It’s not often one gets to hear sworn witnesses in federal court explain the intricacies of header bidding under oath.
But that’s what happened during the first day of the Google ad tech-focused antitrust case in Alexandria, Virginia on Monday. It was like a crash course in ad tech – and ad tech history.
The DOJ’s opening statements mentioned first look and unified pricing rules. Google’s opening remarks included a reference to dynamic allocation.
Meanwhile, there was testimony about the end of the publisher waterfall, the difference between direct buying and programmatic, and the nuance between take rate and ad server fees. At one point, there was full-on a debate over introducing an Ads.txt file as factual evidence.
And presiding over it all is Judge Leonie M. Brinkema, a US District Court judge, sitting in a green leather chair at the head of the court with her gray hair knotted into a perfectly circular bun and zero patience for courtroom shenanigans.
Because this is a bench trial, there’s no jury. Once the trial wraps in four to six weeks, Judge Brinkema alone will decide whether Google is guilty of operating what the DOJ alleges is a trio of monopolies over the ad server, ad exchange and ad network markets.
In the meantime, here’s your Day One download.
DOJ’s opening statements
Julia Tarver Wood, a senior DOJ attorney, began the day with opening statements for the plaintiff and, as she put it, said “the quiet part out loud.”
One monopoly is bad enough, Wood said, but the government plans to argue that Google operates three of them. She said Google also willfully maintains its monopolies – and control over the “open display advertising market” – by tying its ad server to its ad exchange and making Google Ads demand exclusive to AdX.
Publishers are “totally dependent” on their ad server, and it takes “an act of god to switch,” Wood said. According to the DOJ, Google controls between 87% and 91% of the ad server market depending on the geo.
“Customers will testify they feel captive to Google’s products and have no freedom to choose,” Wood said. “They have to use DFP to access that [AdX] demand and it’s almost impossible to leave – which is classic tying.”
It’s this sense of frustration that led to the rise of header bidding almost 10 years ago as a way to circumvent what Wood referred to as the equivalent of a silent auction, where every bid happens in secret, but only one party gets the chance to peek in the envelope at the end and pay one penny more to win.
“Would anyone call that a fair market?” Wood asked.
Google’s opening statements
In her opening statements, Google’s lead attorney Karen Dunn countered that the DOJ’s case is backward-looking and there’s no such thing as an “open web display advertising” market.
“The government’s case is like a time capsule,” she said. “Break it open, and you’ll find a BlackBerry, an iPod and a Blockbuster video card.”
According to Google, ads are ads. And there’s a lot more ad inventory out there than just banners and boxes on websites. There’s in-app inventory, native, video, streaming, social media and other sundry walled gardens.
Google also contends that ad servers, exchanges and networks aren’t separate markets. Instead, Google competes in a single market made up of buyers on one side and sellers on the other. By that equation, Google says it controls only 25% of the market, which is below the Supreme Court’s 75% threshold for what constitutes market dominance.
The DOJ is “gerrymandering its way to market reality,” Dunn said.
She also argued that there’s no evidence Google prevented customers from working with rivals and that most publishers work with multiple ad exchanges.
Ad tech zingers
After opening remarks, the trial zipped through four DOJ witnesses. (They don’t call the US District Court for the Eastern District of Virginia the “rocket docket” for nothing.)
- Witness #1: Tim Wolfe, SVP of ad revenue operations, Gannett
- Witness #2: Andrew Casale, CEO & president, Index Exchange
- Witness #3: Joshua Lowcock, president, Quad Media & former global chief media officer, UM Worldwide
- Witness #4: James Avery, CEO & founder, Kevel
The main purpose of this testimony was to help prove the DOJ’s market definitions and explain to the judge how ad tech and publisher monetization works. It was like a crash course in ad tech.
But there were also lots of one-liners, wisecracks and noteworthy stats sprinkled throughout.
Tim Wolfe, Gannett
* According to Wolfe, Gannett, which has been a Google ad server customer for around 12 years, pays north of $15 million annually on ad tech to serve ads – and more than $10 million of that goes to Google.
