The Department of Justice simply wrapped up three weeks of trial the place it argued whether or not Google has created unlawful monopolies within the advert tech market. During a lot of it, Google stored asking a extra elementary query: what is that market?
The firm has quite a lot of defenses to the DOJ’s accusations, starting from Supreme Court precedent to safety considerations. One of its largest, nevertheless, is that the company merely doesn’t perceive internet advertising. Google alleges that it’s slicing up the market in a method that doesn’t make sense and that it downplays or ignores Google’s largest promoting competitors: social media.
Three markets or one?
Over the previous weeks, the DOJ has painted a really particular image of how internet advertising works. It’s involved with what it calls open internet show advertisements, higher often known as the advert packing containers and banners you’ll see on numerous web sites (together with this one). It identifies a “trifecta of monopolies” right here: writer advert servers for promoting area on web sites, advertiser advert networks the place entrepreneurs purchase impressions, and exchanges that run superfast auctions to put advertisements on websites.
This definition of markets issues for a few causes. The first is that, when outlined on this method, Google totally dominates: the DOJ estimates Google’s writer advert server, recognized on this case as DoubleClick For Publishers (DFP), has about 90 p.c market share within the US. The second is that, in response to the DOJ, Google owes no less than a few of that dominance to tying its merchandise collectively. Witnesses testified time and again that publishers merely had to be on DFP as a result of it was the one technique to totally entry the big base of advertisers in Google’s advert community by way of Google’s AdX alternate. If we’re speaking about three totally different markets, that is perhaps Google leveraging its energy in a single market to knock out competitors in one other — a basic monopolist play.
Google says that’s unnecessarily complicated. During its protection, it instructed the courtroom we’re actually one market with stakeholders on each side: patrons and sellers of digital promoting. From that perspective, Google is simply constructing the perfect single-market software that it could possibly, connecting totally different elements to make it simpler.
The firm’s skilled witness, economist Mark Israel, argued the DOJ’s definition “misses the forest for the timber.” The digital advert business is simply “a enterprise about matches,” and fairly than posing a monopoly drawback, Google’s built-in advert tech stack advantages its prospects. An all-in-one software could be cheaper than mixing and matching a number of totally different merchandise, Israel stated, since you don’t have a number of firms every taking a separate fee.
Google is making an attempt to suit its case into the Supreme Court precedent often known as Ohio v. American Express. That case was a few two-sided market within the bank card business — with cardholders on one aspect and retailers on the opposite. In a 2018 determination, the courtroom dominated that in this sort of market, plaintiffs want to point out the anticompetitive hurt spans each side.
If Google can show that there’s only one two-sided market fairly than three distinct ones, it makes the federal government’s case tougher
If Google can show that there’s only one two-sided market fairly than three distinct ones, it makes the federal government’s case tougher. The DOJ must reveal that Google’s actions harmed each publishers and advertisers. That’s a tough proposition as a result of a selection that drives down the value of publishers’ advert area may save advertisers cash, and a selection that drives up prices for advertisers could possibly be a windfall for publishers. The mere indisputable fact that Google advantages, too, doesn’t make it illegal.
What is a web based advert?
The variety of markets isn’t Google’s solely objection. The DOJ says open internet show advertisements are a definite section of promoting with no ample substitutes. If you don’t like Google’s product, you may’t get comparable outcomes by merely shopping for advertisements someplace else, like social media or video streaming providers, as a result of these advertisements typically serve totally different advertising and marketing functions and require totally different design codecs.
Google says advertisers merely care about getting a return on their funding. If they’re spending extra money than they’re making from an open internet show advert, they’ll — and incessantly do — transfer their funds to a different venue like social media, streaming providers, and cellular apps.
The DOJ desires to restrict the market definition simply to the open internet: locations the place advertisements could be purchased and offered with third-party instruments, in contrast to a “walled backyard” like Facebook that has its personal ecosystem for purchasing advertisements on its web site. Google desires that checklist to incorporate a a lot bigger pool of issues we eat digitally, irrespective of the scope of the ad-buying instruments.
Internal Google paperwork confirmed it rigorously watched opponents the federal government has outlined to be outdoors the related market, together with social media platforms like TikTok and Facebook and retailers like Amazon, which it referred to as an “existential risk.” Since Google noticed it that method, Israel stated, it did have a test on its energy that may maintain it from appearing anticompetitively.
