Trial Update, September 24: Google says it's the guardian of the industry, but DOJ says “not so fast”

It’s day 12 of US v. Google, and the defense finally decided to show up today, bringing with them Nobel laureate auction and market design expert, Paul Milgrom.

Paul Milgrom, Professor at Stanford and Chairman of Auctionomics

Google starts with a timeline of their product developments over the years, and isolates conducts related to auction design that Milgrom analyzed. They then walk through each of them, having Milgrom speak to why DOJ expert findings were “misleading,” “incorrect,” or “omitted information.”  Again, Google had the expert speak to demonstrative visuals to support his points. Many of these would juxtapose the DOJ and their experts’ visuals against Milgrom’s “corrected” version, following the same gaslight-to-Googlefy flow they’ve attempted throughout, where they instill doubt and then allow their preferred explanation to fill in these created gaps.  

It was an effective testimony, and Judge Brinkema appears to find Milgrom’s explanations compelling, engaging directly with him at various points, albeit expressing her sustained skepticism about second price auctions not harming publishers. Google selectively included conduct not cited by DOJ experts as anticompetitive conducts. For EDA, for example, they countered DOJ’s objection by saying it’s relevant because in allowing direct and indirect inventory to compete, it is relevant to direct-sold as a “substitute” for indirectly sold inventory.

Google continued their games with timelines and presentation of events. The Google timeline only focused on Google, and not the broader landscape. For example, while Milgrom explains that 2nd price auctions and 1st price auctions would effectively even out over time as bidders learn to bid more effectively, and explains how rational buyers would bid differently in each (i.e. shading bids in 1st price), Milgrom does not discuss the reality where Last Look meant that a winning HB bid in a 1st price auction would serve as the floor for the 2nd price AdX auction.  Without addressing this explicitly on direct, Milgrom did allude again to inflating/boosting remnant line items as the mechanism publishers had to set higher floors for AdX auctions, without mention of how common this was in practice. He also didn’t discuss impact on rival exchanges during any of his testimony. Google only addressed the industry shift to 1st Price as set-up for their discussion of Google’s implementation of UPR, removal of Last Look and move to unified 1st price auction.

Google’s timeline also included Buy-side changes on the bottom, and Sell-side changes on top, yet even for clear Sell-Side changes, like UPR, it was Buy-Side benefits that they discussed. He positioned Poirot, a buy-side change, as though it would “increase the size of the pie” to the benefit of publishers as well, by virtue of improving performance for advertisers. He said that the DOJ’s allegation of Poirot as pretextual and intended to damage Header Bidding as “ridiculous” and said Header Bidding was a good idea because it increased programmatic transactions, despite the many internal discussions we’ve seen about Google trying to kill it.

DOJ began cross right before lunch. They started with Last Look, where Milgrom conceded that it does create an advantage for AdX when we take Open Bidding and bid inflation out of the equation, and that he did not do any analysis of the frequency with which bids were inflated by publishers or what the downsides of doing this would be.  Further, Milgrom conceded that SSDRS + LL gave AdX an advantage none of the other exchanges had of opening sealed auction envelopes and setting their price/take afterwards. We see Google docs and emails that allude to Exchange Bidding with no Last Look as creating a level playing field (implying Google knew they had an advantage), as well as the email we’ve seen previously describing SSDRS as another way for AdX to exploit LL.  We also see a document where Facebook discusses this as a significant disadvantage to competitors, because even though they can access inventory, their ability to compete for it is handicapped. Milgrom concedes he did not analyze impact of LL on other exchanges, or conduct a full analysis of LL’s impact on competition or if harms outweighed the benefits. An impressive showing by DOJ, particularly given their lack of Google’s fancy visuals.  I unfortunately missed the rest of cross after lunch, which miraculously ran for just under an hour.

Per Bjorke, Director of Product Management, AdSpam Team @ Google

Very sad I didn’t bring my bingo card to the afternoon session.  Bjorke told us all about Google’s Ad Traffic Quality (AdSpam) work, as part of the broader Ads Privacy and Safety organization at Google. He’s been at Google since 2013, and seems like a very nice guy that has operated exclusively in the AdSpam bubble, largely removed from the realities of the “machine” and the commercial decisions that undermine good intentions. He talks about all Google does to combat Invalid Traffic and ad fraud, and Google’s ~$250M investment in the area in ‘22. He explains how IVT matters to advertisers, as they wouldn’t want to pay for traffic from bots sitting in a data center somewhere. He speaks to the publisher vetting process, and how keeping bad actors out of the AdX system is important, so Google doesn’t need to battle them later on. We hear about how they have a refund and claw-back process to make sure advertisers don’t pay for and publishers aren’t paid for IVT. Google points to AWbid to try to show how fraud and spam was more prevalent on third party exchanges, and Bjorke explains why it is much easier to contain in a closed system.

He discusses Google’s partnership with HUMAN (fka WhiteOps), and how they uncovered the 3ve bot network, saying Google took a $30M - $40M hit as a result.  He says most of the fraudulent sites in 3ve and Methbot came from 3rd party exchanges - minimal amount through AdX.  We see a deck where he’s pitching Google that the AdSpam team should clean up the whole ecosystem to “grow the pie” vs. just clean up Google to differentiate on quality (grow the slice). He says Google opted to grow the pie. He also gushes about his work and Google’s leadership in developing Ads.txt, and evangelizing its adoption after IAB Tech Lab published the standard. You’ll be pleased to hear that according to Bjorke, domain spoofing has largely been solved thanks to Google.

On cross-examination, DOJ clarifies that Google is in fact not credited as the developer of Ads.txt and the IAB Tech Lab release mentions a number of other exchanges and adtech companies as significant contributors to the standard. TAG also makes an appearance, and for once TAG’s lax standards come in handy, as DOJ is able to point to the fact that many exchanges - not just Google - have TAG certifications.  Bjorke calls TAG “the minimum bar.” DOJ also flags instances where other industry participants, like OpenX, have reported suspected IVT in Google inventory that Google itself hadn’t identified. The moment I’ve been waiting for arrives, as DOJ asks Bjorke if he was aware of reports identifying Google running ads on sanctioned sites in Iran (Adalytics) and Bosnia (Propublica), or that 48% of traffic on fake news comes from Google (University of Michigan). Bjorke is not aware of these reports.

Finally, DOJ references instances of Google apparently blocking valid traffic. Bjorke says this can happen unintentionally. Sometimes it will be blocked on 3rd party exchanges, but allowed on AdX. Then, DOJ asks if he is aware of Financial Times inventory flagged as IVT that was accepted by DBM on 3rd Party Exchanges (TrustX, Bidswitch) but blocked on AdX.

Kenneth Blom, Chief Business Officer at BuzzFeed

We start Blom’s video deposition. He’s former Reprise (agency), and now at BuzzFeed. Of note, he speaks highly of GAM’s features, and loves UPRs. He seems nervous, and chooses his words carefully, as one might expect of a publisher employee who is being asked questions by the defense counsel representing the monopolist that holds his livelihood in its hands.

Court wrapped early today. Tomorrow we hear from “take rate expert” Judith Chevalier and Adam Stewart, VP of Consumer, Government, and Entertainment at Google. I don’t know how long Judge Brinkema will allow another Government-related Googler to go on, but the defense flags his health issues, so I anticipate the Judge will be more permissive. Other expected witnesses are listed below.

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