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Google Sued (Again) for Monopolistic Ad-Tech Ecosystem—This Time by USA Today Owner Gannett

The case comes after multiple investigations against the tech giant’s ad-tech monopolies by competition regulators globally

Google controls how publishers sell their ad slots, and it forces publishers to sell growing shares of that ad space to Google at depressed prices,” alleged United States media giant Gannett in the latest suit filed against Google’s anti-competitive ad-tech practices. “The result is dramatically less revenue for publishers and Google’s ad-tech rivals, while Google enjoys exorbitant monopoly profits”. 

“Publishers do not see the [benefits of] growing ad spending because Google and its parent Alphabet unlawfully have acquired and maintain monopolies for the advertising technology (“ad tech”) tools that publishers and advertisers use to buy and sell online ad space,” Gannett said in its 80-page petitioned filed in a US district court in June. The conglomerate owns over 500 digital news and media imprints, including USA Today, as well as 200 daily print brands. 

The suit seeks to restore competition in the ad-tech market and “safeguard news content for readers” of the conglomerate’s multiple news properties.

The case comes after multiple investigations against the tech giant’s ad-tech monopolies by competition regulators globally. In response, Google has been experimenting with various privacy and competition-respecting advertising technologies—although even these haven’t escaped criticism.

But first, back to basics

How do online ads work?: Think of a newspaper—every day, it has chunks of its pages that it needs to fill up with ads. In the online world, this ad space is called an ‘impression’. So, every online news publisher essentially has a bunch of ad impressions that could be filled up with an ad. They find these ads through an ad server—its job is to identify when an ad impression is available to be bought and filled up. It then solicits bids from advertisers to fill up this space from “ad exchanges”, which organise auctions for the impression among buyers. Ad exchanges suggest bids from their winning buyers to the server—the latter then chooses the winning bid, and that ad will be placed on the site accordingly. All of this happens within fractions of a second, while a webpage loads.

Google runs an ad server called DoubleClick for Publishers (DFP), which controls 90% of the ad server market. It also runs an ad exchange called AdX, which is tied to DFP, and controls 60% of the exchange market—this linking is the source for much of the anti-competitive allegations made against it by Gannett (more on how that happens below).

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Where do online media houses fit in?: The ideal is that online publishers will get the best deal possible for their many available ad impressions. This should boost ad revenues too.

Gannett argues that in the current ecosystem, this is hardly the case—in fact, “news publications’ advertising revenue has declined by nearly 70%” since 2009, it argued. Because of that, media publications have either shut down or sacked swathes of their employees. Gannett itself shut down 170 publications since 2019.

This is a bit of a paradox, especially given that so many of us get our news online and view these ads multiple times a day. However, Gannett squarely blames Google for this scenario—it controls ad tech to depress the cost of buying ad space, to the publishers’ detriment.

So, how does Google make money from this system?Through what can be loosely described as commissions. Google collects fees from publishers to ‘serve’ an available impression to the exchange using its ad server. Its ad exchange also charges a fee to manage the auction (around 20% of the sale price). Google also exacts a revenue share from advertisers hawking their ads on the exchange through “Demand-Side Platforms” or DSPs. But all this money is collected only if Google’s technologies win:

“It exacts an exchange fee from publishers only if AdX wins the right to intermediate the transaction,” Gannett explained in its petition. “Likewise, its DSP exacts a fee only if it ultimately provides an ad to fill the impression. If Google’s exchange and DSP lose out the impression, Google makes nothing.” 

Ordinarily, that should give Google an incentive to bid competitively. But this is a monopolistic situation—so Google instead chooses to abuse its power, rig bids, and win more of publishers’ ad inventory, Gannett alleges. According to Gannett, this is why Google’s ad-tech ecosystem is so lucrative for the company: for example, Google made $30 billion in 2022 from its ad-tech service, six times the combined digital advertising revenue for every United States news house. 

The allegations: How exactly did Google allegedly manipulate ad-tech?

