Trial Update, September 11: Google exploited adserver switching costs to “crush” competitors, and impose “debt” on publishers

Day 3 picked up right where yesterday left off: with Google’s conflicts of interest in the spotlight.
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Brad Bender, Ex-Google Product Lead

The day started with adversarial witness, Brad Bender - a Xoogler who worked on both buy and sell-sides during his tenure.  He still holds >$1M in Google stock, and it was fairly evident from his testimony.

For clarity, most of what emerged was found in the documents he was asked to speak to - not attributed to him.

• In an email from just after the DoubleClick acquisition, containing former DoubleClick CEO David Rosenblatt's Google Display strategy, Rosenblatt talks about how "the most efficient way to access that inventory is by owning the  primary ad server," the value of which is to "allow you to have a firstlook at each impression."
• He says that the great part about it is that "there's a huge switching cost" - great for Google which was "aheadintellectually" but having trouble building its own. It takes "an act of God" to get publishers to switch, because it's a "nightmare."
• A reference to how Google is both "Goldman and the NYSE" is made, and DOJ suggests that Google was intending to do with display what it did with search, pointing to an excerpt about how this would result in controlling or managing probably 90% of display inventory. "We'll be able to crush the other networks, and that's the goal," Rosenblatt said.
• A lot of talk about spoliation issues and "Communicate with Care" instruction. Bender hadn't turn the delete chat history default off after receiving the litigation hold instruction (granted, he left a month after receiving instruction.) Judge Brinkema is clearly still not amused by the evidence deletion games, and asked to see the lit hold instructions moving forward.
• We saw an email about how DV360 was giving a huge chunk of revenue to publishers using Header Bidding, and how this "seems pretty broken" - with Google's Payam Shodjai sayingthat the problem with Header Bidding “is that Header Bidding exists.” No mention of the alleged spam/fraud/inventory quality issues I tried to contain my eye-rolls about during Google's cross-examination of Bender.
• Google said Exchange Bidding would "stem the bleeding" and Google thought it was better to "cannibalize” themselves than see other exchanges take share.
• Judge Brinkema continues to be an absolute boss. She asked re: AwBid, "If a marketer isn't interested in remarketing" whether bids stay only within the Google network. Bender says "yes."
• Google’s cross-examination focused on all of their alleged inventory quality and fraud prevention measures on their ad network. They “did a lot of work” to make sure their network has “safe, high quality inventory” that is brand safe versus DV360, where “the onus is on the advertisers.”  Obviously this is nonsense. But also, a nice admission by Google about the extent to which they take responsibility for inventory bought through DV360 that advertisers should take note of.
• Bender said advertisers “multi-home” using both DV360 and Google Ads, which is quite the stretch on what multi-homing means.
• We got a peek at the Display P&L - looking forward to getting a closer look at that exhibit tomorrow.  Also, they identified DV and IAS as competition on one slide, which goes to show no conflict is too large and no partnership is off limits when it comes to their monopolistic ambitions.
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Ravi Ramamoorthi, Professor of Computer Science at UC San Diego

Next up was the government’s first expert witness. He is an expert in discrete optimization and auction design.

• He evaluated four “conducts” using Google’s own experiment documentation - First Look, Last Look, Poirot, and Unified Pricing Rules -  and concluded that “broadly speaking [the conduct] was not implemented in an optimal way to sell impressions for customers” and it “advantaged Google’s products” while it disadvantaged others in adtech.
• He spoke to how in First Look, where AdX sees almost all impressions won and lost, Google gets an advantage while cutting off signal to rivals.  53% of Google’s wins were due to First Look, he says.  First Look also changes the floor over time, because AdX would win more valuable impressions, and the less valuable ones would set the floor price making AdX even more likely to win - a “self-fulfilling prophecy.”
• To overcome the downsides, Header Bidding emerged, then First Look became Last Look. When line items went into DFP, Google got the price of the bid, and AdX got last right of refusal.  With Sell-Side Dynamic Revenue Share and Last Look, the floor price of the highest Header Bid was the “target” and SSDRS could reduce revenue share to meet the floor.  In the first version Google only reduced take rates. In the second, they’d increase it as well.  “Dynamic Revenue Share is another way for AdX to exploit last look advantage,” a Google document read. He found this reduces publisher revenue by taking auction pressure off of AdX, and Last Look steals header bids from other exchanges to reduce won impressions.
• Judge Brinkema asks if “latency issues” make it so you can only bid once on the same impression, or many times like a normal auction. Dr. Ravi says you can only bid once, and Judge Brinkema wonders about whether better tech would enable multiple bids. Dr. Ravi says “yes, but the speed of light is an impediment.” LOL of the day.
• Then we get into Poirot and bid shading practices.  Dr. Ravi explains bid shading is reasonable in a first price auction, not in second price. He explained that UPR incentivizes bid shading where Reserve Price Optimization exists. If historical bids were higher for a particular buyer, you could set a different Reserve Price.  Not anymore.
• He also explains that with Dynamic Revenue share, Google imposes “debt” on publishers. He speaks to the importance of scale - number of participants (thickness) and won transactions. He says that scale is fodder for optimization, and scale impacts “debt recoupment” - so a strategy only Google could pull off.
• The cross-examination lasted about an hour and a half and went nowhere. My notes literally read that this is an hour of my life I will never get back.  The defense tried repeatedly to make it sound like Google was just helping one side of their customers win with each of these moves. They aren’t “self-preferencing” for themselves, but for their customers.   Dr. Ravi disagreed. Every time.  Then the defense tried to make it sound like he selectively chose the conduct to evaluate - and Dr. Ravi said he evaluated the conduct that was key to the auction mechanics. Yes, an hour and a half of this.

