The Department of Justice V Google Ads: Part 4

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3:47Better Offline. Today, I'm joined again for the last episode of our DOJV Google Ads series, Ariel Garcia of Check My Ads, and of course, Jason Kent of DCN. Thank you so much for coming. What's happened in this week's, this saga? So this week, we had the opportunity to listen to Google's defense. They, I haven't done the tally yet, I intend to, but the vast majority of witnesses they called were people that either have been paid or still are paid by Google. So that includes people like current employees, small businesses that get big grants from Google, and their expert witnesses. The most notable one is Dr.

4:37Mark Israel, who is at a consultancy called Compass lexicon. He was their lead economist. So if you remember, we've talked about how Google is trying to argue that ad tech is just one big two-sided market that connects advertisers and impressions, not even publishers. Publishers don't exist. Okay. So that two-sided market argument comes from uh mark israel's work or it was his expert report that really defined that argument and for the listener's sake what is this man like what does he do for a living yeah so that's what the doj wanted to know so apparently um he makes 80 of his money and spends 85 of his time being an expert witness so literally getting paid um to say what people want him to say cool so is that like a job that anyone could do just just wondering but in all seriousness looking up this this wonderful man's he has a phd in economics from stanford msc in economics from the university of wisconsin madison so big 10 boy a b.a in economics from illinois wesleyan university this man's job is just having a job it's just like existing and saying stuff that people ask him to like come on man you can't do this well i mean you can and he does he um i think it's worth noting he was the expert witness for google at the search trial too that they just lost and and he's done like 50 or so different cases uh he's also albertson's and kroger which is playing out in the grocery store space so yeah this is his full-time job wait so he's in the albertson's and kroger case as well Yeah.

6:28Jesus. So this man's job is just like kind of being a sock puppet, but like a really well-paid one. Your words, but as somebody sitting there listening to him testify, I guess I would say, and this happens a lot of time, I think, with economists, not to be critical of the whole field, but it wasn't connected to the real world at all. And so it was like, you know, an argument that nobody that understands the actual advertising business would agree with. like, yeah, it's one big two-sided market that also competes with Reddit and Facebook and all these other, you know, large platforms as if they're just directly similar and comparable.

7:09And how did his argument do with the judge? I didn't think it did well at all. I mean, as he was spinning the yarn in the beginning, I could see where somebody could be convinced that they didn't really understand the business. But then once the Justice Department did their cross, it really fell apart in my mind. I don't know, Ariel, if you have a different point of view. Yeah, no, I agree with that. And you could tell because at one point when he was talking about one of the alleged reasonable substitutes that publishers have, he was basically saying that a publisher that has a website and sells ads on their website can just move those ads to their app.

7:53right and so the judge asks like well what if the publisher doesn't have an app and he's like well then there would be they would need to build one she's like well that would cost money no and he's like well yeah in that instance they would need to pay money to build an app that was the only and that like that was the simplest pushback point we're not addressing the fact that like the amount of people that end up on your website versus the amount of readers that will download and app are not the same. We got to that today when the DOJ called their rebuttal witness. But yeah, that's the type of flavor that we got.

8:29And if the judge was not already skeptical from the direct, definitely the DOJ absolutely. I literally, my immediate commentary was that the DOJ mopped the floor with him. And just to be clear, his argument was, if you don't like Google's heavy monopoly, you could build your own app. Yes. And it gets more wild. Like at one point he was saying that if, uh, if a publisher's ad server is bad, is bad, then advertisers might move money to Facebook. Like the, these two things have nothing to do so if the tool a publisher uses to manage their campaigns is bad an advertiser might move money to social media these it was just completely unhinged this man is meant to be smart that feels like a dumb guy argument that that doesn't even make technical is this just google's attempt to just kind of obfuscate things and try and muddy the waters uh so i think i think I'm speculating, but I think what he was trying to drive at is that on some level, a good product on one side has implications for the other side.

9:48It's part of this bigger argument that they're trying to make for why Google being on both sides of the market of their alleged two-sided market is good. That when they do something good for advertisers, the knock-on effects are good for publishers and vice versa. What the DOJ points out is like, okay, but that means ostensibly it can't always just be about the advertisers, right? And we didn't really have a good answer for that. so we're at the end of this trial though there are closing arguments in November you mentioned before the call how did the rest of the last week or so go was it mostly just Google attempting to muddy more like it did they come up with new arguments of any kind there's nothing I didn't hear anything really new um and I think really the fireworks were mostly today as the Justice Department brought in one of the publisher witnesses for a rebuttal.

