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Google antitrust lawsuit part 3: What is header bidding and how did a secret deal with Facebook kill it?

A look at how Google teamed with Facebook to kill a new industry innovation and maintain its monopoly.

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In 2014, a new innovation called header bidding (HB) gained popularity as it allowed publishers to route inventory to multiple ad exchanges. But Google did not welcome the competition and wanted to “kill” header bidding, an antitrust lawsuit filed by sixteen US states led by Texas against Google alleges. The lawsuit argues that Google unlawfully monopolised online advertising. In part 1 we explored how online advertising works and Google's monopoly power in various markets in online advertising. In this post, we will dive into the alleged anticompetitive conduct Google engaged in to acquire and maintain its monopoly power, specifically how Google teamed up with Facebook to kill a new industry innovation called header bidding. You can read other parts of this series here. Overview of how online advertising works Online advertising for display ads (e.g. image-based ads) relies on three main components: Ad servers: The inventory management software that helps publishers sell their ad inventory. Publishers are websites with ad spaces such as news websites and blogs. Ad buying tools: The software that advertisers use to buy display inventory from publishers. Ad marketplaces: The electronic marketplaces where buyers and sellers of display ads are matched. Buyers (advertisers) are represented by their ad buying tool whereas sellers (publishers) are represented by their ad server. There are two main types of marketplaces: ad exchanges and ad networks. For more on how the online advertising market works, read our explainer here. What is header-bidding and how did Google initially try to quash it? How does header bidding work? "Header bidding involves a creative…

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