How Big Tech Is Losing Their Antitrust Trials feat. Jason Kint

0:00This is an iHeart Podcast.

0:30Thomson Reuters and specialized bikes have since they upgraded to the next generation of the cloud. Oracle Cloud Infrastructure. OCI is the blazing fast platform for your infrastructure, database, application development, and AI needs, where you can run any workload in a high availability, consistently high performance environment, and spend less than you would with other clouds. How is it faster? OCI's block storage gives you more operations per second. Cheaper? OCI costs up to 50 % less for computing, 70 % less for storage, and 80 % less for networking. Better? In test after test, OCI customers report lower latency and higher bandwidth versus other clouds.

1:12This is the cloud built for AI and all your biggest workloads. Right now, with zero commitment, try OCI for free. Head to oracle.com slash strategic. That's oracle.com slash strategic. Wells Fargo has awarded$138 million in grants to nonprofits, supporting military and veterans with housing, small business, career transition, and more over the last 10 years. It's one of the many ways Wells Fargo seeks broad impact in communities. Wells Fargo, the bank of doing. Learn more at wellsfargo.com slash say do. Support includes contributions from Wells Fargo and Company and the Wells Fargo Foundation.

1:52This week on a very special episode of Health Discovered, we're taking a closer look at a condition that affects hundreds of thousands of men each year, prostate cancer. I first found out about my cancer at the age of 45. Anything with cancer, you just think death sentence. In this episode, we'll explore the science behind detection along with the practical steps men can take to protect their health. Listen to Health Discovered on America's number one podcast network, iHeart. Open your free iHeart app, search Health Discovered, and start listening. CallZone Media I get on their ass. Somebody's got to do it.

2:44Better Offline. This is Better Offline. I'm Ed Zitron. Today I'm joined by the wonderful Jason Kint, who has been at the Google Ads trial and multiple other FTC and DOJ-related trials as well. Now, last week we had wonderful news. The Department of Justice won their antitrust trial against Google, saying they have a monopoly over ad tech. This is a wonderful time. And Jason, of course, last year was here for multiple episodes with us to walk us through the trial. He was there in person. Jason, how are you doing? I'm good, Ed. thank you. It's good to see decisions starting to come in from the courts on what we've been talking about.

3:20And just to be clear, Jason, as the CEO of Digital Content Next, I did not say that at the top. It's the professional podcast run by a professional. But so walk us through what the verdict was. This is the ad tech case against Google that was in Virginia, to remind the listeners. And it was around Google having market power and monopoly power on the buy side, the sell side and in the exchange, and then illegally using that monopoly power. The decision from the judge was that mostly in agreement with the plaintiffs, and it was a big win for the Justice Department who worked really hard on this case, that they have monopoly power in the exchange.

4:00So where the auctions actually happen. And then on the publisher side with the ad server marketplace that determines what ads land on the page and that they illegally tied those two products together. So the only part of the decision, which I think Google's trying to make to be a bigger deal than it probably is, is that the judge did not agree that there was this market on the buy side, the way it was defined. And so what does that mean in simpler terms? In simpler terms, it could affect where remedies go, because there is not a finding that they illegally used monopoly power on the buy side with advertisers buying ads and so just they owned the technology to sell the ads and the ways in which it was selling like i guess yeah they they still they still it's true that they have significant influence because they have their largest player on the buy side of ads so where advertisers are actually buying the ads but not that they she didn't find that they had that there was a foreign legal market there that they abused and so as we go through remedies discussions i think it's probably it might be less likely that there's some sort of structural separation where they need to divest the buy side too although all this stuff's frankly going to get tangled together and and it'll be a whole new ball game with remedies um especially with search remedies going on this week too so go ahead i was gonna say like so what are the remedies that the department of justice is actually seeking here on the ad tech case on this case it's a structural separation um of their roles in the ad tech marketplace and so that was very clear coming into the into the trial so just break it down for me though what they how would they break up google in its current form is that even possible i mean in yes absolutely in the in the simplest way would be forcing google to divest which probably would mean spinning off to its shareholders rather than selling because it's going to be such a valuable asset.