10:46It was the only rebuttal witness. And there was a lot of back and forth about whether or not he was going to be able to testify again. But he basically, you know, each of those arguments, Mark Israel, Matthew Wheatland from the Daily Mail, senior executive of the Daily Mail. And so each of those arguments that Israel had made, they kind of cleaned that up. I think the Department made it clear that that wasn't wasn't in the real world. That wasn't an issue. And, but it got to the point then during when the, when Google was doing its cross where it got really, it's kind of absurd if you were in the room.

11:17I feel like the judge even knew it was absurd where they were, you know, if he was cleaning up that, that it wasn't a real world situation that you could just, you know, shut down your website if things weren't working well with the Google monopoly and launch an app. and and then google's attorney started to compare the number of clicks it takes to type in a website like literally down to the https colon slash slash versus downloading an app and was actually comparing how much time it takes to do the two different things and it was just i i couldn't understand how we were getting that literal on the last day in the last witness.

11:57So was the argument that apps are easier to launch than websites? It felt like they were going back to Google's classic argument of, you know, of efficiency and, you know, competitions that click away and, you know, and all these arguments about, yeah, how quickly you can do different things. So it was not working in my opinion. So. I mean, in Google's world where they can just kind of like coerce their users and customers to do whatever they want them to. Maybe that works, but it doesn't really matter if it's the same amount of clicks for a consumer, for a user to download an app as it is to go to a website.

12:32No one can force them to download the app, right? But yes, I completely agree. It was just ridiculous. It also was, because she decided to go there, every time Wheatland went to talk, she had to cut him off because he was trying to you could tell she being the judge here no no no every time wheatland uh went to talk beyond a yes or no google's counsel needed to cut him off because she probably realized that he was going to say well no like he kept saying that's one way to get to a website and obviously you know search results would be another one you know so it was just a very odd it really does feel and i said this last episode it doesn't feel like google came in with an argument i'm astonished because these are meant to for years we've seen these companies as these kind of mammoth organizations that can do what they want but in in front of a judge they just seem kind of pathetic i think that the facts were just so not on their side that they really struggled.

13:43There was not one witness that they called where on cross-examination, DOJ didn't manage to surface something that set Google back a little bit or introduced something new that was bad. You know what I mean? They didn't have very much. And so that's why their experts, and specifically Mark Israel, because the other experts that Google called, their analysis relied heavily on Israel's report, right? So it was really hinging on Israel. I expected that there would be something at least somewhat compelling there. And when I saw that there was just absolutely nothing there, I mean, to me, that was the nail in the coffin for their case.

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18:27Yeah. They did. And, you know, I think their argument there was, you know, that they still had kind of a giant elephant in the room that they were spending, you know, upwards of 20, 25 billion dollars a year for the search slot. And, you know, if they were the best product out there and consumers wanted it naturally, then why do they have to pay all that money? That was the big elephant in the room. But but they at least could make arguments about exclusionary conduct and a few other things that they'll try to make in their appeal. I don't think they're going to win because the appeal goes to the same as in the same circuit as USB Microsoft, which it relied on.

19:02So but they you know, it was more down to legal arguments and they didn't have the same issues with deletion of emails and all that stuff in the same way that came out in this case. So, yeah, you know, one thing, Ed, I've been thinking a lot about is, I mean, as much as, you know, they've got, it feels like, you know, almost every major law firm at their fingertips when they need them and experts and paid experts, etc. It's a really complicated chess game when you've got remedies going on in California from your app store loss and you've got the search case remedies going on in D.C. and all these things are, you know, dividing executive time within the company.

19:41And you also are trying to manage, you know, your business at the same time, you've got Sundar Pashai going on TV a couple nights ago, you know, to say that, you know, everything's all good, right? It's a very complicated chess game, no matter who you are. And do you think it what do you think these cases are kind of splitting their attention? That'd be my I mean, it has to be at some point. And you kind of see that play out in the real world. You know, when you've got, you know, I saw in the search case, I think it was like one of the last days where you had Kent Walker, the chief legal officer at Google, you know, in the front row and then like literally move up to the lawyer's table, you know, which was kind of unusual to try to whisper to some of the lawyers in real time.

20:20So he's getting involved in the actual arguments at the trial as search cases wind down. And I sense that a little bit today, Ariel. I don't know if you sense this. You were in the courtroom. But there was shuffling around by various Google and their law firm folks. When you say shuffling around, is he just handing papers to people? Yeah, there was almost mini huddles happening, a borderline close to disturbing the judge. but you had three or four people leaning back and forth, talking to each other, and then people running out of the room and stuff. It was like they were trying to escalate and deal with things in real time because things weren't going well.

