While Google was preparing to defend its advertising business in the US earlier this year, it reportedly looked to placate European regulators by offering a major sale.
In an effort to end an EU antitrust investigation into its ad tech businesses, Google offered to sell its ad exchange, AdX, Reuters reported Wednesday. That offer was reportedly rejected by EU publishers, who said the move wouldn’t suffice.
The news broke in the middle of a late-morning break during Google’s eighth day in court defending its advertising business in a case brought by the Department of Justice. The government has alleged that AdX, which publishers use to sell their ad inventory, is a core piece of Google’s advertising monopoly because it is built on exclusivity. Lawyers for the government have dug into the fact that publishers cannot access the countless advertisers that use Google’s ad tools without going through AdX, something that execs from News Corp and Gannett have testified to during the trial.
Matthew Wheatland, chief digital officer of the Daily Mail, took the stand Wednesday and testified that the publication had looked into changing from Google’s ad server but ultimately didn’t because of its reliance on AdX.
- In an undated, internal test shown in court, the Daily Mail found that it would lose 28% of its programmatic revenue if it moved away from Google’s publisher technology.
“Leaving AdX would be financially detrimental,” Wheatland told the court, adding that AdX’s take rate of 20% is higher—nearly double, in some instances—than other exchanges.
That reliance on AdX also cost advertisers, the DOJ argued. Expert witness Timothy Simcoe, an economist from Boston University, shared research indicating that AdX overcharges anywhere from 19% to 27% more than if it were operating in a “competitive market,” he said.
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According to documents shown in court earlier this week, Google’s own employees have raised concerns about this exclusivity. As far back as 2011, Google began working on a tool called AWBid (AdWords bidding) that would open up the platform and allow more exchanges to bid on Google’s inventory. Though it was eventually kept to retargeting campaigns, and ultimately only made up a tiny portion of Google’s advertising business (less than 4% of Google’s display network revenue at one point, according to DOJ testimony) employees worried about its potential impact on Google’s sell-side business, according to emails shared in court.
“As you know, there are significant concerns over how we can maintain our 20% revenue share,” Johan Land, product lead for display ads optimization at Google from 2012–2015, wrote in a 2014 email about AWBids.
Former Google VP Scott Spencer, who testified Wednesday but shared very little, replied to that email, writing that “we do not like the idea of AdWords being given a disadvantage compared to other buyers in order to strengthen the publisher pitch (and uphold the 20% margin).”
We’re all getting tired: Several times on Wednesday, Judge Leonie M. Brinkema expressed frustration that lawyers for both sides kept revisiting information that isn’t “cumulative,” she said, especially when it comes to defining what exactly constitutes a digital ad. At one point, she cut short a read-in deposition from an advertiser representing the Air Force, saying that “market definition doesn’t have to do with the US military.”