Why Google is back in court for another monopoly showdown
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your podcast a walk to decoder. I really like to tell editor in chief of the virgin decoder is my show, but big ideas, other problems. Today we're talking about the big google ana, a trial that s currently taking place in a federal no, not the one you thinking of is the second google and a trust case.

In just as many months, the company lost a landmark case in August too much. A court ruled that IT had an illegal manually in search. This time around, the department of justice is claiming that google has another illegal monopoly in the online advertising market.

Unlike the search case, the ads case is both extremely complicated and somewhat harder to see. We all use search all day, and we're surrounded by online ads all day. But while it's easy to talk about search, no one really wants to think about how the ads get there or how much they really cost.

And there's added complex here because the inter relationship between google add products and its which afforded google to scale and resources and quite on a the cash flow to grow far faster than its competition, especially through aggressive acquisitions. See, well, google figure out how to put ads the search results page by itself. I had to acquire its expertise in many of the other forms of online advertising, like display in video ads, by buying competitors.

He then spent many years integrating in combining those companies and their products into a wildly complicated system known as an ad text tag, basically in only one shop for businesses and websites of all sizes to buy and sell ads, creating, argued, the worlds most sophisticated digital add network. To hear the rest of the industry telling, google maintained the dominance of that network pretty ruthlessly. Most people to see the cuddle side of google, not the side that makes money in that side, is just as cut through up and competitive.

Is any big business verge senior policy porter lorn finer has been at the course in alexandru y origination basically every day this month to hear testimony from news publishers, advertising experts and google executives that makes sense of what's going on, and ultimately to see whether a federal judge hands google another anti trust defy. So I have learned to join the show this week to help me break IT all down and get hurt on which direction SHE thinks this case is headed next before we head into IT, though, I want to take a moment to zoom out to the big picture. There's a lot of vocabulary here you are.

You on the fine details of how advertising works, but there's a few key ideas we should go over. Just were up to be terminology is getting thrown around in this court room at the harder the trial. Here is the market for what we call web display advertising.

At high level, display advertising is to the cornerstone of the digital add market, and the oldest form of advertising we have on the internet started back in early nineties with the banner ad, and its expanded from there to include a variety of different ad formats. When you're reading website, the ads you see most often are display ads, and the market leader there is google. And all google now has a lot of different kinds of ads, from search ads to the videos on youtube.

This case doesn't concern those. It's focused on the display ads, how they get there, how much the cost behind the divide is a supplier, the news publisher, the website donor, whoever owns the boxes on the web pages that are being filled with ads never said there is a customer usually accompany transsolar product or service. Someone who wants to fill those boxes in the middle sit the ad exchanges, which facility the buying and selling of ads at massive scale companies like google with its google ads, and add sense platforms and competitors like pop matic.

But over time, google has come to own virtually every piece of the ad tech stack, not just the exchanges, but also the tech used on both sides of the add transaction. As online advertising became more sophisticated over time, companies that google began to experience technology that would automate those transactions that ever greater scale and speed through automated bidding. Thinking of you like countless split second options that are happening across the entire internet all day, every day, often for just pennies per click, the money is in the scale.

Google recorded two hundred and thirty eight billion dollars in ad revenue last year, primarily from the ad products of power, its search engine and the huge swath of the web that use its related display in video ad products. You're going to hear law and talk about all of these terms. And in particular, you'll hear her talk about a company called double click, which google purchased in two thousand and seven, and how would eventually formed the backbone of the exchange called adec.

Virtually all of these platforms and services have since been combined, rebranded into more generic sending google products. But the technology at the heart is what regulators argue allow google to consolidate power in unprecedented fashion. Okay, who was big? And I trust fight over ads here. good.

Laun finer, welcome to the coder.

Thanks for having .

me let's art at a very basic level. What is this case? Who's suing google? What's IT about?

