Google’s Alleged Schemes to Corner the Online Ad Market, Now Unredacted

Gilad Edelman, reporting for Wired:

So when you see an ad on a website, it’s a good bet that the advertiser used Google to place it, Google’s exchange submitted it to the site, and the site used Google to make the space available. Google, in other words, runs the auction while representing both the buyers and sellers in that auction.

It’s kind of hard to believe that anyone ever went along with this, but Google’s control over all sides of the market slowly accrued over time. If they had come out of the gate with the whole system fully-formed, not just running the auction while representing both buyers and seller, but themselves competing in the same auctions, they’d have been laughed at. But here we are.

According to the complaint, under Dynamic Revenue Share Google would peek at all the bids and adjust its commission rate in order to win an auction. The newly unredacted complaint quotes a Google employee suggesting that the system was deceptive: “One known issue with the current DRS is that it makes the auction untruthful,” they wrote. By allegedly letting itself adjust its commission on a case-by-case basis, Google gave itself an advantage over other exchanges, which have to worry about losing auctions if they set their fees too high.

The final scheme alleged in the complaint undermines one of the most important aspects of second-price auctions. Because the winner’s bid is never disclosed, no one finds out how much they would have been willing to pay.

A program called Reserve Price Optimization allegedly undermined that benefit. In an ad auction, publishers get to set a minimum price, or floor, for the ad impression. If the floor is higher than the second-place bid, it essentially becomes the second-place bid. So if the top bid is $10, the second bid is $5, but the floor is $8, the winner ends up paying $8. According to the lawsuit, the RPO program used advertisers’ bid history to artificially inflate those price floors. For example, if a headphone company has repeatedly bid $20 to show you their ad, Google could use that information to raise the floor to $19.90 — even if the publisher thought it had set its floor at $10. In other words, Google allegedly used advertisers’ past bids to squeeze more money out of them.

The whole thing has been as crooked as a $3 bill. Billions and billions of $3 bills.

Here’s Google’s official response from Adam Cohen, the company’s director of economic policy. Doesn’t address any of the above allegations to my eyes, but you be the judge.

Saturday, 15 January 2022