20:59Look at my lawyer dog. I'm losing this trial. Their whole team was there today. Everyone knew that today was going to be the last day, so Google's entire team was there. And I'll also say we knew it was a big team, between like their associates and their comms people and stuff. But I didn't know quite how big it was. They filled like the entire middle section of the courtroom, which is the largest section. I'd say they had three times the amount of people there that DOJ did. And because everyone was there, you could see the full extent of the shuffling. So even someone next to me all the way in the back of the room was having, you know notes scribbled and and people were running back and forth to them handing them notes um so it was like it was very obvious that there was an all hands on deck scramble uh when the when doj called their rebuttal witness and the judge decided to allow it to proceed and what was so scary about this witness what was it that like chilled them that he had the real world experience to knock down every single one of mark israel's wild uh recommendation and this was the fellow from the daily mail just correct correct so it's like they were just gonna go one by one and be like you know if if uh an advertiser moves spending to uh social does that impact your negotiations with Google?

22:36No, you know, like they just kind of went one by one. And because the questions, the hypotheticals are so outlandish, Google knew that he was going to seem confused by the very question. Like, like the premise is so backwards that it would that his sincere confusion would come across, you know, so that there is one person I want to bring up. So big on tech, Tom Blakely over there he brought up on Tuesday that there was testimony from a guy called Dr. Paul Milgram yes from Stanford now Blakely seems to think that this was a good a good day for Google what do you think I wasn't there that day I was actually up which is a whole nother um a whole nother story I was up I ran up to New York real quickly for a conference but um I think Ariel you were there I I know who he is though and I actually think he probably could have been their best witness, expert witness.

23:33He's like an auction guru. But, but Ariel, you'd have to say how you thought it went. It, my read on it wasn't. Yeah. No, I agree with that. Yeah. I agree with that. I think by far he was their best witness and, and he, it was very clear that the judge found him credible. I would say he's the witness that the judge engaged directly with the most on both sides. What was his art? How did they use him? To explain the auction dynamics. They were trying to use him to explain why Last Look wasn't always beneficial to Google. And that's where Google can see the bids of competing advertisers and beat them by a dollar.

24:19Yeah, yeah. Or like a cent. Yeah, so they went through each of those kind of like auction dynamic questions. But I still think that the DOJ did well on Cross at highlighting things that he didn't bring up. I don't want to like get too far into the weeds on it. That's fine. But yeah, the DOJ did a good job at illuminating the things that he just didn't emphasize, right? They played some games with a timeline of changes they made to their product. And it's not that his testimony necessarily was false, but it was a little bit misleading in the way it presented things if you consider the timelines of the changes that Google implemented.

25:02And I think the DOJ did a good job of clearing that up. But I do think that this was Google's strongest witness.

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28:18It doesn't sound like it went well. And I mean, maybe this is the right time to ask both of you. What do you think happens? I mean, in terms of the actual opinion, you've heard from me. It didn't go well. Yeah, one expert witness actually gained into the granular detail of auctions. and that element probably isn't necessary anyway because the monopoly power is clear and the conflict of interest is clear and the tying is clear. So depending on the actual analysis of a paid witness by Google is really a Hail Mary at that point. I think it's very rare that an expert witness like that can swing the case.

29:03So I think it's very much the DOJ's case to lose at this point. I mean, they're going to update their findings of fact, and they still have the advantage of the judge questioning the credibility of all the Google witnesses from the deletion of the chats, et cetera. So then we just get to remedies. And since we last talked, we've got the schedule for remedies in search too. So those are going to be happening probably shortly after the ad tech remedies. So here we go. And when would those be? That hearing is going to be in april and the and judge meta said he wants to have his opinion out by the summertime so um and so in the ad tech case the ad tech case closing arguments are november and i would think that means her opinion probably will be out january i would doubt it before the holidays how are you feeling about ariel so what do you think might happen i i mean i i agree i like especially when i think about like the ad server monopolization claim the tying claim i i don't really see a realm in reality that where the where the doj's claims there don't succeed there's just like there's so much evidence to to to prove it and there's so little evidence that google put forward to even try to refute it they put all of their eggs in that market definition basket and from that perspective i I think, you know, I was debating in my mind earlier and actually with Tom Blakely if they should have called the rebuttal witness.

30:42But I do see the value in what they did because they literally closed their rebuttal by saying, okay, what is the tool that ultimately decides what ad is served? And he says, the ad server. Okay, who is your ad server? Google, right? So I just, I think they ended it perfectly. I don't think that there's a way that the ad server or the tying claims fail. I'm interested to see what happens with the ad network side of things, because I think that the DOJ spent the least amount of time on that. But I also don't think it really changes the remedy very much. What do you think the remedies might be though?