Internal Google paperwork confirmed it rigorously watched opponents the federal government has outlined to be outdoors the related market
And though so many publishers use DFP, he stated, massive tech firms like Amazon and Reddit have switched away from it to their very own in-house advert servers. The risk that even a number of massive prospects may swap could possibly be sufficient to constrain Google’s energy, stopping it from jacking up costs.
Google additionally argues the DOJ is ignoring a key a part of its empire: its demand-side platform DV360. Where advertiser advert networks like Google Ads cater to smaller prospects, demand-side platforms (DSPs) are utilized by greater firms that need extra customization. The DOJ has largely handled these as separate markets, claiming Google has a monopoly in advertiser advert networks however not in DSPs.
But Google has introduced witnesses and paperwork indicating that many massive advertisers use each. In doing so, it’s apparently chipping away on the declare that Google monopolizes a discrete, definable nook of internet advertising. If advertisers see the instruments as a part of the identical product, and the DOJ concedes Google faces actual competitors in a part of that product, can the entire bundle be a monopoly?
Dishwashers and Costco rotisserie chickens
On cross-examination, DOJ counsel Aaron Teitelbaum chipped away at Israel’s credibility, portray him as a profession trial witness — and a questionable one, at that. Israel conceded that about 80 p.c of his work is being an skilled witness, and he’s testified greater than 40 occasions as such, although he’s by no means held a tenured educational place. In an train that resembled studying out imply tweets, Teitelbaum learn out essential feedback by judges in different circumstances, together with one which he introduced as displaying Israel misunderstood core elements of antitrust regulation.
Teitelbaum argued in opposition to a declare that Google faces competitors as a result of firms are spending more and more much less on show advertisements relative to social media. He used the metaphor of a household that spends cash on each smartphones and dishwashers. As smartphones turn out to be extra ubiquitous, the household may spend a larger proportion of their funds on them, whereas the share of funds spent on dishwashers would decline as compared — however that doesn’t imply dishwashers are an alternative to smartphones. (We don’t know if that metaphor will win Judge Leonie Brinkema over, however she did name Teitlebaum’s metaphors a “nice change” from weeks of promoting jargon.)
Teitelbaum additionally identified that irrespective of what number of firms are in a position to swap a few of their advert spending to social platforms, publishers like The New York Times will nonetheless have show advert stock they should promote.
Leaning on metaphor once more, Teitelbaum in contrast Google’s strategizing to Costco’s infamously low cost rotisserie chickens. Google and Costco, he argued, are each keen to lose cash in a single space to make extra someplace else. Israel conceded he hasn’t dominated out the prospect Google achieves worth from its huge knowledge and scale, even when providing low costs is what will get prospects within the door.
Teitelbaum in contrast Google’s strategizing to Costco’s infamously low cost rotisserie chickens
And to deal with the argument that firms can merely shift cash round, the DOJ introduced again a single witness: DailyMail.com chief digital officer Matthew Wheatland. Wheatland shot down a suggestion by Israel that publishers may keep away from Google by directing customers to apps and promoting advertisements inside that. It’s “massively troublesome to transform an online person to be a loyal app person,” Wheatland stated — in truth, solely 2 p.c of the Daily Mail’s readership accesses it by way of the app. As for a suggestion that publishers merely negotiate direct offers with advertisers, Wheatland stated they’re already doing this as a lot as attainable, and it’s a pricey endeavor that requires groups of salespeople and help employees.
Judge Brinkema, who ushered alongside the extremely technical trial a lot faster than the unique six-week timeline, hasn’t carried out a lot to tip her hand about who may win. Brinkema has remained attentive, however she’s requested solely occasional questions to tell her understanding of the case. On the trial’s ultimate day, nevertheless, she gave one small glimpse into her pondering.
Before the federal government began its rebuttal, Google objected to the DOJ’s framing of a separate lawsuit the place it claimed Google used a distinct market definition, contradicting its place right here. Brinkema stated that “market definition is core to this case,” and it’s “considerably of an issue for Google to take one place in a single courtroom and considerably of a distinct place in one other courtroom.” But, she stated, she’d take a look at the “whole combine” of proof in reaching her determination. When the events return to courtroom for closing arguments on November twenty fifth, she’ll have another probability to ask the attorneys what the boundaries of that market ought to appear like.