6:08But actually - So like a separate company. A separate company that is the ad server marketplace. Yeah. And the exchange itself too. So dumb guy question for you. What is an ad server in this case? How does this actually break down? It's the technology that sits on the web pages or on the publisher side that actually makes the decision on what ad to serve on the page. So when you're browsing a web page or on an app, it's what's deciding to serve the ad. And so Google ran that themselves. They ran that themselves, so they ended up prioritizing their own ads, I'm guessing? Yes, that's the case. And in the findings, what's really interesting is that the judge very much agreed with and understood that Google's illegal conduct in terms of how they were able to manipulate auctions in ways that probably favored them and certainly harmed the publishers was a part of the finding.

7:11So, yeah. And when you say they harmed the publishers, is it just that it wasn't possible to compete with Google on ads because Google both made ads and then had the platform that showed the ads to people? You know, she hit on a number of things that I think are going to be super interesting in The Remedy. She hit on that Google was able to keep charging 20 % of the exchange market so they could take 20 % of every single transaction and that that price never moved from 20 % for the most part because of their monopoly power. But she also hit on all the ways that they can manipulate the auctions, which could end up being – that's a bigger issue.

7:47When you start thinking about the private lawsuits that are out there too, you get into literally tens of tens of billions of dollars of potential harm to publishers from auction manipulations. And how were they manipulating auctions, just so we understand? Well, the allegations were that, and what she addressed in the opinion, were things like first look and last look, where they actually were able to see the prices ahead of time or at the end of the auction and make decisions based on the bids that they uniquely were able to do. Which is so insane. that they were able to basically set prices, get everyone to bid, and then just immediately beat them.

8:41It's shocking. That's the thing. It's kind of flagrant. So with Last Look, I think I've hit on two things here. One of the Last Look, which I think the judge very much understood because I can remember her, who was completely new to this marketplace, she totally got why that was an issue. When she, you know, last look, if you take to like a silent auction where you put your little bids down in an envelope and everybody has kind of their secret bid, this would be like Google then at the end was able to look at everybody's bid, see what the highest bid was, and then bid higher if they wanted. That was last look.

9:16And there were a bunch of other things that stemmed from that. And she really seemed to understand it, which is, you know, it's nice to see. Kind of impressive to see a judge just pick up an entire subject matter like that. I totally agree. You know what I should be most scared, frankly, by this opinion is if I'm Facebook or Meta, who is like counting on this idea that the judge in their case doesn't know or use social media and TikTok and Instagram, etc. It tells you once again that a judge that understands the law and sits there for four weeks plus all the pretrial stuff and listens to the evidence can understand these issues.

9:57And the most important ingredient, I think, was the Justice Department who really understood the case in a way that they could dive deep and then explain it to the judge. And they succeeded to do that. So it kind of reminds me. So during some of the Google Ads trial things, you talked about the spaghetti thing where they were trying to do this kind of sleight of hand thing. And they're like, oh, it's too impossible to understand. Like it's too complex. And they turned it into that ridiculous thing. That's right. They did. And yeah, and that tells you that that is not going to be a successful defense, is trying to confuse a judge who has never used it or would understand ad tech.

10:36That's not going to work. The Justice Department succeeded in explaining it. They kept it simple.

11:05This week on a very special episode of Health Discovered, we're taking a closer look at a condition that affects hundreds of thousands of men each year, prostate cancer. I first found out about my cancer on my birthday at the age of 45. I found out my cancer has spread to my pelvic bone. And from there, life just changed. About one in eight men will be diagnosed with prostate cancer during their lifetime. And the risk increases with age. Anything with cancer, you just think death sentence. And the only thing I could think about was, who's going to take care of my family? You have to go out there and build your support system.

11:47You got to build your team. In this episode, we'll explore the science behind detection, along with the practical steps men can take to protect their health. Listen to Health Discovered on America's number one podcast network, iHeart. Open your free iHeart app, search Health Discovered, and start listening.

12:09Wells Fargo has awarded$138 million in grants to nonprofits, supporting military and veterans with housing, small business, career transition, and more over the last 10 years. It's one of the many ways Wells Fargo seeks broad impact in communities. Wells Fargo, the bank of doing. Learn more at wellsfargo.com slash saydo. Support includes contributions from Wells Fargo & Company and the Wells Fargo Foundation. So I've shopped with quints before they were an advertiser and after they became one, and then again before I had to record this ad, I really like them. My green over shirt in particular looks great.

