Google has misled publishers and advertisers for years about its ad auction prices and processes, creating secret schemes that have deflated sales for some companies while raising prices for buyers, according to allegations and details recently. unredacted in a lawsuit filed by state attorneys general.
Meanwhile, Google pocketed the difference between what it told publishers and advertisers an ad costs and used the pool of money to manipulate future auctions to expand its digital monopoly, the complaint says. newly unredacted. The documents cite internal correspondence in which Google employees said some of these practices amounted to growing its business through “inside information.”
Friday’s unredacted filing in U.S. District Court for the Southern District of New York came after a federal judge ruled last week that an amended complaint filed last year can be unsealed.
The lawsuit was first filed in December 2020, with many sections of the complaint redacted. Since then, the redactions have been removed in a series of rulings, providing new detail on the states’ argument that Google operates a monopoly that hurts ad industry competitors and publishers.
Google, a unit of Alphabet Inc., announced plans to file a motion to dismiss next week. A company spokesperson said the lawsuit was “full of inaccuracies and lacking in legal merit”. He added, “Our ad technologies help websites and apps fund their content and enable small businesses to reach customers around the world. There is vigorous competition in online advertising.”
The way advertisements are bought and sold on the Internet is a complex process in which Google plays an outsized role as a participant in and manager of the auctions that determine sales. Google holds the dominant tool at each link in the chain between online publishers and advertisers, which gives it unique power over the monetization of digital content. It also has key platforms for reaching consumers, such as YouTube. As a result, rivals have complained that the tech giant has tilted the market in its favor, allowing it to win more bids and shut out competition. The amended complaint and its unredacted details are intended to shed light on how this works in practice.
Led by Texas Attorney General Ken Paxton and joined by more than a dozen states, the lawsuit alleges Google’s business practices inflate advertising costs, which brands pass on to consumers in more expensive products. It also alleges that Google is removing competition from competing exchanges and limiting websites’ options for serving ads, based on the company’s internal comparison with a bank that also owns the New York Stock Exchange.
“Our amended complaint details how Google manipulates the online auction to punish publishers and blatantly lies to them about how they run the auction,” Paxton said.
The suit is supplemented by a separate antitrust case by the US Department of Justice and more than three dozen state attorneys general focused on Google’s search services. The cases are due for trial in 2023 or later.
Meanwhile, a dozen Republicans and Democrats in the Senate are introducing a bill that would treat Google’s search engine like a railroad operator, barring it from profiting from its own products and services to the detriment of others. platform-dependent businesses. Digital ad analysts say if passed, it could force Google to spin off or sell its ad tech business formerly known as DoubleClick Inc.
In addition to detailing some of Google’s programs, the new complaint states that Alphabet and Google Chief Executive Sundar Pichai and Meta Platforms Inc. Chief Executive Mark Zuckerberg signed a 2018 trade agreement that would have guaranteed that Meta’s subsidiary, Facebook, would bid and win. —a fixed percentage of advertising bids. It was previously reported that the deal was signed by Philipp Schindler, chief commercial officer of Google, and Sheryl Sandberg, chief operating officer of Facebook.
State prosecutors argued that it was an illegal price-fixing agreement. Companies said it was above all board.
The newly unredacted details provide more information on a series of programs run by Google, named Project Bernanke, Reserve Price Optimization and Dynamic Revenue Share. The Bernanke program has previously been reported on, but the new, unredacted complaint reveals it had three versions between 2010 and 2019.
In the first version, Google tricked publishers and advertisers into thinking they were participating in a “second-price auction”, where the winner pays the price of the second-highest bid, when using its advertising exchange, AdX, allegedly However, under Google’s Bernanke program, AdX sometimes eliminated the second-highest bid, allowing the third-highest bid to win, depriving the publisher of revenue, according to the complaint. At the same time, Google was charging advertisers the price of the second-highest bid and pocketing the difference, according to the complaint.
Google pooled overpayments from advertisers and used the money to manipulate bidding on its systems, sometimes raising advertisers’ bids through its ad buying tools to ensure it would win an auction it didn’t. wouldn’t have otherwise, according to the complaint.
It affected billions of ad impressions sold each month and Google research found it caused publishers’ revenue to plummet by up to 40%, according to the complaint. “Bernanke is powerful,” said a Google employee, according to internal company communications cited in the complaint.
A second version of the program, dubbed Global Bernanke, used funds raised by Google to only inflate bids belonging to Google’s ad-buying tool for small advertisers, originally known as AdWords and now called Google. Ads, when those auctions were about to otherwise lose bids on Google’s exchange, the complaint alleges.
A third version of the program, called Bell, penalized publishers who failed to give Google what the complaint calls “preferential access” to their ad inventory by redirecting the money it collected to those who did. did, according to the complaint. Publishers were eligible. for those funds only if they participated in Google programs such as dynamic allocation, which gave Google’s AdX the right of first refusal against competing exchanges in auctions, according to the complaint.
A Google spokesperson said Bernanke was implemented to “optimize advertiser bidding” and was part of improvements to increase competition and make ads more effective for businesses. He added that the program was not artificially raising prices and denied claims that Google “manipulated” his ad. exchange.
As part of the reserve price optimization program, Google used historical data from an advertiser’s previous auctions to set “floors” or minimum prices for that advertiser, which resulted in advertisers paying higher prices, according to the complaint. In a recently unredacted corporate communication, Google employees said the program should be based on “intelligence and technology” rather than “insider information.”
The new details further suggest that Google employees were wary of the dynamic caused by another program, Dynamic Revenue Share, which changed the fees collected by Google’s ad exchange to help Google’s tools earn more. auction than they would otherwise. Google only did this after it could see what all of its rivals had offered, due to its dominance of the publisher ad server market, according to the complaint.
The program “makes the bidding false because we determine the AdX revshare after seeing bids from buyers,” a Google employee wrote, in newly unredacted sections of the complaint.
A Google spokesperson said these programs do not manipulate bids and are designed to help publishers maximize ad sales.
This story was published from a news agency feed with no text edits
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