By unlawfully tying its ad server (DFP) to its ad exchange (AdX) and erecting market barriers for rival ad servers, Google forces publishers to use DFP, something they wouldn’t do in a competitive market, Gannett alleges. Rival ad servers mostly exit the market, while new players have the tall task of developing ad exchanges as powerful as Google’s. Google has also resorted to anti-competitive practices to undermine a potential workaround—client-side header bidding—stalling the entry of potential ad-serving competitors.

The overall effects of this monopolised ecosystem—reducing exchanges’ investments in a publisher’s content, while also depressing the output of impressions on the market. Or, as Gannett puts it, “over several years, Google’s share of the exchange market has grown substantially, while rivals have not made any appreciable gains”. Its alleged malpractices include:

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Google limits publishers from using other ad servers“Google permits publishers to clear transactions for impressions through AdX only if they also use DFP,” Gannett added. What’s more, AdX allegedly thrives on inside information, Gannett added, which drives down the price solicited for ad impressions: 

“Google prohibits publishers from communicating publisher-owned data about readers to rival exchanges, which results in rival exchanges returning substantially lower bids,” Gannett alleged. “Then, AdX trades on those depressed bids by returning bids that are a penny higher, even though AdX buyers originally submitted substantially higher bids to AdX for the same ad slot. That means Google wins more inventory [through AdX] at depressed prices.”

Google’s AdX is the only ad exchange to limit delivering real-time bids to the ad server: For Google, this presumably helps it rig the auction in its favour. However, Gannett argues that there are no legitimate reasons to do this. For example, non-Google ad exchanges allow real-time bids to be shared with the publisher’s chosen ad server. Ad-serving rivals also accept real-time bids from AdX—this allows it to “offer a competitive ad server without having simultaneously to develop its own powerful exchange,” Gannett suggested.

Google encrypts key customer data, except for itself: User IDs are generated by publishers and are used to target specific ads at specific consumers. In 2009, Google began hashing or encrypting these, making them unusable for advertisers trying to place bids for an ad impression. But: Google let itself access the IDs when placing its own bids, and it still does, Gannett alleged. This harmed Gannett financially—user IDs let publishers and ad exchanges “understand the value of inventory, cap the number of times users see the same ad, and effectively target and track online advertising campaigns”.

Without that information, the prices for bids fall. Google said it did all of this to protect user privacy—an argument that falls flat in light of its self-preferencing, Gannett argued. Google is a bigger threat to user privacy as it can combine customer data with information from its other products (like YouTube or Google Maps) to glean more information about customers. Google began combining datasets in this way in 2016, Gannett alleged.

Google throttled competitive alternatives like client-side header bidding through insider trading: The tech allowed for competitive real-time bidding by ad exchanges for ad impressions, benefiting publishers. But, by using its Dynamic Allocation ad-tech, Google knew about the highest bid from this auction before it solicited ads from buyers. “AdX could [then] run a second-price auction [among buyers] but adjust the clearing price when needed to outbid a competitor by a penny,” Gannett explained. This “Last Look” tech is how AdX won ad impressions—and it’s something the company admitted is “unfair”. It is also insider trading, Gannett argued—and it depressed how high a bid for an ad impression could reach

“For example, without Last Look, if header bidding returned a bid of $4.00 and AdX ran a typical second-price auction with $6.00 and $3.00 bids, the AdX auction would clear at $3.01, and the winning header-bidding exchange would win the impression for $4.00,” the Gannett petition illustrated. “Without inside information, AdX would have needed to submit a $6.00 bid to win the auction. However, because of Last Look, AdX did not need to compete on a first-price basis and place the available $6.00 bid. Instead, AdX could increase its bid from $3.01 to $4.01 and win the impression by a penny. Only because AdX knew the price to beat for the impression could it maintain a second- price auction with little risk of losing to first-price competitors.”

