The Department of Justice sued Google last week, accusing it of abusing its market power to suppress competition within the realm of open web display advertising. In this post, I attempt to outline and clarify the DoJ's 10 specific accusations (1/X)
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2/ The DoJ's complaint is lengthy and dense, making for tedious reading. It's also rife with jargon that's likely inscrutable to non-practitioners. I don't evaluate the merit of the accusations in the post; I attempt to demystify them, plainly.
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3/ GOOGLE ACQUIRES DOUBLECLICK: in 2008, Google acquired DoubleClick, an ad tech company that operated a publisher ad server and a fledgling ad exchange. Google had monetized search at this point but had struggled to gain traction in monetizing 3rd-party websites.
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4/ Google's acquisition of DoubleClick allowed it to route its proprietary demand to web destinations it didn't own, increasing its reach. DoubleClick's publisher ad server, DoubleClick for Publishers (DFP) had a 60% market share at the time of acquisition.
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5/ Microsoft had lost its bid to acquire DoubleClick and objected to Google's acquisition, claiming it would give Google too much control over a nascent industry, digital advertising. The FTC investigated and ultimately approved the transaction.
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6/ It's worth noting that the "network" (non-owned) share of Google's ads business has declined fairly steadily since Google went public, despite its acquisition of DoubleClick. Network revenue represents just 15% of overall ad revenue today.
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7/ GOOGLE RESTRICTS ITS DEMAND TO ADX: The DoJ contends that Google allowed its pooled demand to only flow through AdX following the DoubleClick acquisition, which, among other alleged harms, starved competitors of the data they'd need to compete effectively.
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8/ The complaint alleges that Google's ownership of both DFP & AdX, as well as its pooled demand stemming from its 1P ad products, allowed it to deliver outsized performance to publishers, subsidized by higher-than-necessary advertiser bids (“buyside-subsidizes-sellside model.”)
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9/ GOOGLE LIMITS DYNAMIC ALLOCATION BIDDING TO ADX: The complaint alleges that Google introduced a feature called "dynamic allocation" that gave its ad exchange a first-look at DFP inventory on a real-time basis, relegating rival exchanges to waterfall-based bidding.
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10/ Additionally, the complaint alleges that Google shared the highest average CPM in the bid waterfall with advertisers ahead of the real-time dynamic allocation auction, effectively setting a floor price that disadvantaged exchanges in the waterfall.
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11/ The complaint contends that this ultimately created a two-tier system for competing for impressions served by Google's DFP publisher ad server: Google, with superior data and real-time access, and everyone else, with historical-average-CPM-based waterfall priority access.
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12/ GOOGLE PROVIDED ADX WITH LAST-LOOK PRIVILEGES: The complaint alleges that when Header Bidding gained traction as a means of, per the complaint, opposing Google's power, Google's dynamic allocation feature became a last-look advantage.
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13/ Because header bidding auctions are run before the publisher's ad server is invoked, Google was able to see the winning bid from the auction before it queried its ad exchange, setting a floor price for Google's auction.
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14/ GOOGLE ACQUIRES AND SHUTTERS ADMELD: The complaint alleges that Google acquired AdMeld, which operated an SSP that facilitated unified, real-time auctions, simply to shut it down and prevent that technology from being adopted by publishers.
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15/ PROJECT BELL: The complaint alleges that Google pursued a number of schemes to dynamically adjust its buy-side margin for specific impressions, increasing the likelihood that its advertisers' net bids (bid minus margin) would win those auctions.
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16/ Worth noting here that the complaint contends that Google was only able to do this because its control of the entire, end-to-end stack (demand, exchange, publisher ad server) empowered it with data and access with which no single point solution could compete.
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17/ According to the complaint, the first of these schemes was Dynamic Revenue Share, which reduced margin on competitive impressions but augmented it on lightly-contested impressions to compensate, with a target of 14% average margin at the publisher level.
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18/ The second was Project Bernanke, whereby Google might allow its margin to run negative (ie. it would lose money on a filled impression), compensated for by higher margin increases for lightly-contested impressions.
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19/ And finally, Project Global Bernanke, in which Google set a margin target for its exchange, allowing per-publisher average margins to diverge so long as a target margin at the exchange level was maintained.
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20/ According to the complaint, Project Bell worked similarly, but with the opposite intention: it systematically reduced advertiser bids on publisher inventory where another exchange had first-look privileges.
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21/ DYNAMIC REVENUE SHARE: The tactics described above, as depicted by the complaint, applied to buy-side margins. The complaint alleges that Google introduced a program to achieve the same end with sell-side margins called Sell-Side Dynamic Revenue Share.
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22/ The complaint proposes that Google reduced its sell-side margin to allow the net bid (ie. money paid to the publisher) to exceed that of rival exchanges in cases where Google would have otherwise lost. The DoJ alleges that this was only possible through control of DFP & AdX.
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23/ PROJECT POIROT: The complaint alleges that Google instituted a scheme called Project Poirot to drive more of its DV360 DSP demand through AdX, versus other exchanges that participated in header bidding, by systematically reducing bids to rival exchanges.
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24/ According to the complaint, Project Poirot, in combination with dynamic allocation, allowed Google to reduce bids to first-price auctions on rival exchanges (likely accommodated with header bidding) through DV360 such that they served as price floors for AdX.
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25/ In short: DV360 reduced advertiser bids to rival first-price exchanges, and the outcome of the first-price auction was passed to DFP. DFP sent that information to AdX via dynamic allocation, which passed it back to DV360 as a floor price. DV360 then provided two bids to AdX.
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26/ UNIFIED PRICING RULES: According to the complaint, Google realized that rival exchanges won impressions via DV360 demand because DFP allowed publishers to set divergent exchange-level price floors for traffic. In other words: publishers demanded higher prices from AdX.
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27/ The complaint alleges that Google responded by transitioning AdX to a first-price auction -- aligned with the rest of the market -- while simultaneously removing this price floor configurability from DFP, which it called Unified Pricing Rules.
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28/ The complaint asserts that publishers were unhappy with this change and saw it as a reduction of granular control over the way in which they served impressions and balanced demand sources.
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29/ The entire DoJ complaint can be found here: justice.gov/opa/press-rele
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