google still had the opportunity to cherry pick the best impressions and outbid other exchanges.
It’s not such a big deal giving up first look, when you’ve got last look.
In 2019, Google moved to a first-price auction and also ceded its last look advantage in AdX, in part because it had to. Most exchanges had already moved to first price.
Google was well aware of what it meant to give up first look.
In an unsealed but still mostly redacted Google position paper marked “Privileged and Confidential (Please Do Not Share)” about the migration to a first-price auction, Google acknowledges that last look “creates a big advantage.”
Removing this advantage, according to the documents, results in a 21% revenue loss for Google display ads and a 9% revenue loss for DV360 – 14% combined.
‘Extremely sensitive’
Meanwhile, other ad exchanges experienced a decline in spend following the move to first price and unified pricing rules (UPR), a feature that automatically optimizes floor prices in Google Ad Manager.
According to the DOJ’s original complaint, Google used its switch to a first-price auction as air cover to introduce what it calls more “contentious changes,” including UPR, which eliminated differential floor pricing.
Publicly, Google told publishers and others that this combined change was a good thing because it would simplify the programmatic buying process. But, internally, the complaint alleges Google admitted the migration to a first-price auction was primarily a pretext to implement UPR as a way to prevent publishers from preferencing other ad exchanges.
These other ad exchanges, including Rubicon, quickly felt the pinch.
In an August 2019 email thread, Lindsay (Adishian) Pursell, then an account manager for authorized buyers (AB), observes that “Rubicon and the greater EB [exchange bidding] community have seen a decline in spend since first price / UPR.”
A little later in the chain, Barbara Piermont, then Google’s head of industry and exchange bidding, asks what advice Google should give to Rubicon.
“Just that it’s going to be more competitive now and they will have to increase their bids to win as much as they were before?” she asks. “Do we think this will be magnified even more so when we make the move to 100% or will AB buyers ‘learn’ by then how to properly bid into a 1 p auction? What sort of hit are we expecting the EB business to see when this happens?”
In response, Art Price, Google’s head of analytics, notes that the team should convene to “discuss how we want to position this info to Rubicon (verbally).” [“Verbally” appears in parentheses in the original email, ostensibly to emphasize the danger of putting certain points in writing.]
“Bidding higher to keep up with a more competitive environment is part of it,” Price continues, “but collecting and using floor data is another big part of it as they were previously not subject to them in many cases and in this new post-UPR world they will be.”
Then, Haskell Garon, at the time Google’s senior product manager for sell-side platforms, jumps in with a little warning:
“Just a reminder that any info about share-shift between OB/AB is extremely sensitive and not something we should be sharing externally (and should be treated with care internally). Let’s discuss in comms if there are any questions about how to position this to Rubicon or other buyside customers.”
Now, there are no doubt questions about how to position all of this to Judge Brinkema in court starting on September 9.