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News Plus 25 Jan 2022 - 4 min read

'The entire ad industry is co-operating': US investigators ask brands, agencies for data as Google denies it rigged ad auctions

By Sam Buckingham-Jones - Deputy Editor
Brian O'Kelley Google Lawsuit

“Most of the allegations were either things we knew or suspected in the industry,” Brian O'Kelley, who co-founded AppNexus (soon to be Microsoft-owned Xandr), says.

As Google rebuts a major US court case alleging market manipulation and bid rigging, advertisers and agencies in the US are being drawn deeper into two forensic investigations into the tech giant's ad operations. Sources state "the entire industry [has been] formally requested to provide information to assist the investigations" being led by the Department of Justice and the 17 US States now trying to prove allegations that Google rigged the market, undercut competition and harmed publishers’ revenue while colluding with Facebook to kill header bidding.

 

What you need to know: 

  • Mi3 understands major US advertisers have been formally asked to share information with two ongoing investigations into Google’s ad tech business: One probe by the Department of Justice, which is yet to detail its findings, and another from Attorneys General from 17 US states, who have filed a bombshell case in New York.
  • The court case alleges Google overcharged advertisers for ads and underpaid publishers for their inventory.
  • Google hit back over the weekend refuting the claims as “false and misleading”. Not only are the facts wrong, Google argued in its response, they are too late to bring to court under US law’s statute of limitations. Google has submitted a motion to dismiss the lawsuit.
  • "The antitrust laws do not require Google to share its competitive advantages with rivals," per Google's lawyers.
  • Brian O’Kelley, the cofounder of rival ad platform AppNexus, said his business was severely hit by Google’s decision to block third party access to YouTube inventory. The allegations in the AG case were “either things we knew or suspected in the industry”.
  • His view on Google's take that enforcement efforts are too late? "‘Yeah, I stole a bunch of money, but you didn’t catch me at the time, so now I get to keep it.’ That’s kind of how this feels.”

Major US advertisers have been formally asked to share information to help with two ongoing investigations into Google’s advertising technology practices.

Mi3 understands the US advertising industry has been quietly aiding a lawsuit filed by 17 Attorneys General, led by Texas AG Ken Paxton, and an ongoing investigation by the US Department of Justice. In September, the Washington Post reported the DOJ was preparing an antitrust lawsuit against Google.

The lawsuit filed by the AGs in a New York District Court claims Google ran secret programs that underpaid publishers and overcharged advertisers for ads, artificially manipulated prices and fees to win more ads, and changed the floor price for ads so the company could take a bigger cut.

Brian O’Kelley, the co-founder of AppNexus, now Xandr, said he suspected many of the alleged practices were taking place and has spoken to both the DOJ and the states while they were preparing their case.

Over the weekend Google hit back, saying allegations of rigging auctions and misleading publishers are “false and misleading” and “more heat than light”.

In a statement written by Adam Cohen, Google’s Director of Economic Policy, the tech giant says the case makes inaccurate and inflammatory allegations that are then highly publicised but not legally credible. Google says the lawsuit “missed the law and the facts”.

Google’s response

In a 52-page document filed in a District Court in New York, Google submitted a ‘motion to dismiss’ the case, making four key arguments:

  • The allegations are too late and are limited by the statute of limitations.
  • The states haven’t shown Google acted anticompetitively under the law.
  • There’s no proof Google ties publishers to its services – i.e. they’re free to use products from competitors.
  • And the states haven’t shown Google’s agreement with Facebook violates antitrust legislation.

“Google, over the past 10-plus years, has clearly been a successful competitor” in the digital advertising market, the tech giant’s lawyers argued, but it had operated within the bounds of the law.

Far from being a way to fleece publishers and advertisers, three Google programs called Project Bernanke, Dynamic Revenue Share and Reserve Price Optimisation aided them. “Project Bernanke was intended to help Google Ads advertisers win more auctions, and sometimes allowed them to pay less for impressions,” Google’s lawyers argued.

“Even if Google delivered these benefits using ‘inside information’, the antitrust laws do not require Google to share its competitive advantages with rivals.”

Cohen wrote that the states’ case overlooks the facts. “Ad tech is a highly dynamic industry with countless competitors… We want to publicly and unequivocally refute the more egregious allegations.”

AppNexus co-founder: Long time coming

Brian O’Kelley is the CEO of Waybridge, a supply chain management platform. In 2007, he founded AppNexus, which positioned itself as a single platform to manage and buy all online ads. That changed when Google stopped selling YouTube inventory through open exchanges. In 2018, AT&T bought AppNexus and rebranded it to Xandr. Xandr was acquired by Microsoft in December.

“Our pitch before it was: Buy everything through one platform – and don’t trust Google. But then we couldn’t say that anymore. It was: ‘Buy everything except for Google and YouTube through one platform’. YouTube was so strong. What were we supposed to do? It really, really hurt us,” O’Kelley said.

“Most of the allegations (in the court case) were either things we knew or suspected in the industry… it’s fascinating for me, as someone who competed with Google for that whole time, to see it all documented.”

Speaking directly about Google’s response to the case, O’Kelley said its argument about timing was the “more scary” part.

“They’re claiming that a lot of these things happened so long ago that they don’t really matter anymore… ‘Yeah, I stole a bunch of money, but you didn’t catch me at the time, so now I get to keep it.’ That’s kind of how this feels,” he said.

“One of the things that is so hard for these cases is, what are the remedies? I can’t unsell AppNexus and buy it back. I guess I could try. But the problem is that if Google didn’t own YouTube, that strategy wouldn’t have worked. If they didn’t own search and DoubleClick, this wouldn’t work.”

O’Kelley said the DOJ and the AGs from various US states have been looking into Google’s ad business for some time.

“They have talked to everybody as they were trying to investigate… I personally have not talked to the DOJ recently, but I have talked to them many times over the years,” he said.

“I talked to the Texas AG before they announced anything. Because I don’t work in the industry anymore, I don’t think I’m an interesting part of the conversation. Maybe they’ll call me at some point.”

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