Trial Update, September 13: Case moves at warp-speed, as we hear about FB and Google's secret Network Bidding Agreement

It’s the end of a very long week one, and Judge Brinkema is moving us right along. She says she’s heard a LOT about header bidding, and has asked both sides to streamline.

We learned DOJ anticipated 3 weeks to make their case, and now anticipates about half. There’s a Google employee or Xoogler planned for M-Th next week, 9AM slot.

To that end, we heard from a whopping 6 witnesses today.‍

1. ‍Tom Kershaw, former Magnite CTO (continued)

Today, we picked up with Tom Kershaw, former Magnite CTO, and co-founder of Prebid.org.

• On cross, Google was trying to position prebid/HB as a meaningful alternative that could bypass reliance on AdX and DFP. Tom compared publishers “having the option” to forego AdX demand to him “having the option to starve to death.”  Sure, publishers could choose prebid demand only, but they wouldn’t make it very far.   He similarly explained that most small business owners can’t “fire up a laptop,” let alone install javascript, and that practically speaking, publishers need an ad server because it also houses direct-sold deals, etc.
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2. Chris LaSala, Manager for Global Commercialization

We moved on to Xoogler, Chris LaSala, who was the Manager for Global Commercialization on the sell-side, which surfaced a number of damning emails.

• Analysis from the Discount Review Group shows that out of nearly 4K publishers, 13 of them received a discount. Instead of paying 20% rate, they paid on avg. 19.8%. How generous.
• Google was insulated from pricing pressure “because it comes with unique demand via AdWords”
• A part about 32% AwBid take rate that confused everyone. I’ll let Ari Paparo explain later, since he kindly explained it to me.
• LaSala mentioned in emails that there’s not 20% of value in AdX, but in other parts. He was advocating for “commoditizing” the ad exchange business instead of “extract[ing] irrationally high rent” tolerated by the market only because of unique demand.
• Discussions showing Google knew AdX charged double the take rate of other exchanges.
• He also says in an email that calls for transparency from buyers and publishers are “not to be dismissed,” explaining that out of every marketer $1, 15 cents goes to the agency, 10 cents to the DSP, 10 - 20 cents to SSP, 10-20 cents to the Network, then data and measurement, meaning lowest scenario is 50 cents out of every dollar go to middlemen, and that since Google is the middle for both the buy and the sell side, it could be argued that they are taking an outsized share.
• Another email about how if Google “want[s] to be in the pipes business,” (DV360 and GAM), “we should accept downward pressure UNLESS we can tie our buy and sell sides together to create unique, differentiated value.”  He says he was pushing for Google to stay within the network business vs. this “complex adtech business.”
• More on stickiness of ad servers, and HB as an “existential threat.”  An email from a colleague reads that invalidating the need for an ad server, we are “setting the stage for Google to actually have to compete” alongside SSPs and that publishers are eager to cut Google out.
• At the beginning of cross, we’re told he hasn’t received severance from Google and isn’t contractually restricted.  Some answers sound coached, reminiscent of Bender - e.g. chats are for “hallway” conversations, and he doesn’t know/remember how First/Last Look work, but at other times he genuinely seems to be speaking to his own views that Google should’ve stayed out of the adtech pipes business.
• Cross again focused on market definition, alleging competition with Facebook and Amazon. I’ll spare you the replay.
• At one point, Judge Brinkema asks if there are any objections to an exhibit, and LaSala accidentally says “yes” - everyone laughs, and he says “I object to all of this.”

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3. ‍Luke Lambert, Chief Innovation Officer, OMD (Agency)

This was a quick one with no exhibits, again laser-focused on market definition.

• Luke explained attribution and Media Mix Modeling. DOJ focused on optimization, with Luke generally saying that optimizations are within channels.
• Google focused on a US Army campaign document, harping on Digital Display including more than just open web display.

4. ‍Arnaud Creput, CEO, Equative

This was a transcript read-in. I’m going to focus on key points, as much of this reiterated perspectives of prior witnesses.