Where's a being hurt? This trial is about google advertising technology business. And that's a business where google has a role in several different parts of the market. Basically, you have the publisher side, you have the advertisers are side, and you have the technology that sits in the middle and facilitate the buying and selling of adam and tory.

The government basically saying that google has maintained illegal monopoly in a couple of these different parts of the advertising technology stack and also illegally tied together two of its tools to entrench that power in this lawsuit. There's still the department of justice there really leading the questioning of the witnesses so far in this case. You also have, I think some are over a dozen state attorney general that have signed on to the D O, J.

S. case. The government is making four key arguments in this case. They're saying that google first monolithic market for the publisher ad server, which is the publisher side tool used to sell add space on the internet. They've also been opposed, zed, the market for ad exchanges, which is the technology that sits in the middle and facilities buying and selling, and then for the ad network pitches basically the large advertiser base that google has that provides buying demand to its platform. And the fourth argument is that google has illegally tied together its publisher, ad server and its ad exchange, leveraging the dominance of both of those to extend its monopoly power.

presumable. Google disagrees with all this. What's their response?

Google has said that the government really gets this wrong. They're not understanding the space, that they have plenty of competition here. That advertising tech is an industry that's alive and well, and that IT just happens to have these tools that have certain efficiencies with each other that ultimately benefit the industry.

We haven't really gone to hear their case in full yet because right now the government is going through its witnesses. And after that, we'll get to hear more of google side of the story. But we did get to hear a little bit of this in opening arguments.

Google, I lost a big federal and interest case once this year in search. What makes this case different from that one?

In the google search case, that was the case about essentially google contracts with browser makers and phones makers that would make google search the default on their platforms. Ultimately, the judges in that case ruled that google did illegally monopolize the search market and that while it's true that consumers could change the defaults on these browsers or phones, that IT was clear to the judge that google intended to illegally monopoly this market and box out s from being able to really gain a foothold in this space. So that's a case that currently in the remedies phase, so they are figuring out what's the government going to ask for in order to solve this harm that the judge found in this case, the arguments in these cases, they're pretty different there, different industries in a sense, although, of course, the popularity of google really surprises from its search product. But I don't know if I necessarily tells us the full story of how the judge may approach this case because IT is a different industry, it's a different set of facts.

These cases is related at all that they stem from the same investigation. Or is that just two totally different things?

I would say it's more akin to two separate avenues just because the first case, the search case was filed under the trumpet administration, the second case was filed under the bind administration. The by administration did continue to Carry out the search trial when that administration took over. So I don't think there's necessarily like a dispute in you know how necessarily they think about these markets, but they are different cases.

They kind of stemmed from stem from different administrations. But that said, you know, there is something that's a little bit odd about talking about the advertising technology business and isolation just because a lot of the demand that especially in google advertising network, comes from the popularity of search. And you know, I think search is really what google popularity in general has always stamped from. But I do think it's significant that we see in twenty twenty four, a federal judge saying the anti trust laws can be applied to attacked platform to say that this company illegally monopolized the market because we haven't seen that in a really long time.

The search case was heard in a federal court in washington, D. C. Is this one in the same court with the same judge? And how long is the thing going to take? Because the other case was during trapt administration, which means to took four years to get a trial, and it's still not over.

This case is an elephant of the eastern and district of Virginia. The eastern district of Virginia actually has kind of a funny nickname in legal circles. It's known as the rocket docket because it's known for moving cases relatively quickly.

And I think that is pretty much what we've seen here. IT is being a reseed by judge lane brinkema. My understand that she's a highly respected judge.

I think she's been very, very, matter of fact, very strong to the point he doesn't want to to hear a lot of repetition of arguments or repetition of concepts that she's heard from witnesses. I think the questions i've heard her us so far seem to indicate that SHE to understands this market. She's getting a grasp of for the technical elements of this case.

And SHE wants to keep a movie. I think we've seen that a lot in the argument so far. IT started last monday.

