The Department of Justice V Google Ads: Part 3

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3:40Hello and welcome to Better Offline. I'm your host, Ed Zitron.

3:55Once again, we are here to talk about the Department of Justice's case against Google Ads. Today, of course, I'm joined by Jason Kint, the CEO of DCN. We've got a special guest as well, Ariel Garcia, Director of Intelligence at Ad Transparency Nonprofit. Check my ads. Ariel, Jason, thank you so much for joining me. Thanks for having us. Likewise. So, Ariel, why don't you tell me a little bit about the end of the Department of Justice's case? Anything fun, interesting, or scandalous happened in the last week? Yeah, I will say it was definitely a markedly slower week than it was last week. A lot of the testimony that we heard was simply for the purpose of getting exhibits into evidence.

4:37But there were a couple of things that stood out. We started the week with Neil Mohan and the big revelation there. And who is Neil Mohan, just to be clear? He is now CEO of YouTube, but he came over with the DoubleClick acquisition. And so one of the big focus areas of his testimony was about the AdMeld Yield Manager acquisition. And we saw internal decks where they were discussing whether or not to purchase a Yield Manager. What does that mean as well? So it basically helped publishers optimize Yield. Jason, you can probably add more color to this than I can. Yeah, you hit it. That's it. Okay.

5:20Now, there is one important point. There's two kind of component functionalities that AdMeld had. One was the yield management functionality, and the other was real-time bidding, right? And just so we're clear, yield management is managing the amount of money you make from your ads? Yeah, it is. Like I said, I'm not on the publisher side, so I don't know. I've never worked in one, but I can certainly talk Google ads. But anyway, what Google did when it ultimately did buy AdMeld was kill the real-time bidding bit, but we'll get to that. So we see a deck where they're debating whether Yield Manager would be a good investment to make.

6:01And it says in the deck that their tech is irrelevant to Google. And then we see that they paid, I don't remember the exact number, but I think it was like 100 million over the valuation. And before that, we see an internal exchange where Neil says something to the effect of, well, we could just buy it and park it somewhere. So they were upset that yield managers were starting to gain traction. It ran the risk of disintermediating DFP. And obviously, that would cause risk to revenue through ADEX, which was very, very profitable for them. So just break it down in simple terms for a simpleton, talking about myself here.

6:42So by killing off this product, this yield management company, it means that they would stop people being able to optimize how much they make. What are the ramifications of doing this? Well, remember that it came with the real-time bidding functionality as well. So what this was really about was two things. It was to, again, protect their adx revenue, but also to make sure that DFP, that double click for publishers stays critical. and so what they did was they took it in they built in some of the core yield management functionality into DFP, they integrated that but they got rid of real-time bidding so that they can keep restricting and setting the rules for the auction on their side So they deliberately killed a useful product that they owned as a means of making the product worse so that they would make more money They didn't kill it, they parked it And then we had Neil try to explain that park didn't really mean what we all thought it meant.

7:49It just meant to continue to operate it status quo for now. That classic word park that I use to refer to operating something and using it. That's why it's called a car park and you drive on it. Exactly. So we hear something else very similar while we're on that topic. One of the other spicy things that happened was we heard from Jonathan Belak yesterday. He's another longtime now ex-Google employee that came over with the DoubleClick acquisition. And with him, they were talking about exchange bidding, which was basically the product that Google launched to kill header bidding. And we see an email about how their goal is to make exchange bidding slightly better than header bidding.

8:39So the DOJ - And header bidding is the open source ad network approach. That's correct. So, well, not ad network, but like header bidding wrapper, it allows them to bid without like Google getting first look. It enabled a fair auction, right? Oh, Google will never have that then. So what we see is that their goal was to roll out a exchange bidding so that it's slightly better than header bidding. And the DOJ asks Belak why slightly better. And he explains the context as his goal was for his team to roll out a product that is as much better than header bidding as possible. But the direction from leadership was to scale it back to only slightly better.

9:29And the DOJ asked him why that is. Was it because they wanted to protect ADEX revenue? And he said something to the effect of you're going to have to ask leadership about that. So that was another interesting one, right? About how they like intentionally. Oh, and by this point, they also mentioned that header bidding innovation had continued. And so by this point, exchange bidding would be inferior, right? So that was certainly interesting and also told like a bit of a more nuanced story about the fact that even if the product organization wanted to do right by their publisher customers, they were hamstrung by leadership.

10:08That's very good. I think that's what we say here. It does feel like this, I don't think there's any open and shut case in anything like this, but it does feel like Google's egregiously taken the piss in a lot of these scenarios. It feels like there's been a lot of testimony and discovery that it's just them saying, what if we made it so that no one else could do this and we would make more money than them through monopolist that like it feels almost too on the nose yeah no that's fair and then i'll save my last one big highlight that is one that not too many other people are are talking about so i'm making sure to talk about it all the time um so during brian o 'kelly's deposition tape he was he used to be CEO of UpNexus.