* Wolfe also described switching ad servers as being like “changing the tires on a race car midrace.”
* Gannett saw CPMs improve by 15% to 20% shortly after implementing header bidding.
* At one point, Smart AdServer (now Equativ) approached Gannett with a pitch to switch from DFP with the promise of lower ad serving fees. Gannett considered the offer but decided not to move from DFP because the lower fees weren’t worth losing Google Ads demand.
* Google has been responsible for as much as 60% (and now 50%) of Gannett’s programmatic monetization.
Andrew Casale, Index
* The vast majority of Index’s impressions (83%) come from DFP. The next closest source is Microsoft’s Xandr in the single digits.
* Index fields 250 billion auction requests for open web display on a daily basis and only wins the opportunity roughly 0.5% of the time.
* Publishers rarely if ever switch their ad servers, in part because ad servers are like “a utility,” Casale said, and it’s not at all common to use multiple ad servers, which would make reconciliation, rendering and billing confusing.
* Index regularly runs experiments to lower its take rate. At one point, it lowered its fees to zero with the expectation of a massive uptick in its win rate, but the increase was only nominal. “You think we’d win all the impressions if we’re free, but that was not the case,” Casale said.
* When asked what it feels like to compete with AdX, Casale said, “It’s very challenging,” and pointed to the fact that Index doesn’t have the same access to programmatic guaranteed impressions. “That’s only available through Google,” he said, “and it makes our products look deficient.”
Joshua Lowcock, Quad Media
* This is the second time Lowcock has testified in an antitrust trial against Google this year (!). He was also a witness for the DOJ during the recently decided search trial and his testimony in this case mirrors his previous testimony.
* According to Lowcock, “open web display advertising” is a distinct market, and other channels, including search, social media, native, in-app and traditional TV, aren’t a “reasonable substitute” for display.
James Avery, Kevel
* When asked how many publishers Kevel was able to convince to move from DFP to its ad server, Avery said, “I don’t know of any.” When asked why, he said, “We quickly realized this was not a market we could win because of the tie between Google’s demand through AdX.”
* Avery said Kevel also lost customers to DFP, including Reddit, because it couldn’t access AdX demand. Kevel eventually shifted its business away from open web display and traditional publishers to focus on retail media and ecommerce.
* Twice in the past, Kevel asked Google for access to AdX, once around 2012/2013 and once a couple of years ago. The first time, Kevel was told that Google “doesn’t work that way,” with no further explanation, and no dice the second time either.
* Kevel uses Google’s ad tech as an advertiser to promote its own products on search. Why? “If I could avoid giving one of my competitors money, I would,” Avery said, “but Google is like the default search engine.”
Our flowers
And just to get meta for a moment (lowercase “m”), AdExchanger got a couple of shoutouts throughout the day.
The first reference was to a 2015 article by AdExchanger’s former executive editor, Zach Rodgers, which was published shortly after Casale Media changed its name to Index Exchange. The story, based on an interview with Andrew Casale, notes that, at the time, Index projected $200 million in gross revenue for its fiscal year.
On cross, one of Google’s lawyers asked Casale how he could contend that Index is a small company, which Casale had previously done during direct examination, if its revenue was actually growing. To which Casale a little tersely explained the difference between revenue and gross revenue.
Then, during Avery’s testimony, the DOJ introduced an email exchange from April 2019 between him and AdExchanger’s executive editor, Sarah Sluis, about AdWords “kinda” being able to integrate with other ad servers. Sluis had reached out to dig in after seeing Avery tweet about it.
The emails were projected on a screen in the courtroom, and Avery was asked to read excerpts aloud.
Avery: “But AdX is almost completely tied to DFP (Ad Manager). We have worked with some customers who have AdX tags, meaning they can put them in our ad server or another, but no one really wants to use tags anymore since you end up with passbacks and other inefficiencies.
“Almost every ad server has gone out of business because of this integration between AdX and Ad Manager. Publishers may want to use another ad server but they would end up giving up a chunk of revenue from AdX.
“It turns out monopolies are pretty effective.”