Trial Update, September 12: Publishers willing to accept some revenue loss for reduced dependency, but Google figures they’ll “get over their control loss aversion”

DOJ and Google attorneys negotiated the TTD documents overnight at issue during Dederick’s testimony yesterday, with Jed's cross-examination resuming just before lunch recess.  The morning began with Xoogler, Rahul Srinivasan, who was the PM leading the UPR roll-out.

Rahul Srinivasan, former Product Manager, GAM, Google

• His testimony started off with a weird apparent lie or misstatement that he wasn't represented by the same counsel as Google during his deposition, that Ms. Wood promptly clarified.
• His direct examination focused on the 2019 roll-out of the bundle of:
  (1) Unified 1st Price Auction
  (2) UPR
  (3) Removal of Last Look

• There were many internal emails, as well as a recording played/transcript shown of the 2019 publisher meeting - where we heard Stephanie Layser and a number of other publishers express their frustration and concern with UPR.
• We started off with emails demonstrating that Google wanted to "dry out" Header Bidding, before moving into Google's imposition of UPR.
• During the Jedi rollout, Google learned definitively that publishers were setting higher price floors for AdX. In 2018 emails, they brainstormed their approach.
• Sam Cox said in an email, "I keep thinking about publishers setting high floors for AdX" and "it makes me want to turn off" that ability.  Another employee said, "I thought we wanted the reverse" - i.e. no floors per buyer because "pushing Google harder" is more difficult in a world where you can't set floors per-buyer.
• Rahul responds that both problems exist, outlining why Publishers value variable price floors.
  (1) AdX has last look, so pubs want it to work harder
  (2) Publishers have perception that undesirable ads have low CPMs and use variable floors to avoid this
  (3) They want to simulate real-time waterfall
  (4) Global Bernanke subsidizes setting higher floors, so there can be a yield benefit

• Nitish Korula adds one more:  (5) The perceived benefit from revenue diversification. Publishers have expressed  "willingness to accept some revenue loss in exchange for reduced dependency" on Google. They clearly understood that their change bundle, and subsequent features would not address this concern.
• There's a "Unified Yield Management Strategy" deck next, where we see among other things the data showing 42% of HB won queries have higher AdX floors, and that Google considered lowering their take rate instead of coercing publishers, but decided against it. There was "progress" through Poirot, says Giles. And we see Google acknowledge that by this point, other exchanges had moved to 1st price.
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• There's a late '18/'19 exec meeting to solidify a roll-out plan. They talk about bundling the move to 1st price and removal of Last Look with the imposition of UPR to manage blowback.
  
  "If this migration ends up shifting a visible portion of DBM spend from 3PE to Adx" would it "further impact perception of DBM as a cross-platform product?"  It'll be tricky, says Sam Temes. Rolling out UPR alone would be a "pure loss of functionality that we're doing for our perceived nefarious self-serving purpose."

• There’s another fake-privilege email (recurring theme during Rahul’s Direct) where there’s recognition that even with the bundled changes, the revenue diversification pushback is still valid, but this is the “best opportunity to clean this up.” “More effective” than waiting for publishers to “voluntarily” give up the variable floor functionality.
• Then we hear the 2019 publisher meeting audio, with accompanying transcript.
  • Stephanie Layser says that “optimizing yield is important, but control is also important.” Raul says that this change is needed to make this more of a “financial markets” model, and Stephanie says that the difference is that the people that own financial markets are not also bidding.
  • Another Publisher attendee says that Google made it hard to get deal reporting so it is “next to impossible” to improve yield with non-Google partners.
  • Another wonders what the point is in asking for feedback on a product already built. There’s “no recourse” for publishers, more goes through Google’s pipes, and “control lifted” from Publishers. “A hard pill to swallow,” he says.
  • Felix Zeng (another Publisher on the witness list” asks if Google is willing to lower take rates. Rahul says that “his premise is mistaken.” Calls variable floors “hacky” and assures there are still “hacky” ways. Another says this “hand-ties” us.
  • Stephanie chimes in again to ask about what happens if she is unhappy with this and wants to switch ad servers. Any plans to integrate? Rahul says they’ll explore it. They never did get back to Stephanie. She chimes in again about how Google will give you tags but not the price. Another Google employee chimes in, making light of her frustration.
• An email exchange just prior to the meeting says that Publishers have variable floors for a reason. It’s generating “real revenue” and we “can’t tell them it won’t go away.” There’s acknowledgement that publisher backlash looks serious.  Rahul says that bundling with 1st price gives additional justification, and Publishers will “get over” their “control loss aversion.”
• On cross-exam, there’s an attempt to justify the changes. Increasing complexity. Bid duplication. Improving “understanding and transparency” of the auction. Buyers won’t need to throttle queries. Obviously, no mention of the removal of control, and Publisher desire to diversify and own their own destiny.
• A lot of focus on Communicate With Care, and a dispute between DOJ and Google over the disappointing delivery of litigation hold information, which only contained names and dates. Judge Brinkema reviewed them, and agreed with Google’s assertion that they contain confidential information. DOJ is filing a brief to dispute this given Google’s spoliation games surfaced with the Adverse Inference motion.

