Google’s alleged plan to hunt down the online advertising market

In 2010, A Google Product Manager named Scott Spencer conducted an interview explaining that Google is using a “second price” auction to place ads across the web.In the second price auction, the highest bidder wins, but you have to pay The second It was the highest bid. Economists love this setting (the one who theorizes that it won the Nobel Prize). This is to encourage participants to bid on anything that is truly valuable, without worrying about overpayment. As Spencer explained, “minimize the need to” game “the system. “

But what if Google is playing a system game?

This is an accusation filed in an antitrust proceeding filed by a state coalition led by Texas Attorney General Ken Paxton. On Friday morning, a federal judge released an unedited version of the latest complaint in the case, first filed in 2020. This document is inside information that Google allegedly misleads advertisers and publishers over the years. When an employee put it in a newly published internal document, Google’s public claim about the second price auction was “ruthless.”

One of the few proceedings the company is facing, the Texas proceedings, aims to have Google control the auction-driven display advertising market. Google has complete control over all links in the chain between the advertiser and the audience. We own the largest buyer platform, the largest ad exchange, and the largest publisher platform. Therefore, when an ad appears on a website, the advertiser uses Google to place the ad, the Google exchange sends it to the site, and the site uses Google to make space available. There is no doubt about it. That is, Google runs the auction on behalf of both the buyer and seller of the auction.

This shows a clear conflict of interest. As one employee said, as quoted in a previously unsealed version of the proceedings, “an analogy to Goldman or Citibank owning the New York Stock Exchange.” According to Texas, Google couldn’t resist the temptation to take advantage of market power for its own benefit. The proceedings accuse it of deploying at least three programs secretly designed to distort the expected second-price auction. The existence of these programs has already been published, but the newly unedited complaints provide new details on how they work.

The first program launched in 2013 was a strangely named project Bernanke, like Ben Bernanke of the former Federal Reserve Board. That’s how this worked, as described in Texas’ internal Google Docs. Suppose your highest bid was $ 10 and the second highest bid was $ 8 through Google’s ad exchange, AdX. In that case, the advertiser who bids for $ 10 will have to win the auction and pay the publisher $ 8. However, under project Bernanke, Google will pay the publisher instead. number 3-The highest bid was $ 5, for example, but I charged the advertiser for the full $ 8.

What happened to the $ 3 difference? According to the complaint, Google sucked it into “Bernankipour”, which used its own ad-buying tool, Google Ads. Filing cites a 2014 internal document explaining the need for Google employees to reverse the “2013 trends of concern.” A rival ad buying platform has won too many auctions with AdX. According to complaints, Google used the money in the pool to boost lower bids than bids made through other platforms. (This could explain why this program was named after Bernanke, who promoted “quantitative easing” (funding the economy) to fight the Great Recession. Internal Google Slides. So I’m using the phrase quantitative easing.) A lot of money that was withheld from the publisher and eventually repaid to them. However, according to complaints, newer versions of the program have even stopped doing that.

Google’s alleged plan to hunt down the online advertising market

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