• Equative operates a (small) ad server, an SSP, and a DSP.
• It’s practically impossible to compete with DFP because of demand, and switching costs are high.
• We hear a bit about AdX mediation, and that it was not really a practical solution.
• More on Google/AdX/DFP self-preferencing - e.g. limiting auction data access, access to Google Ads demand, and AdX preferential treatment by DV360. Customer match was referenced as an example of the advantage Google has.
• My favorite part: he speaks to how large agencies have volume deals with Google so they’re incentivized to use DV360 and AdX. “It makes no difference to them.”‍

5. ‍Brian Boland, formerly VP Partnerships Product Marketing, Partner Engineering, Strategic Operations & Analytics, Meta

• DOJ dives into FAN, and how FAN exited open web display in 2019.  They thought about an ad server for open web display, but didn’t go there. They also didn’t have an ad exchange for open web display.  No DSP. Just FB Ads.
• We see a document about how he’s worried that when Google sits between publishers and facebook, he would hate for DoubleClick to use FAN to gain a “strong mediation foothold” and bias their systems against FB, “like thye do on desktop” with dynamic allocation. The “dynamic allocation effect” is what they were trying to “work around” with header bidding.
• We also see a document that talks about key decisions for FAN to be successful. FB considered whether to move forward with the adtech partnership strategy by partnering with Google, because they worried about having transactions facilitated by a Google, given its history of preferential treatment of its ad exchange.
• We see a FAN Bidding FYI update post about Google moving to defense mode. HB benefits everyone but Google. AdX share of impressions cut in half with publishers that moved to HB.  It “threatens Google’s monopoly.”
• Drumroll We see a document about the Network Bidding Agreement (Jedi Blue, though this code name wasn’t referenced).  It’s some sort of internal update or strategy document. Google wanted FB to pay 15% of working media to remove Last Look.  It was a tense moment. Google objected, at first sustained, contending he had no firsthand knowledge.  Another objection is raised a few moments later, and Judge Brinkema jumps in. She thought DOJ had another FB witness to speak to this issue, and Ms. Wood says he’s the only one. The frustration was palpable.  Judge Brinkema asked Boland questions to establish his involvement and knowledge of the matter. She is satisfied that he did indeed oversee FAN and have personal involvement in this deal, so questioning proceeds with the document entered into evidence.  She tells Google they can probe on his involvement on cross-exam, but they don’t.
  
  
  More details here on the deal.
  
  
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• Cross-examination focuses on confirming that Google didn’t “directly” cause the shut down of FB’s acquired video adserver, LiveRail. More market definition games, and highlighting that FAN reached 1 billion people each month. Ms. Wood ends her redirect by clarifying that despite this success in reaching so many people, Boland still suggested to shut down FAN on open web display. Boland says yes.

6. ‍Brian O’Kelley, CEO of Scope3, former CEO of AppNexus

• The day ends with the beginning of O’Kelley’s video deposition. We didn’t get too far into this, and much of the discussion was a history of adtech, starting pre-DoubleClick acquisition.  He is the first witness to explain the user data side of Google’s advantage in detail. We get up to Header Bidding’s rise in popularity in ‘14 as publishers realize the clear potential for more revenue, along with the opportunity to compete with Google, before Judge Brinkema brings the day to a close.

Next week, we’re hearing from a couple of expert witnesses, a couple of industry participants, and most exciting: four Google/Xooglers, as I mentioned at the top.
They're all slated for the morning slot currently, so O'Kelley's deposition tape will resume at an unknown time.

1. Monday: Neal Mohan, current YouTube CEO, previously on Ads business, coming over from DoubleClick
2. Tuesday: Nirmal Jayaram, Sr. Director, Engineering
3. Wednesday: Scott Spencer, Xoogler and ex-DoubleClick, former VP of Product Management
4. Thursday: Jonathan Bellack, Xoogler, Director of Project Management

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