So far, it's been basically a week of trial, and it's been every single day of the work week. IT could go up to six weeks. IT seems like that's not going to happen.

I'd say it's probably going to go, I would guess, at least another couple weeks, but I won't imagine they're going to take the four, six weeks. IT sounded like the dear j might wrap up its case in the chief this week, at which point google will begin bringing and witnesses. Speaking of length.

we have take a quick break back.

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Looking back, i'm talking to verge, senior policy reporter learned finer about google's current antitrust case. Separate and apart from the Hardy lost about search last month. The justice department is to bring all its witnesses in first to this trial.

It's been doing that last week. In this week, laun, you've been in court virtually every day washing that unfold. What kind of witnesses is the department of justice spring in?

There has been several groups of different types of witnesses so far. We've heard from publishers. We've heard from people on the buying side who represent agencies that buy ads for clients. We've heard from one expert so far, and we've also heard from former google executives who've worked in parts of the attack business on the publisher side, one that released out to me was definitely laser, who was a former news corp.

Executive who spoke pretty passionately about the issues that he had with google, publish her side tools and feeling locked into their whole technology ecosystem despite issues that he had with IT. We've heard from performer google executives like a former suicide executive, Christless sala. We saw several documents from him and colleagues that kind of underscored google understanding that publishers were not so happy with the kind of fees that were charged for selling add space through their technology. So yeah, we've heard from a whole range of different people across the industry, both inside and outside of google, and seems like the government is trying to paint this picture that google employees understood the kinds of push fact that they were getting, particularly from the publisher side, and trying to show the kind of impact to that google alleged monopoly ly power head on, particularly the publishing industry.

Acquisitions have definitely been a major theme here. Google started out as just a search engine twenty five years ago, but quickly acquired its way into being a major versing player.

Has that come up? There's a couple of the acquisitions that are mentioned in this case. But I think really the most important one is google acquisition of double click, which kind of brought over the publisher ad server and helped google build out its ad exchange. And those are the two pieces of technology that the government is saying. Google has illegally tied together to physical lock in customers and make IT really difficult to switch to another attack tool and just compound its dominance in the market.

A lot of people think letting google are quite a double clip just wasn't a great idea, especially now the google has allegedly used IT in a monopolist kind of fashion. So they get looked out of the time.

The ftc did review this acquisition, but they ultimately decided to let you go through. And when that happens, I think to the general public, they might see that an agency let an acquisition go through IT means they kind of put their stamp of approval on IT. That's not entirely how IT works.

The ftc year, the D O J anti trust division lets and acquisition go through IT basically just means that they're choosing not to chAllenge IT right now, but they always have the right to chAllenge in the future. Of course, back could be more complicated for many reasons. And there's also the problem of, you know, it's difficult to unscramble the eggs. It's a common phrase and anti trust once everything is mixed together. Right after laun .

talus for subscribe, another major witness took the stand. Neon moon is now the CEO of youtube. He's actually been on the code before, but he joined google as part of the double click acquisition.

Way back in two thousand eight, the D. O, J. Lawyers brought my honey to grill him about something called parking. Basically, the governance claim is that google uses its immense market power and resources to buy up any company that looks like I could become a competitor in the ad tech space, and then basically set to decide.

Instead of using the company to tack of the people, google allegedly just parks IT out the way somewhere so IT can cause them in trouble. So double clink in a tone of other companies are part of google now they scramble the eggs, you can unscramble them. What is the D O jays argument about what google doing with all that power?

In opening arguments, the government basically laid out three different ways that who will behaved that, IT said, was put story out of the classic monopoles playbook. Really, what IT comes down to is control. That's really the government's mean narrative in its opening arguments of this case.

So they said, birthday control the competition by buying competitors like double click. Then they control customers by locking them in through these tie arrangements or other kinds of programs that they put in place. And then they control the rules.