Google’s Enhanced Dynamic Allocation also snubbed competition: The ad-tech essentially set temporary price floors for direct deals for ad impressions. Google’s ad server sent this floor to its ad exchange. AdX would then be able to win the impression and defeat previously negotiated ad deals, as long as it bid a penny higher than the assigned price floor. Publishers were never told about how the price floor was calculated—they couldn’t determine whether the price low-balled the value of a direct deal for an ad impression. “As a result, AdX can win impressions even if a direct deal would have paid more,” the company concluded. If Gannett disabled Enhanced Dynamic Allocation, AdX would not submit live competitive bids for its ad impressions—the company has no choice but to accept these terms as a result.  

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Project Bernanke saw Google pocket price differences in ad sales: Publishers were paid on a third-price basis, while advertisers were paid on a second-price basis. Here’s how that worked: 

“So, if header bidding returned a bid of $8.99, and AdX received 2 Google Ads bids for $19 and $18 and a third non- Google DSP bid for $9, AdX would return a bid of $9.01 (third price) rather than $18.01 (second price), less its revenue share,” Gannett explained. “As with Last Look, AdX could get away with its third-price scheme because it already knew the results of header bidding and could rig its bids accordingly…But while Bernanke switched AdX to a third-price auction for publishers, nothing changed for advertisers — they still paid a penny above the second-highest price. Google keeps the difference and moves it to a “pool” to boost bids from Google Ads when it otherwise would lose the auction in AdX, and AdX would lose the final auction among exchanges in the ad server. Capitalizing on its artificial information advantage, Google used rival bids and un- hashed user IDs from publishers’ ad servers to determine precisely how much to inflate Google bids in order to take impressions from competing DSPs and exchanges”.

Google placed deflated bids on third-price auctions for publishers declining to enable Enhanced Dynamic Allocation. It “purposefully” lost millions of auctions to “punish non-compliant publishers”.

Dynamic revenue sharing favoured Google too: The tool allows Google to reduce the revenue share it collects for the ad impression when trying to win a bid—but, it can also increase this fee for impressions selling for less too. Google is able to adjust its shares based on insider information on how its rivals are bidding for the impression. Although launched in 2014, publishers were only made aware that this was happening in 2016:

“For example, if header bidding returns a bid of $4.00, and the highest available bid in AdX (net of Google’s fees) is $3.57, AdX can forgo its revenue share (20%) and bid up to $4.46,” Gannett explained. “However, because AdX knows the floor is $4.00, it charges a fee of 10% and wins the auction at $4.01. Conversely, for the next auction, if AdX clears at $4.20 (net of Google’s fees) and the highest bid from header bidding is $3.67, Google can increase its revenue share to 30% and win the impression for $3.68. Google thus wins both impressions and makes $2.02 ($0.45 + $1.57). The publisher, meanwhile, makes $7.69 ($4.01 + $3.68).”

On top of this, Google charges its 20% contracted revenue share during the billing period.

Google’s attempts to sideline client-side header bidding: Exchange bidding allows non-Google exchanges to place real-time bids against AdX—publishers are charged by Google for ad space sold this way, on top of the revenue share charges. But, because the service is hosted by AdX, it’s the only exchange with full insight into the user—the non-Google ad exchanges lack this information, and can’t bid competitively. Gannett alleges that this is Google’s attempt to snuff out alternatives like client-side header bidding, with the tech giant claiming that it would lead to higher ad revenues for publishers. Under the program, Google then secretly applied its Multi-Ad for Video program across Gannett’s inventory, which “reduced AdX’s bids for video inventory by 30% or more yet permitted AdX to increase its share of Gannett’s video inventory. The share of video inventory sold through rival exchanges in header bidding decreased by nearly 40%”. Gannett would go on to disable Exchange Bidding.