10:54Now he is CEO of Scope 3. During the end of his deposition tape, he talks about how pre-bid, which is the open source thing that we were talking about before, kind of, pre-bid was brought to IAB Tech Lab that typically will govern open source standards and stuff like that. They wanted Tech Lab to take over the governance of the pre-bid standards. And IAB Tech Lab rejected it. Why? Because Google vehemently objected. Obviously, they were worried about the threat it posed to them. And so that's why pre-bid became its own separate nonprofit. So we also, Brian, flags that Google at the time at least was the biggest financial contributor to IAB.

11:48And what is IAB, just for the listeners? Interactive Advertising Bureau. The tech lab is a separate entity, to be clear. There is some overlapping governance, but I just don't... I know that there will be a barrage of people that say they're separate. So I'm acknowledging they are separate entities, but there is overlapping governance. The IAB tech lab has a lot of standards, like they have the OpenRTB standards. IAB itself has its own standards or frameworks that it oversees. But in terms of like the technical standards, that's under the IAB Tech Lab. So they're kind of like a professional association for the ads industry or digital ads?

12:28Yeah. Ads, ad tech, et cetera. I mean, this one, just to jump in, this one, to be fair, I was not in the courtroom when they read this one in, when they showed this deposition. So I saw the news report on it in AdExchanger, I think. But, you know, this is a situation where AppNexus, the largest independent ad tech company out there besides Google at the time, you know, had this open source code that they developed with other players to open up the auctions and create a fair environment against Google. And what the report is and what Brian O 'Kelly, the CEO, testified under oath is that, yeah, that they had this and they want to donate it to the industry.

13:11Right. So you've got this industry association that's supposed to be for the betterment of the entire industry, and one company's interests weighed in heavier than the rest of the entire industry, which is a very clear symptom of the problem we're talking through in all these lawsuits, right? Is that one company's interests outweigh everybody else, and they just continue to gain more and more market share. So that's very concerning. I didn't shed good light on IAB either, frankly. It feels like we are at this point in the ads industry where things are, if Google is broken up in the way they're suggesting, it's going to have more ramifications than just for Google.

13:47It feels like there are organizational shifts that will have to happen as a result. That's right. Those who have aligned with them, at least. That's right. And I think in moments like this, because we are getting to this moment, frankly, between the search opinion and now this trial where it seems to be headed, sometimes it's hard to think through what this means and the collateral damage. And people worry about the negative, but it also creates a lot of opportunity, right? And so it unlocks and creates oxygen for everybody. And that's the fun part. Have we heard anything more about Jedi Blue?

14:22Jedi Blue, the Facebook-Google deal, that is a big deal or isn't a big deal, depending on who you ask? I'd look to Texas in Q1 of next year. Is that where the suits are happening? That's where the state AG suit is, and that's where they were able to depose Sunar Pashai, and they were able to depose the Facebook witness. It's come up in a few different ways, and it continues. even today where they are trying to bring Facebook in as a competitor in this relevant market that this suit's all about. And it's the threat of Facebook coming into the market. But the rest of that story is that Facebook didn't really come into the market because they had this sweetheart deal with Google to not come into the market.

15:07And so we're not telling the rest of the story right now. And I think it's because the Justice Department maybe doesn't need to tell the whole story. They already have enough. But I don't know if you have a different read, Ariel. No, I think that's right. I mean, you're exactly right that it came up like once, but I also agree that that's part of the contortion that they're doing. Then the other part of the contortion is still like the market definition contortion. Like just today at the very end, they were going through, we started to hear from a Microsoft employee, Benizer, I think it was, is it Ben John?

15:46That's it, it was Ben John. And they were talking about how Xander had helped Microsoft gain a foothold in ad tech. But if you actually read the documents Google was pointing us to, it was talking about how Xander invested in video. So we're still ignoring we're still ignoring the display market and their like systematic control of it. They're just kind of pointing to all of the other areas that that they that they haven't yet taken completely over just yet.

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19:23Or visit amerifactors.com. Well, that kind of leads us to the next part. So it sounds like today we're recording Friday, September 20th. My iPhone is still not arrived. So Google is now on the stand. So walk me through it. Jason, why don't you start? him. Sure. So they bring up their first witness, who we don't know a lot about because he seems to have disappeared off the internet. But he's been there for nearly two decades. And he's one of the few people that didn't leave when the lawsuit was filed. And most of the Google-led defense, the Google attorneys were focused on, I think, two things.

20:00One was having him draw out on a visual the entire ad tech supply chain and all of Google's components of it, which at first seemed like a good strategy to kind of confuse the room and the judge. But I think at the end of the day, it was more annoying. And it actually it just showed that they were all over the entire marketplace. Right. And and so it was a lot of smoke and mirrors. And then the other piece was to try to bring in this element of all these different products serve other types of advertising, be it video, be it app advertising, be it native advertising in stream. And so all these different things that are not actually part of this case to try to make advertising a larger market than it really is to make Google look less of a major player.

