It’s hard to keep track of all of the lawsuits Google is facing these days, but one of its most significant legal challenges from the past year is a barrage of antitrust lawsuits filed by both the Department of Justice and several state attorneys general. Thanks to some newly-unredacted filings first unsealed on Friday, we’re finally getting a good idea as to how Google runs its advertising business, including claims of collusion, manipulation, shady deals, and more.
There’s a lot to break down in these documents, ranging from claims of market manipulation to the sheer size and scope of just how large Google’s ad exchange truly is (via Patrick McGee). However, the biggest — and likely most impactful — story here is a possible case of collusion.
“Jedi Blue”
According to this report, Google and Facebook allegedly joined together in secret on an initiative known as “Jedi Blue.” Starting in 2017, as Facebook looked to shift away from Google’s “waterfall” ad buys to an alternative method known as “header bidding,” Google requested the social network stick to its auction style, where each publisher would get a chance to buy impressions at increasingly reduced prices. In exchange, Facebook was offered specific quotas on how often it would win in those bidding auctions, complete with manipulated minimum spending.
If this all sounds pretty bad so far, you aren’t wrong — and Google knows it. As reported in these filings, the company was terrified of how header bidding would affect its own ad exchange, even as it publicly announced it wasn’t concerned. Employees also knew that, should this information ever get out to the press, it would result in overwhelmingly negative coverage. One employee reportedly proposed a “nuclear option” that would cut its exchange rates to nothing.
Exchange rates
As we’re also learning from this report, Google’s AdX handles more daily transactions than the NYSE and NASDAQ combined, a fact that makes these sorts of manipulation allegations look much more sinister. The search giant charges a “tax” on anywhere between 22 and 42 percent of ad revenue used by most major online publishers, a cost which allegedly is passed onto consumers through those advertisers. That’s all in addition to the 19-22% rates charged for buying ads on AdX, up to four times as much as competing exchanges. If you’re using “Google Display Network,” a closed exchange for advertisers described as the “largest ad network in the world,” those percentages are even higher: up to 40 percent of each transaction. And as if that wasn’t enough, “high value” ad views are limited for content creators, with nearly 80 percent of all ad revenue made from just 20 percent of impressions.
Despite comparisons to the NYSE, the company’s ad marketplace is anything but neutral. Google has reportedly considered developing a similar platform — one it even admits should exist, as an exchange “shouldn’t be an immensely profitable business” — though it ultimately declined to do so. As for why the company charges such high fees for buying ads from its platform: “quite simply, ‘we can.’ ‘Smaller pubs don’t have alternative revenue sources.'”
Project NERA
If this sounds like an overwhelming amount of information on how anti-competitive the ad business can be, it doesn’t even scratch the surface. Also included in this report is an initiative called “Project NERA,” a plan to “create a closed ecosystem out of the open internet.” Effectively, Google wanted to exert more control over independent websites just as it does to its own products, like YouTube, all by forcing publishers to give “exclusive access over their ad inventory.”
This plan was two-pronged. First, Google used the success and popularity of Chrome by punishing users who logged out of the browser. If you’ve ever found yourself frustrated after logging out of Chrome and finding you’ve been signed out of YouTube, Gmail, and every other site in its portfolio, well, now you know that’s not an accident. Even if you tried to avoid signing into the browser, logging into a site like YouTube would auto-add your account into Chrome anyway.
Second, the company pushed users to grant permissions to track their data across the web — bypassing cookies altogether — and effectively making a site’s data on its readership no longer exclusive. Now armed with data on what, when, and how people were visiting specific sites, Google turned around and offered those same publishers access to all of the information it had learned from users in exchange for an exclusive ad deal. Publishers had the option to decline these terms, but if they did, Chrome would continue to collect valuable user data to sell additional ads. As stated in the filing, this outcome was seen as a “win-win” for the company.
In a statement delivered to Bloomberg, Google accused the lawsuit of being “riddled with inaccuracies.”
“In reality, our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world. There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers.”
As you might expect from a 173-page court document that is nearly wholly unredacted, there’s even more information on Google’s shady business practices, including claims that AMP pages actually load slower compared to other optimization practices, and secret meetings held between itself and competitors like Microsoft and Apple.
It’s worth reading in its entirety, especially because — if these facts are correct — Google may have violated the Sherman Antitrust Act of 1890, as alleged in the final pages of this filing. Whether the government will take any action against the company — apart from the usual slap on the wrist that comes from various fines — remains to be seen.
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