12:45I use it like a jacket. It's breathable and comfortable and hangs on my body nicely. I get a lot of compliments. I liked it so much. I got it in all the different colors, along with one of their corduroy ones, which I think I pull off. And really, that's the only person that matters. I also really love their linen shirts, too. They're comfortable, they're breathable, and they look nice. Get a lot of compliments there, too. I have a few of them. love their rust-colored ones as well. And in general, I really like Quince. The shirts fit nicely and the rest of their clothes do too. They ship quickly, they look good, they're high quality, and they partner directly with ethical factories and skip the middleman.

13:16So you get top-tier fabrics and craftsmanship at half the price of similar brands. And I'm probably going to buy more from them very, very soon. Keep it classic and cool this fall. With long-lasting staples from Quince, go to quince.com slash better for free shipping on your order and 365-day returns. That's Q-U-I-N-C-E dot com slash better. Free shipping and 365 day returns. Quince.com slash better.

13:47So what happens next? What are the next moves with this pub? Well, a reminder, this is what's called the rocket docket, the Virginia district, Eastern District of Virginia. And so the judge moved really, really fast. That's why they have that name. this case was filed in January of 2023. And so we got to a trial, you know, 18 months later and a decision that took, you know, frankly, the decision took a lot longer than anyone thought it was going to take to come out. People were starting to get nervous, but, you know, it just took time and she clearly wrote a really clear opinion. And it's, it's very, it's very easy to read through.

14:24So So that, keeping in mind, I think she'll probably move fast. They have a meeting, I think it'll be tomorrow, in terms of what's the schedule going forward for Remedies. And so I would expect the dates to all be in the next few months. But what would the Remedies be? So they would have to break off the three-part, like the ad side. They would have to break off the sell side. What are they going to have to do in theory? I realize you're just guessing. I'm just guessing. The findings are clear enough that there's going to be structural separation that they're going to be pushing for. How the buy side gets handled is going to be really important because a reminder, and this doesn't come out really in the proceedings as much, but the ad tech case is downstream from the search case.

15:16and the arguments were that the reason Google was able to dominate the buy side and the sell side in ad tech was because of the monopoly power in search, which we also have remedies now that started on Monday. And so these things are going to start to swirl together. And when you think about Google having to divest Chrome and some of the other remedies within the search case, it's quite possible that there'll be some larger settlement that will be proposed or a larger structural separation that needs to play out between the two decisions. So as you've been hinting at, there was the verdict last year that Google did have a monopoly over search.

15:59How do you think that these two things are going to play together? You kind of got it there, but what are the ways in which this could go? Well, the search decision was not, there were two monopolies that they were found of abused. One was search, the other was search text ads. So it was the ads that we see in search, which is Google's largest business, right? And so those... So just so I'm clear, you're saying that there's the monopoly over a search engine and then the advertising on said search engine. Exactly. And so, and that advertising on said search engine is what allowed them, according to the Just Department, to then dominate in the ad tech stack.

16:42And so I think that's the connection point between the cases. And we'll also start to be a part of the discussion in the remedies. Both cases involve network effects. Both cases involve using data to maintain market power and to abuse it. Right. So the potential remedies, it sounds like, could be almost breaking up Google into multiple different companies with this case the the baby bells you know idea of what happened to at &t uh should be much more what happened there just for the listeners they divided at &t up into into pieces and so um so you know not just forcing them to invest one piece of their business and so you know with the ad tech case again there's you know there's settlements that can happen there's appeals that will happen but the argument for you know should google have to divest not just its advertising ad tech business but also you know other areas of its business i think becomes much stronger you can imagine chrome you can imagine android you can imagine youtube yeah actually here's a good question for you i i know chrome and i'm sure many listeners know chrome as a free browser, not really a business entity.

