Trial Update, September 9th: DOJ opens with a portrait of Google’s trifecta of monopolies, while Google spends all day badgering witnesses on cross-exam disputing that open-web display ads are a real thing.

Today marked the beginning of the landmark US v. Google trial.

We heard opening arguments from both sides, and the DOJ called their first four witnesses - each representing a different side of the market.  
The DOJ is 1.5 witnesses ahead of schedule, so this first update is jam-packed. Let's jump in.

DOJ Opening Arguments:

The DOJ opened up by “saying the quiet part out loud,” with a powerful telling of Google’s trifecta of monopolies: the advertiser ad network, publisher ad server, and ad exchange that connects the two.  She explained that the DOJ’s goal is “freedom of choice for all market participants.”

DOJ set up that this case is about how Google used its search monopoly to build new monopoly over adtech tools.

Julia Wood explained how Google’s conduct is straight out of the “monopolist playbook” where control is the defining characteristic of a monopoly.  When one company controls, nobody wins. This was broken down into three parts:

1. Control of competition: Google didn’t innovate - it “acquired its way to success” the DOJ contends, referencing Doubleclick and Admeld acquisitions. Google used the “power of the purse” according to the DOJ - saying it’s been a game of whac-a-mole, where Google uses its power in one market to cement its dominance over another.
2. Control of customers: DOJ spoke to the tying of Google Ads to AdX, and AdX to GAM/DFP.
   The DOJ says that while Google frames it as legitimate “refusal to deal,” Google’s “all or nothing” strategy was intentional (citing PTX0124).
3. Control of the Rules: DOJ speaks to how Google took “first look” advantage, with AdX “cutting the line” to see what it has to pay to win. DOJ explains last-look using an analogy of a silent auction where one player could open the envelope and offer to pay a penny more. Also, set up Google’s assault on Header Bidding, and how it removed the right  of publishers to set prices via Unified Pricing Rules, imposing it by fiat.

Witnesses that DOJ outlined will testify from different sides of the market:

Publishers:

1. Tim Wolfe, Gannett
2. Felix Zeng, The Weather Company
3. Stephanie Layser, ex-NewsCorp

Ad Server:

1. James Avery, Kevel
2. Arnaud Creput, Equative

Ad Exchanges:

1. Andrew Casale, Index Exchange
2. Tim Cadogan, Openx

Advertisers:

1. Joshua Lowcock, UM
2. Jay Friedman, Goodway Group
3. Luke Lambert, OMD

DSP:

1. Jed Dederick, The Trade Desk

Facebook:

1. Brian Boland

Google Opening Arguments:

Google started off with a history lesson on RTB as a game-changer, and how since then Google has invested billions into adtech to make tools that operate “seamlessly” and “securely.”  Google explains that adtech is intensely competitive. Google points to the 18x growth in display ad spend, and downplaying Google’s share of the alleged single two-sided market.  Google points to the rapidly changing market, and how the DOJ is asking to control an uncertain future.

1. Google doubles down on its market definition jazz hands as expected, alleging the DOJ “cannot prove relevant market” and insinuating that the DOJ contradicts itself on whether this is one market or three.  Points to Amex precedent, and claims all they have is a 25% share in a single 2-sided market, where the pie is growing whilst Google share shrinks.  We then begin the first of many attempts of Google to assert open web display ads are not a real thing, and the DOJ’s market definition is gerrymandered artificially, before dunking on one of the DOJ’s experts, Robin Lee.
2. They say their conduct is per se legal and their refusals to deal are pro-competitive, essentially arguing the DOJ wants them to offer favorable terms to competitors, which they’re under no obligation to do. We get a smattering of allusions to multi-homing, their ‘quality’ argument of how their refusals to deal have been in the interest of guarding quality, privacy, security, control, and choice, before telling us about how Google’s strategy focuses on ROI for advertisers, Yield for publishers, and User Experience (again noting this includes security - to which I once again roll my eyes).
3. Finally, as they run out of time, they show a chart of Microsoft, Amazon, Meta, TikTok and Google to once again try to establish that they have competition, and let us know that while the DOJ isn’t calling government advertisers (duh, the damages piece was settled by their $2.3M check stunt), they will be calling Army, Navy, Airforce, USPS, US Dep’t of Veterans Affairs, and Census.

Day 1 Witnesses | Some quick highlights - mostly market definition

1. Tim Wolfe - Gannett / Publisher
   1. Of $15M they pay for in tools, >$10M goes to Google
   2. Establishes how difficult and impractical it is to switch Ad Servers
   3. Explains ad serving is CPM-based fee, whereas take-rate is rev share associated with the exchange (20%)
   4. 20% improvement to revenue with header bidding
   5. AdX important because local advertisers
   6. On cross-exam, Tim made a pointed remark about how what they want is for “everyone to compete, including Google, at the same time”
   7. Google also asked Tim to read Gannett’s ads.txt file…(cross-exams didn’t get less bizarre from here)
2. Andrew Casale - Index Exchange / Ad Exchange
   1. “Nobody switches” ad servers - it’s “like a utility” - and very uncommon to multihome, as it undermines its autonomy as an ad server.
   2. Market for display ads on open-web is different than Facebook, because “open-web has more standards” - pointing to IAB ad standards, and lack of standards in walled gardens/social media.
   3. Index has a 0.5% win rate on auctions for open-web display impressions
   4. Speaks to the importance of data to scale
   5. Header bidding is not worse for security
   6. Google played word games to confuse Casale’s comment on Header Bidding creating auction competition with market competition, and accosted Casale for not keeping up with their product name rebrands
   7. More definition games with SPO, as we saw in Google’s FoF where on cross-exam, Google alleges SPO necessarily means using fewer SSPs
3. Joshua Lowcock - Quad/ex-UM / Buyer
   1. DOJ ran through distinct ad types (Search, Social, Direct Buys, Native Ads, in-app, traditional), whether they’re reasonable substitutes, and why not.Spoiler alert: none of them are.  E.g. need different assets, teams, skills, or serve a different purpose, to name a few reasons.
   2. Joshua spoke to the marketing funnel - as he did in the search trial - explaining open-web display generally deal with upper-funnel.
   3. Header bidding didn’t cause latency issues, nor is it bad for brand safety. In fact, it’s easier to detect fraudulent traffic before page load.
   4. Scale: More inventory = less diligence
   5. Cross-examination, as with the others, was tedious. Google playing word games and trying to confuse or cause contradiction by pointing to old, out-of-context statements demanding a simple yes/no. A patronizing bit about why FB ads are open-web display because Facebook has a website, and Joshua testified that display ads are “boxes or rectangles” on websites.
4. James Avery, Kevel / Ad Server
   1. DFP/GAM made it impossible to compete in the market for open-web display, so Kevel switched to retail media / e-commerce. No way to address publisher questions about making up for AdX demand, and Google wouldn’t let them integrate.
   2. An email with James and AdExchanger’s Sarah Sluis (PTX0758) where James speaks to how many times he’s asked Google about integrating with AdX, and says “it turns out monopolies are pretty effective.”
   3. On cross-exam, Google points to marketing collateral on Kevel’s site about publishers shifting to build custom ad products, and in-housing ad servers. James says its “marketing wishful thinking” and Google harps on it.

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