A “Minimum Bid to Win”: Google promised to clean up its insider trading act in 2019, however, it still rigged the market in its favour while doing so, Gannett alleged. After the sale was made, the “Minimum Bid to Win” feature informed the winning bidder what the minimum price to win the impression was, which is the second highest bid placed. This price could be used to predict the minimum bidding price in the next auction similar to this one—coupled with its access to information other exchanges don’t have, Google could use this to effectively win subsequent auctions.

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Projects Poirot and Elmo secretly disadvantaged publishers: They offered depressed advertiser bids on non-Google exchanges participating in client-side bidding. On the flip side, if the non-Google exchange didn’t participate in this alternative, they were offered higher bids. Google “coerced publishers to sell inventory either to AdX or the preferred non-Google exchanges participating in Exchange Bidding,” Gannett alleged.

Redacted datasets favour Google: In 2018, Google redacted access to two data fields used by publishers to compare impressions and bid data from header-bidding exchanges and Exchange Bidding exchanges. Publishers couldn’t make out comparative advantages—making it difficult to design revenue-maximising client-side header bidding systems.

‘Line items’ hit header bidding and publishers: Google depressed bids by competing ad exchanges during client-side header bidding through ‘line items’. These are potential values assigned by the publisher for the impression—rival bids are rounded down to the nearest line item. So, a non-Google exchange’s bid of $4.29 would be rounded down to the $4.00 line item set by the publisher. Google limited the number of line items that could be set to keep rival bids low, and to coerce publishers to shift to Exchange Bidding, Gannett alleged.

Google eliminated publisher-set price floors: Publishers set advertiser-specific price floors to establish a minimum price for their impression. This allowed them to generate competitive bids from buyers. Google repeatedly took measures to disable these price floors—for example, by 2019, it said the price floors should equally apply to all exchanges and buyers.

This was allegedly because Google “was dissatisfied with publishers setting unique price floors that made AdX compete” with rival exchanges. Even without the floors, Google still doesn’t offer competitive bids through its anti-competitive practices. It also led to ‘unsuitable ads’ finding their way onto Gannett’s platform. “For years, Gannett used differential price floors to weed out unsuitable ads that its readers did not want to see,” the petition noted. “Eliminating DSP-level price floors has left Gannett exposed to a greater threat of improper (or even malicious) advertisements appearing on its pages.”

Also anticompetitive, Google’s ‘news carousel’: The Google news carousel displayed at the top of a search result displays snippets from related news articles. However, only publishers that format according to the “Accelerated Mobile Pages” or AMP format will see their content displayed. According to Gannett, AMP is “simply an HTML webpage that has been stripped of any third-party script (including JavaScript)”. Google claimed that ad monetization on these pages was similar or better than on mobile sites—which Gannett denied, because AMPs are incompatible with client-side header bidding. The consequence was that only AdX was bidding for Gannett’s AMP impressions—winning “virtually” all the comparatively depressed bids it placed (compared to ads appearing on non-AMP pages). Gannett had to put up with this, as it would lose search traffic otherwise. Google also later disabled later workarounds enabling client-side header bidding on AMPs.

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Google’s claims that AMPs help load webpages faster also fall flat, Gannett argues. “AMP pages load faster on a Google search results page only because Google pre-loads them once a user runs a search,” it claimed. “Indeed, Gannett has designed its webpages to be faster than AMP and yet remain compatible with client-side header bidding”.

Switching away from Google’s ad server is expensive: Gannett would need to reconfigure “hundreds of millions of webpages” in order to do that. Any glitches while transitioning could also hurt company revenues.

Gannett’s media empire was substantially harmed by Google’s ‘fraudulent’ practices: Google knew about its malpractices, yet knowingly miscommunicated its actions as kosher to publishers like Gannett. Given Google’s market share over the ad market, these practices affect over 90% of the United States publishers, Gannett hypothesised. Also affected: Gannett’s wide portfolio, which includes over 500 digital news and media brands.

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I'm interested in stories that explore how countries use the law to govern technology—and what this tells us about how they perceive tech and its impacts on society. To chat, for feedback, or to leave a tip: aarathi@medianama.com

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