So that, quote, all roads lead back to google. This is how the government's a turney laid out on the first day of arguments. In this case.

you spend a lot of time in your reporting during the first week the trial talking about something called U. P. R.

Can you expand on that? what? What does that mean? Why matter?

U, P, R, sense for unified pricing rules. Basically, google put unified pricing rules in place in about twenty nine IT requires publishers to set the same minimum bid that IT would accept from ad exchanges across all the ad exchanges that is looking at, basically, the ad exchange will deliver a bid on advertising space. And there's a google's addix.

There's other addix changes out there. And what publishers had been doing with basically saying, okay, will accept what's, say, a dollar bid from all of these other other exchanges. But for google, our minimum bid that will accept from google aex is a dollar and five cents.

And that means if another other exchange would say, pathetic, had a bit of a dollar IT would accept that. But if I had a bit of a dollar from google aex, then that wouldn't be accepted. The reason that publishers did this or one big reason that publishers did this was because they wanted to diversify their revenue.

They didn't want all of the revenue coming from google because like any business might think about, if you're getting all of your revenue from one customer, that is a risky position to be in because what if the customer goes away? What if something happens that cuts you off from that source of revenue? So publishers, we're doing this to lower their risk in this way.

Google understood this, but also felt like this was something that was negative for its own standing. And so he came up with the inside pricing rules in documents with on core. Google executives understood that publishers would not be happy with this change, and they did roll IT out with some other changes that they felt publishers would be satisfied with. The government frame. This says softening the blow to publishers and changing these rules.

Why did google have these rules where they designed to keep customers from going to competing exchanges?

I wouldn't say I was necessarily to keep them from going to competing ad exchanges because publishers will work with several add exchanges at the same time because they receive bids from these different ad exchanges. But I think they recognize that the publishers were trying to reduce their reliance on google, and they worried about the long term impact of that kind of behavior on their business.

And they wanted to even the playing field in their eyes of how google addix was treated compared to other addix changes. But I think the reason we've heard from publishers, if IT was so difficult to walk away from google's attack and why many felt like I was not a real possibility to walk away from addix, was that IT delivers what in the industry they call unique demand from google's advertising network. When they say unique demand, they basically mean having this really full access to this huge base of advertisers that come through google's ad network.

The add network demand is only available in real time with real time Prices through google at exchange add x and while there are kind of ways to try to get out google a network base, it's not really possible to access IT in the same full way as IT is through google s atos. And that's where some of the concerns come in around trying leveraging the different parts of the market against one another. Basically, publishers have told the core IT was really hard to negotiate with google. And you know what, you might be able to get a Better deal with, you know, some other companies, google really wouldn't really wiggle much. And I think the government is trying to say that because they didn't have to because they hide a dominant position here, they didn't feel the kind of pricing pressure that other companies did.

We have second.

another quick ke will go get back.

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Welcome back, verge, senior policy reporter, learn finals here explaining what's going on with google's big ad tech and a trust case. The case is still happening. It's got to wrap up the second week of government witnesses.

Google will be able to present each side of things for a few weeks. It's definite too early to say how this case might play out. But looking forward, if google should end up losing this case, what kind of outcomes you think we might .

see while searches obviously, the part of google's business that I think the general consumer knows best, the advertising technology businesses really important for google. It's a big way that they make money. It's a big way that people in the publishing and advertising space interact with google. I think this is really significant if they lose this case. At the same time, I talk to any any trust professor prior to the trial beginning who said none of this will really be the end of google, so to speak, but I think IT IT could really change who the big players in this market could be.

Meanwhile, we're still waiting on the remedy y's portion of the search case to play out. There's been some reporting that the D O J is considering requesting a full break up of google, but IT doesn't have to officially submit IT suggested penalties to the court until the end of the year. So that can take a while. Is there any chance the outcomes in that case could affect .

the ruling in the ad test case? Obviously, judges are humans, and i'm sure just fully aware of what happened in the search case. But these are different cases.

