DOJ’s Ad Tech Case Will Come Down to Whether Google Has a Duty to Help its Rivals

The Department of Justice’s second major antitrust trial against Google, which centered on the company’s ad tech products, concluded at the end of September. I attended every day of the trial, sharing recaps of what each witness brought to the table. Here’s what stood out most to me.

Skewed Market Definitions and Economic Realities

The Department of Justice, in its attempt to establish requisite relevant antitrust markets, opted to delineate its markets among three products (with a major caveat I’ll get into later) that spanned across the ad tech stack: publisher ad servers, ad exchanges, and advertiser ad networks.

In contrast, Google argued that this delineation does not reflect the reality of competition in digital advertising and leaves out other tools competing for ad spend. There was a stark contrast between the DOJ’s sanitized visualization of the ecosystem and Google’s “spaghetti football.” Yes, you read that correctly, and yes, that is what the visual below was referred to in court by the judge.

Is ‘open web display advertising’ actually a thing?

These four words generated a lot of controversy throughout the trial. It was added as a qualifier to each of the Department of Justice’s product markets. It effectively excluded other major categories of digital ads from being factored in: video ads, app ads, display ads, connected TV ads, etc.

The DOJ defined open web display advertising as being “squares and rectangles,” usually in the form of banner ads or side panels that you see on the open web, as opposed to “walled gardens” like Facebook.com, which require a user to login to view webpages. They even excluded native ads that appear on a web page in squares or rectangles but are meant to blend in more seamlessly on a page.

We were left in a weird “he said, she said” cycle, where witnesses said they never heard of this term or could deduce what it meant but that it was not used in practice. Even DOJ’s key witness on market definition, Robin Lee, admitted that he never saw the term in his review and preparation for the case but that it still captured a definable segment in digital advertising.

Google pushed back on this distinction, arguing that it heavily narrows the state of competition in digital advertising and doesn’t reflect the economic reality of how ad tech tools work. One example to highlight the absurdity of limiting a market in this manner is that an ad served on the Washington Post’s website is part of the Department of Justice’s market, but the same ad that is served on the Washington Post’s app using the same tools is not in the market.

Display is shrinking, and the pie is growing

Taking a step back from quarreling over ad formats, Google argued that a fundamental issue with the Department of Justice bringing a suit on ad tech competition that is conditioned on display ads is that display is shrinking.

In opening arguments they stated, “this case is a time capsule filled with Blackberries and a Blockbuster video card.” The import is that while the Department of Justice is seeking forward-looking relief that would impact ad tech in major ways by bringing a backward-looking case because they are relying on facts and premises that ad tech has long moved away from.

Google describes this as the digital ad pie growing but their slice shrinking, which is pretty antithetical to a market constrained by monopoly power. The DOJ countered by citing famous antitrust cases and markets: Standard Oil with oil and Microsoft with web browsers. Google’s reply was unlike Standard Oil and Microsoft, Google’s share has only diminished in light of growth and increasing competition. This exemplifies the friction between the two sides, with Google mainly sticking to legal arguments versus the Department of Justice’s fact-based approach.

As digital advertising grows, so does competition

In contrast with the Department of Justice’s three product markets, Google countered with a single two-sided market for digital advertising transactions. Publishers sell ad inventory and advertisers buy it. In between are ad tech tools and rivals who compete to make these transactions run smoothly.

One of the Department of Justice’s gripes against Google is that it operates tools across the ad stack, meaning it caters to publishers and advertisers. While this was framed as a conflict of interest, we heard that ad tech stacks are a common strategy, particularly with larger players like Microsoft, Amazon, and Meta.

Some Publishers are Unhappy, but Both Publishers and Advertisers Have Benefitted from Google

Much of the Department of Justice’s case centered around publishers, and we heard testimony from large publishers like DailyMail, Gannett, and NewsCorp that they were unhappy with some changes Google made to its auction.

For example, a change that generated the most ire was unified pricing rules, where publishers could no longer set fluctuating price floors on different ad exchanges. But Xoogler Rahul Srinivasan testified that Google took into account publisher feedback and increased functionality by allowing publishers to block specific buyers, define different price floors based on ad format, offer discounted floors to achieve business objectives unassociated with yield and increase the number of rules publishers can implement.

We also heard that other ad tech players, including rivals such as App Nexus founder Brian O’Kelley, believed that moving towards unified price floors was in the best interest of the ecosystem though he didn’t necessarily believe in implementing it.

Notably, the Department of Justice’s case was absent of any advertiser witnesses, with just a couple of advertiser agency executives taking the stand who testified about how display ads are a distinct ad format. Google opted to call several advertisers to testify, including a federal agency advertiser. A witness from the U.S. Census Bureau testified that when running the ad campaign for the 2020 Census, which had a whopping $364M digital ad budget, she was concerned with audience reach and didn’t care which ad channels were used to meet those goals.

Publisher and advertiser revenue has only gone up

At the core of its defense, Google claims its actions have been in service of both its publisher and advertiser companies and that its innovations have improved the ad tech ecosystem. But they don’t shy from the idea that they too, have been a beneficiary of these changes. Prominent examples include enhanced dynamic revenue share allocation, which allowed more ad matches, increasing revenue for publishers, return on ad spend for advertisers, and revenue for Google.

Rivals and Publishers Want Google to Give Up Its Goods

A common thread between publishers and ad tech rivals is that they want access to Google’s advertiser demand. This has caused a splinter between the parties on what legal analysis should be applied.

The Department of Justice has brought a tying claim, arguing that Google’s publisher ad server is unlawfully tied to its ad exchange and that publishers only use the publisher ad server to have access. Rivals asserted that they cannot compete due to Google’s large and unique demand. Conversely, Google argues that antitrust law protects against a “duty to deal” with rivals, and harming rivals does not equal harming competition.

Google also stated that while it already grants interoperability, it has no obligation to expend resources to achieve total parity. This seemed reminiscent of the search ads interoperability claim brought by the US plaintiffs last fall in the search case, where the court sided with Google and upheld Trinko, the seminal SCOTUS case outlining that firms do not have a duty to deal with rivals.

Converting a privately owned and developed product into a “common asset” will always raise eyebrows, but this came several times. Department of Justice witness Stephanie Layser, formerly of NewsCorp, was grilled on cross about an op-ed she wrote about Google contributing its exchange to Pre-bid, a popular header bidding solution that is open source.

This was doubled down on by Tom Kershaw, who founded PreBid. Kershaw believes that the industry should contribute its best ideas and collectively own them. Google was quick to draw attention to this rhetoric because forcing companies to share innovations or intellectual property could undermine their incentive to innovate in the first place.

Google meanwhile cited safety and security reasons for being cautious (and slow) in allowing third-party access. The Department of Justice has largely brushed off this argument as pretextual, but we heard from Google employees who work on ad spam and ad safety teams about the risks they identified and Google’s investment in fighting ad spam.

What’s Next?

Things will pick up again in November when parties will submit amended findings of fact and conclusions of law on the 4th. We will hear closing arguments from both sides on the 25th, with Judge Brinkema noting that she should have a quasi-opinion formed and asking very pointed questions to flesh out areas she may be on the fence about. She also stated that she aims to have an opinion by the end of the year.