20:57So if you can actually bring in Facebook and TikTok or you can bring in Netflix advertising for video, then suddenly Google is not such a big player. But it just it didn't it didn't work. And when the Justice Department followed up, they actually just pulled up an email from this witness where he actually went through and talked about their business in those exact ways. And it really negated everything he testified. and there were a couple kind of elements of the judge also seeming to get a little bit annoyed and kind of ready to move on so but yeah it also doesn't seem like their defense is any good it's really it's just very weird because the search trial they were all piss and vinegar they were like ready to rumble this one they're coming in they're like well look our first witness who you will see has emailed literally what we're going to claim he isn't saying uh it's just weird like they just seem almost discombobulated yeah it did it it felt this is their first witness right so they needed to start strong and it did not it was not it wasn't strong and then i mean towards the end just to kind of get the highlights the um two things happened one and this is when google's attorney was up, but she wanted to bring up some more recent things, right?

22:21Like the trade desk, one of the companies they compete with, their earnings from last month, she wanted to bring up something from the earnings last month, which is a year after discovery had closed. Like there's, it's not, you know, it was like a very clear objection for the just - And that's, yeah, that's like something you can't just kind of - You can't bring up. Like it's not an exhibit. It's never been, you know, asked about. It wasn't part of the deposition. It's literally from a month ago. And they wanted to bring up a deal that they'd done with Twitter from the last few months. And so the judge was like, this stuff is not, it's too early.

22:55She said something like, plus it's tainted. Once all the lawsuits started being filed, all this stuff is tainted you're giving me. And so that was interesting. And then she said, and you're also talking about this entire ad tech ecosystem, and that feels more like something for remedies rather than liability so she was saying like let's talk about this when we start to break you up or yeah when i'm punishing you we will come back to this we'll come back to this when we so everybody in the courtroom kind of looked at each other and made their notes but i you know at the same time you know i don't know if that's definitely a leading in care where she's going but it got our attention so ariel have you have you seen anything solid from google like Have they had any wins so far?

23:41No. It sounds like I am saying that because I want to believe it and not because I believe it. No, no, no. I truly don't think you like that. I wouldn't bring anyone on who was just like, I may want them to lose, but I want them to lose properly. Yeah, no. Sincerely, they do not have a strong argument. The fact that their first witness landed with the judge as though they were trying to basically say, well, wouldn't it be like super complicated to blow us up if that's your best argument? Like, you know, and then the fact that, again, first witness, and it felt a little bit like they were resorting to tricks and bringing in documents that weren't part of discovery and that haven't been asked about.

24:28It just wasn't, it was not a strong way to start. They also, their ad tech spaghetti football situation, the DOJ went up there and they're like, okay. Can you explain what that is? By the way, that was the judge's description. So we are getting to the point where she even is trying to make humor. So they bring up a gray oval on the screen, like a ball-shaped oval, and then they ask him to start mapping out the ecosystem. And they put ad tech ecosystem at the top. They put like buy side on the right, sell side on the left. And then he starts populating it with Google products first. Cool. And it's all Google products.

25:17So it's like, okay, like let's start with search and O &O. And then like they go all the AdSense for content, AdSense for search. They go in order and explain the history of why they're absolutely everywhere. And then like there's so now by this point and they they draw lines connecting everything. So at this point, it's a mangled mess of Google logos and unnamed alleged competitors. So it was yeah, it was like a big bowl of ad tech spaghetti where Google is the is the meatballs absolutely everywhere. And some competitor flex are in there as seasoning. It was, it was, and then the DOJ gets up and they're like, first of all, we need to preserve this because we're going to come back to it.

26:00So they preserve that. Thank you for this, by the way. The DOJ gets up and they're like, okay, so if I, if I, if I'm a publisher, if I'm Wall Street Journal and I want to sell ad inventory on my website and not, and I, not on my app, right? Will search help me do that? Will AdSense for search help me do that? And they go down the list one by one, removing the things that do not help them monetize display ad space on their website. And we get to basically exactly where the DOJ's complaint started, with the exception of because he was on the sell side, they didn't touch the DSP. Like they left DV3 or they got exhausted with this.

26:43But we got to exactly why. To me, this was the best way to explain to the judge why their complaint outlined the markets that it did. So in my view, it kind of completely horribly backfired. Has this been published anywhere? Not yet. Not yet. It will be. Demonstrative football. I should say food was a theme today because even with the first witness this morning, who was the last expert for the DOJ. Dr. Robin S. Lee, it looks like. Yeah, and Google was really trying to confuse the judge and confuse him. And he was really sharp and did not fall for a lot of things that they tried to get him to bite on.

27:25But, bad pun, sorry. But Google's attorney was bringing up, trying to bring up product differentiation, I think. And I think at the time was trying to explain why they charged 20 % for their ad exchange for the last decade while everyone else charges a lower rate and why they could justify this higher price. And it wasn't just because of monopoly maintenance. And so he was talking about differentiating higher value from lower value, I think. So he brought up like, well, first he brought up, I think, chips and gasoline at gas stations. But then he brought up the Whopper versus the Big Mac. And then he brought up Coke versus Pepsi.