They're different, different, different set of facts. So i'm pretty sure that judge bring him is going to look at this case pretty independently. And the remedies in the search case, that's a whole other proceeding that's going to happen. Google is also going to appeal that ruling, and it's going to take a long time for all of us to be sorted out as this trial is ongoing to. So I don't know how soon we will get as such remedy answer in general as well.

There's a lot going on in the N A. Trust world right now. The amount of enforcement has just balloon these last few years.

Since eighties, until pretty recently, companies have been allowed to get bigger and more powerful. But regulators are around the world, including lan, iconic dc. And JoNathan countered, the D, O, J have been aggressively pushing back.

We have had counter on the show a couple times this year, most recently right after google lost the search and I trust case. What's interesting with the google cases is that they're not just the first ones to get across the finish line. Some of the first time you can get past the starting line for more than five years, we've heard federal regulators are looking in amazon, meta and apple. And while some suits have been filed, no other cases have been heard in court. Is there a reason that the google cases have gotten the far less the fastest?

That's a really great, great question. I guess I don't entirely know why google is the one that's gone first or been such a big focus this time around. But I think part of IT might be, you know, they have such a sparling business.

And I was an area that the government was able to home in on with many, many, many documents that they were able to get a hold up in their investigation and discovery. And maybe that's where they felt like they had the strongest case earliest on, and that's what they went after. So I think a lot of times what IT comes down to is just what is the strongest case that they feel like they can bring.

And you know what happened to be google? In these first two instances, all of those companies have uh, lawsuits filed against them from the federal forces. Those are making their way through core.

Generally anti trust cases are pretty slow moving. Like I said, this attack cases relatively quick and that still like a year and a half or so from filing to trial. So know when that's quick IT gives you a sense of um the timely for these other matters. The rest of them are moving along, but word is going to have to wait for the trial date and you are .

reporting have you got ten any sense of the remedy in this case? Might look like if google losers.

but I think it's still pretty early to say because right now, the judge is looking at whether google violate these laws to begin with.

But I think in this case, compared to the search case, the lines where the government might seek to break apart google's business seem a little bit clear just because it's looking at these three different markets, the add tech space, the at exchange and the buying side, I think there's kind of ways to clear those at each point. So it's just not to say that, that's necessarily what should happen or what the government will ultimately to go for. But I think it's easier to see in this case where different segments of the business might be attempted to pull apart.

The justice department isn't the only entity that's man at google. Right after the search chenin, we saw some companies immediately pipe up and take advantage of the situation. Other impress choices that we're kind of kick in, google was down or actual lawsuits like when we saw from you, I will see the search business is more visible from the outside than they add business. But have you seen any companies or organizations or witnesses that might target google with their own last suit to bad stuff if google loses this case too?

We heard from former news corp. Executive Steve ie later. I think news corp. Has been a company that's been pretty outspoken about how he feels about its relationship with company is especially google in terms of being A A gatekeeper in how information is distributed. That's the company that I would definitely keep a closed eye on in terms of how they react to any outcome. In this case.

we'll have to have you back on the show when the dust starts to sell more. And thank you so much for turning us into cover.

Thanks for help me.

I like to think, learn for taking time to join the show, and honestly, for city in a courtroom listing to d tech testing on for several weeks. I'd also like to thank you for listening to the coder. I hope you enjoy that to let us know you thought about the show or really anything else, just cover drop us a can email IT to coder of the verge com.

We really do read all the emails. You can also take me out tracking on threats. On that right was trovo and we have a tiktok checking out.

It's at decoder pod. It's a lot of fun for as long as vast. I have to tell you that tiktok ban on suit is just kicking off now, so will cover soon as well. If you like to counter play, share with friends and subscribe over your podcast, the counter a projection, the verge part of asking your podcast network producers are kate cox and next stand or editor is Carry right or supervising and crucial lame James that a coder music is my breakfasted sunder see next time.

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