18:02How does selling off Chrome meaningfully help with the monopoly situation? Google's entire advertising business is based on targeting ads based on signals and data that it gathers from the various ways that it can touch the user. And so Chrome, as a web browser is an incredible way to harvest data about how you're browsing the web and where you are, location, search, etc. And so, you know, where Google believes it has permission to use that data to target ads and train it into its machine learning and AI training, that is very valuable. I didn't so wait, so this is perhaps I'm very stupid. So Chrome collects data on your browsing habits for every user?

18:54Not for every user. There's privacy settings and all sorts of things you can do. You can go into incognito mode. But if Google is acting as your browser, it has access to your browsing history and what you're doing on the web. And they can, where they believe they have the rights, they can use that data to help provide further information on both for search, but also for what content to serve up and what ads to serve up. What they're actually doing becomes a bigger question. Right. So was that established at all at trial? Not. It was in the search case, but it was more specifically focused on the default settings for search from the browser, right?

19:49And so within Chrome, if you type in your location bar, you're always going to be doing a Google search. It's pretty clear how that data then gets passed from the browser to the search engine. Yeah, and if they have billions of users, then everyone is searching using Google because they have because it's the default. That's so crazy. But the thing with Chrome as well is it isn't a revenue driver, is it? Like a direct source of revenue. For Google, if you think about the search case again, I mean, Google was paying Apple$25 billion, let's say, I'm estimating. It was$20 billion a few years ago, but let's say$25 billion they were paying to Apple to be the default search on Safari and all of the access points on iOS.

20:35So Chrome technically is making revenue off of those search queries. it's just Google's pain itself right and so that's the that's the right the issue well the reason I bring that up is one of the remedies the idea of selling Chrome off why would you like what value would there be in Chrome if the whole value of it is to just be kind of a a flume towards Google like a like a kind like a way to like almost like a marketing arm of Google if you sold off Chrome surely it wouldn't have as much business value it wouldn't have as much business value to Google the whole point would be it'd be an independent business that would be making decisions i mean technically a browser is supposed to be a user agent it's supposed to be making decisions for the user and what what they value right so uh a new problem as an autonomous business like yeah because right now it isn't it's not like people pay for credit it just doesn't feel like that is a practical thing to do because if the whole value proposition of it is that it's a free product that makes google money and it doesn't make any money for anyone else or like it isn't you know what i mean yeah so it could make a decision to point to you know a new amazon search site or a sure but where are they gonna get somebody else that gets into search right and so and get paid for it right yeah i mean it almost feels like this could lead to i don't want i'm not going to say the death of google in the sense that google will cease to be but the death of modern google as we know it it definitely you know all leads towards a very different google whether it be structurally different or just being hamstrung by the appeals of all these cases so i mean it it's they i cannot think of anyone who got more lucky than it being good friday than google right now because it's good we're recording this on good friday and um it's like they didn't like the markets are closed so they didn't immediately get the markets just pummeling them, as they should.

22:35Because they've lost both now. They don't, like whatever appeals they may do are not going to really, I don't think they're going to stop everything. Markets are complex. I would hesitate to wonder, you know, to predict why the stock did what it did yesterday, even when the announcement came out. You know, there are some arguments that having to divest, you know, divest parts of the business could actually create more value back to shareholders. What value would that be? Well, typically when you spin things off, you often see or you sell things. Often the stock can go up because of that. And so, is the sum of the parts worth more than the whole?

23:17Those questions all come into play. But that's all up to the markets. And sometimes the markets aren't as smart as we think they are. And they take time to understand and unpack things.

24:01We'll be right back. year, prostate cancer. I first found out about my cancer at the age of 45. Anything with cancer, you just think death sentence. In this episode, we'll explore the science behind detection, along with the practical steps men can take to protect their health. Listen to Health Discovered on America's number one podcast network, iHeart. Open your free iHeart app, Search Health Discovered and start listening. Wells Fargo has awarded$138 million in grants to nonprofits, supporting military and veterans with housing, small business, career transition, and more over the last 10 years.

24:40It's one of the many ways Wells Fargo seeks broad impact in communities. Wells Fargo, the bank of doing. Learn more at wellsfargo.com slash saydo. Support includes contributions from Wells Fargo & Company and the Wells Fargo Foundation. Stop settling for weak sound. It's time to level up your game and bring the boom. Hit the town with the ultra-durable LG XBoom portable speaker and enjoy vibrant sound wherever you go. Elevate your listening experience to new heights because, let's be real, your music deserves it. The future of sound is now with LG XBoom. And for a limited time, save 25 % at LG.com with code FALL25.

