Google Misled Publishers and Advertisers, Unredacted Lawsuit Alleges

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Details suggest Google employees were ‘untrue’ about their ad tech auctions and based on ‘insider information’.

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A federal judge ruled this week that an amended complaint filed last year could be dropped, following an unread filing Friday in the US District Court for the Southern District of New York.

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The suit was first filed in December 2020, modifying several sections of the complaint. Since then, a series of rules reforms have been rolled out, providing fresh details about the states’ argument that Google runs a monopoly that has harmed ad-industry competitors and publishers.

Google said it intends to file a motion to dismiss it next week. A spokesperson for the company said the lawsuit is “full of inaccuracies and lacks legal merit.” He adds, “Our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world. There is fierce competition in online advertising.”

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The way ads are bought and sold on the Internet is a complex process in which Google plays a big role as both a participant in the auction and the manager determining the sale. Google owns the key tools in each link in the chain between online publishers and advertisers, giving it unparalleled power over the monetization of digital content. It also owns major platforms to reach consumers like YouTube. As a result, rivals have complained that the tech giant tilted the market in its favor, allowing it to win more bids and stifle competition. The purpose of the amended complaint and its unsubstantiated description is to explain how it works in practice.

Led by Texas Attorney General Ken Paxton and joined in more than a dozen states, the lawsuit alleges that Google’s business practices drive up advertising costs, which brands pass on to consumers in overpriced products. It also alleges that Google suppresses competition from rival exchanges and limits websites’ options for ad delivery, drawing an internal comparison of the company to a bank that also owns the New York Stock Exchange.

“Our revised complaint describes how Google manipulates online display auctions to penalize publishers and lie to them about how they run auctions,” Mr. Paxton said.

The lawsuit is complemented by a separate antitrust case by the US Justice Department and more than three dozen state attorneys general focused on Google’s search services. The cases are set for trial in 2023 or later.

Meanwhile, a dozen Republicans and Democrats in the Senate presenting the bill Which would treat Google’s search engine like a railroad operator, making it illegal for it to take advantage of its products and services at the expense of other businesses that depend on the platform. Digital advertising analysts say that if it is passed it could force Google to sell 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 Platform Inc. CEO of Mark Zuckerberg signed a 2018 trade deal that reportedly guaranteed that Meta subsidiary Facebook would both bid in—and win—a certain percentage of ad auctions. It has been stated earlier that the agreement was signed By Philip Schindler, Chief Business Officer of Google and Sheryl Sandberg, Chief Operating Officer of Facebook

State lawyers have argued that this was an illegal pricing agreement. The companies have said this was above board.

The new unproven details provide more details about a series of programs that Google ran under the names Project Bernanke, Reserve Price Optimization and Dynamic Revenue Share. The Bernanke program has been reported before, but the new unproven complaint shows it had three editions between 2010 and 2019.

In the first version, Google misled publishers and advertisers into believing they were participating in a “second price auction,” where the winner pays the second highest bid price when using its ad exchange, AdX. Whereas, from the complaint as per the newly amended charges. However, according to the complaint, under Google’s Bernanke program, AdX multiple times rejects the second highest bid, leaving the third highest bid to win, thus depriving the publisher of revenue. Additionally, Google will charge advertisers the price of the second highest bid and pocket the difference, the complaint said.

The complaint states that Google overpaid advertisers and used the money to manipulate auctions on its system, sometimes increasing the bids of advertisers bidding through its ad-buying tools so as to Make sure it wins the auction otherwise it will not happen.

According to the complaint, this affected billions of ad impressions sold each month, and Google’s research found it caused publishers’ revenue to drop by up to 40%. According to newly revised internal company communications cited in the complaint, “Bernak is powerful,” said a Google employee.

A second version of the program, called Global Bernanke, used a pool of funds collected by Google to only raise bids related to Google’s ad-buying tool for small advertisers, originally known as AdWords. Used to be and are now called Google Ads, when these bids were created or otherwise lose auctions on Google’s Exchange, the complaint alleges.

A third version of the program, called Vine, punished publishers who didn’t give Google what the complaint called “preferential access” to its ad listings, redirecting the pool of money it collected. does, the complaint alleges. Publishers were eligible for those funds only if they participated in Google programs such as Dynamic Allocation, which gave Google’s AdX a right of first refusal against competing exchanges in the auction, according to the complaint.

A Google spokesperson said Bernanke was implemented to “optimize advertiser bids” and was one of the improvements made to increase competition and make ads more effective for businesses.

The complaint alleges that in the reserve price optimization program, Google used historical data about an advertiser’s past bids to determine a “floor” or minimum price for that advertiser, resulting in higher prices for advertisers . In a new unproven company communication, Google employees said the program should be based on “smart and tech” rather than “insider information.”

The new details further suggest that Google employees were wary of the dynamics caused by another program, Dynamic Revenue Share, which replaced the fees collected by Google’s ad exchange to help Google’s tool win more auctions. , which they did not have. Google did so only after it was able to see what all of its rivals had bid, due to the dominance of the publisher ad server market, the complaint alleges.

This program “makes the auction untrue because we determine AdX earnings after viewing buyers’ bids,” a Google employee wrote in the new unproven sections of the complaint.

A Google spokesperson said these programs do not manipulate auctions and are designed to help publishers maximize ad sales.

Write Tripp Mickle at [email protected] and Keech Hegey at [email protected]

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