Jed Dederick, CRO at The Trade Desk

Last witness of the day was Jed Dederick, from The Trade Desk - DV360’s main competitor.

• Jed made clear his strong belief that the buy side should serve the buy side, and the sell side should serve the sell side only. He said they have distinct and often opposing interests.
• He spoke to how every one of TTD’s clients uses DV360, or has a contract with Google. They need access to YouTube and Search, and this is the only way to get it.
• He explained the massive advantage that Google has by virtue of their access to data on 2 billion logged in users. Search data. Connectivity to O&O properties like YouTube. It made it difficult for TTD to grow in display, so they’ve invested in other channels like CTV.
• Jed spoke to the disappearance of several ad networks given the dominance of Google Ads. Rocketfuel. Adroll. “There are fewer now.”
• He’s asked what is important in evaluating ad exchanges, and says “a fair and transparent auction. A transparent supply chain. [Advertisers] want to know what they’re buying.”
• TTD has tried to raise concerns with Google about auction fairness, but it didn’t go anywhere.  Alas, AdX is unavoidable for scale.
• Judge Brinkema asks what happens if Google is “blown apart” - without a “great, big, mega” Google, where data is collected, would that be bad for publishers? Glad she’s thinking about this already. Out loud. Jed ponders before saying the biggest issue is a viable adserver alternative. Otherwise, there are other exchanges, and publishers will figure it out.
• He’s asked if AdX has safer, less fraudulent or MFA-riddled inventory than other exchanges. He says no, and starts to reference Adalytics reports, before Google objects, and it is sustained.
• We see just how jazzed TTD was about Header Bidding. They finally “saw potential for competition” in publisher ad servers. They’d be able to access more inventory. They even made their investors watch an explainer video on Header Bidding at IPO.
• We see a deck from their “Palooza ‘17” all hands with more Header Bidding excitement, and what it means for The Trade Desk. It spoke to Google’s 77% share of the adserver market at the time, how tightly integrated the SSP was with the ad server, Google’s significant resulting competitive advantage, and how Header Bidding will level the playing field. No more “Googlopoly,” as one slide alluded to.
• TTD wasn’t worried about latency. They were willing to deal with increased costs to mitigate bid duplication. This was central to their future growth.
• There was no benefit to Open Bidding, he says. Only downsides. The 5% cost was nothing compared to Google taking back control.
• He did say he viewed the ad network as a sell-side tool, which will feature prominently in cross-examination, as Google’s main argument thus far has been to make the market definition seem fuzzy and gerrymandered.
• We started to see this play out, but didn’t get far into cross-examination before a dispute between lawyers over a document that Google began questioning Jed on that had not been submitted in May with their exhibit list as was required.  The first real drama between the DOJ and Google lawyers ensues.
• The document was an investor letter from Jeff Green in May ‘24, that talks about how spend and consumption is moving away from Walled Garden titans like Meta and Google to the open internet. The DOJ objected, and the document was omitted from evidence, but questioning resumed.  The questions led to another objection, which also was sustained, so the document was out. Karen Dunn rifles through pages - clearly having a lot of questions planned for that document. She says that many of the TTD documents were filed under seal, and we’re going to run into this issue a lot, at which point Judge Brinkema closes down the courtroom and asks observers to leave. When tomorrow picks up, the court will still be closed down for cross-examination, so unfortunately, this seems like all we’re going to get on this.

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