25:21Bring the boom. XBoom.

25:30yeah i agree and i've seen the same thing with core weave recently which is a company that has driven me insane um onto onto more sane things though so we're recording this it's going to be next week but the beginning of the remedies for the search trial is on the 21st so what can people expect there i don't think there's gonna be as much excitement and drama as we saw with the with the actual liabilities trial, I think, you know, for the folks that follow the industry closely, what you should expect is all the AI companies are, are involved. And so either through depositions, discovery, and some testifying, so you've got Anthropic, OpenAI, Microsoft.

26:11So when you think about the shaping of the AI world going forward, you're going to have all the major players apple is apple tried to actually intervene and and but the judge didn't allow them so they've they've got a strong interest because they've got estimated to be i think 10 to 15 percent of their profits are tied to their google deal right and so well because google pays them to use just just for the listeners so google pays apple billions to have to be the default search right that's right and the and the you know the remedies are that they can't do that anymore and so the reason they weren't allowed to intervene according to to judge meadow was because he didn't see a difference in apple's interest from google's interest he basically said yeah you have the same interest yeah so i mean the the interest being that apple needs google to keep their monopoly so that apple can keep getting a chunk of their revenue that's exactly right yeah so yeah so apple cares a lot.

27:13Microsoft cares a lot. All the big players care. The testimonies is going to be a lot of experts and less CEOs. Who will be doing the testimonies? It'll be experts from both sides. So academics that study these issues. It will be executives from the AI companies. I think we'll probably hear from Eddie Q again at Apple, who's one of their top executives. We'll probably hear from Sundar Pashai, again, from Google as CEO. They're on the list. And so in those two weeks, what's going to happen? So it's basically another trial to say how they will deal with their monopoly in search. That's right. And I guess one thing that's interesting is they're still pretty far apart.

27:58So Google's proposed remedies for itself are basically a slap on the wrist and kind of embarrassing for anybody that studies these things. So when you say a slap on the wrist, is it like a fine they're offering? No. What is Google offering them? They're offering some restrictions on the way they do things, but nothing that touches on structural separation in any way, shape, or form. Nothing that prevents them from doing an Apple-like deal. And so it's the bare minimum that the only way I can read it, and I'm just spitballing here, but is that they're not giving it an inch right now because they think either they can do some sort of transactional deal settlement with the current administration or that they can win on appeal and they don't want to show their cards by moving the line in any way because it's so far removed from the decision itself.

28:59Right, because if they got defensive, then they would kind of reveal their hand for when they go to appeal, you're saying. That's right. That's right. And so where's the Department of Justice? So the Department of Justice is saying they should sell off Chrome, or is there anything else they're asking for? They should sell off Chrome and divest Chrome. They may need to divest Android, but it basically says, let's see how that goes, but we can still do that. And then very importantly, they're requiring them to share some data with other search engines that would help other search engines have a more level playing field.

29:37And as it relates to publishers who, again, I do a lot of work for the publishers, it requires Google to allow publishers to narrowly define what Google can crawl and use data for. And so the publisher can say, hey, you can crawl my website for the purpose of search, but you cannot then use it to train your AI engines. Fascinating. And so the DOJ is pushing to make sure that's the case? The DOJ is very smartly understanding that if they don't put real constraints on Google around AI, then they're only addressing past behavior, but they're not actually making sure that there's a level playing field going forward in which Google will be able to just abuse and run over the AI marketplace too.

30:32It really feels like we're kind of on the precipice of something changing in the next few years with the web. Because if Google has to even share data from search, that will change, like we will get competition in search for the first time really meaningfully in decades, like decades, I guess, like since the Lycos and AltaVista days, because these two cases are so inherently intertwined. Absolutely. Yeah. And don't shortchange Gopher or Webcrawler in that. Yeah. But yeah, there hasn't been other search engines since the late 90s. Oh, no. I think I said excite. So, okay. Changing gears before we wrap up.