Jed Dederick, CRO, TTD (continued)

• We got to hear the rest of cross-examination. It was fairly circular, with more attempts for Google to dispute Open Web Display ad market definition.
• In the process of this circular tedium, at one point, Google disclosed information from an RFI that was supposed to be redacted about the client they were pitching. They moved on to questioning about a document that contained sensitive financial information, where Jed voiced his concern and discomfort. The document wasn’t made visible to the attendees, but it appeared that TTD counsel realized there were insufficient redactions.  Judge Brinkema told Karen Dunn that she “is not getting very far,” and Dunn insisted this was important to market definition.  Dunn briefly continued questioning, still getting nowhere fast. It was a painful watch.
• Jed was given the opportunity on redirect to finish his thoughts from cross-examination about how Google’s Search dominance led to Google’s dominance over open web display. Search had more demand than supply. Banner ads changed that. They could then bring those “millions” of Search advertisers to publishers.

Rajeev Goel, Co-founder and CEO of Pubmatic

Rajeev is another ad exchange executive, so similar points were explored as with Andrew Casale, save for a few distinct points. I’ll focus mostly on those here.

• We walked through a history of RTB, before the usual line of questioning about how open web display is different than social, mobile, etc.
• He explained the challenges in working with Google as both a partner and a competitor. On the one hand, you want to share information as a partner. On the other, you don’t want it in the hands of your competitor.
• Out of 10 trillion bid requests in one month to Google, win rate was <1%.  DV360 is the majority of that.
• The challenge of competing with Google is their demand, he explains.
• First look was negative for publishers, for advertisers, and suppressed competition, he says, echoing previous witnesses.
• We see an email where they ask Neal Mohan (who we learned will testify Monday) for API access to DFP.  Neal never got back to them. Internally, Neal wrote to colleagues that this seems to go “directly against our dynamic allocation value prop” with AdX. Publishers should just work with AdX.  Rajeed says he asked for API access half a dozen times over the years.
• UPR limited Pubmatic revenue -6% to -8%, he says. We see internal analysis that indeed reflects a similar figure.
• We get into the AdMeld acquisition briefly. We see a whitepaper for customers and prospects that Judge Brinkema admits but cautions will include “puffery” (lol) talking about how EDA may be effective for many publishers, but it favors AdX which reduces competition. The defense’s cross-examination later tries to use this in its favor.
• As with Dederick’s cross-exam, the defense flies close to the sun on sensitive financial information. The document was not shown to the court, but while promising to only ask general questions, the defense posed a question that itself disclosed confidential commercial information. It is beginning to seem intentional.

Tom Kershaw, former CTO, Magnite

The day ended with the beginning of Kershaw’s Direct examination.

• He spoke pointedly about Magnite being an “independent” ad server because it has no conflicts and only serves publishers, unlike Google’s ad exchange.
• We hear a bit about the genesis of pre-bid, and again the importance of data and scale. “If you lose a lot,” you learn a lot, and bid more accurately.
• His direct examination resumes tomorrow. The DOJ, asked about how long it’ll take said that it’ll take a lot less time than Xoogler Chris Lasala’s (who we learned is scheduled also for tomorrow), so tomorrow sounds like a big day.

Tomorrow:

• Tom Kershaw, former CTO, Magnite (continued)
• Chris LaSala, former Managing Director of Publisher Platform Strategy, Google
• Brian Boland, former VP Partnerships Product Marketing, Meta

Judge Brinkema granted a motion filed by the press for advanced notice of closing. Public access continues to be a priority, and we are grateful.

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