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It sounds like a big nerd conspiracy.
At the center of the latest antitrust lawsuit against Google is a bold claim: The company colluded with archrival Facebook Inc in an illegal deal to rig online advertising auctions, an industry both dominate. Google named the secret pact after a Star Wars character.
“Any collaboration between two competitors of this magnitude should have set off the loudest alarms in terms of antitrust compliance,” the Texas lawsuit said. “Apparently it wasn’t.”
Shares of smaller ad tech providers rose when the complaint was filed on Wednesday. PubMatic Inc was up 16%, while Magnite Inc was up 6%.
“This allegation is inaccurate,” Google said in an emailed statement. “Facebook Audience Network (FAN) is one of more than 25 companies participating in our Open Bidding program. There is nothing exclusive about their participation and they do not receive special data. The goal of Open Bidding is to work with a variety of ad networks and exchanges that are important to our publishing partners. ”Facebook declined to comment.
The complaint centers on automated ad technology called a bid header that routes digital ads to a live auction. It is designed to increase the money that web publishers, such as the media, can make for their ad space. With more offers from the widest variety of sources, rates go up.
By 2016, 70% of the top publishers used headline offerings from a variety of smaller ad tech companies. That posed a threat to Google’s ad exchange system because the approach opened the bidding process to other exchanges. So Google created a program to “secretly let its own exchange win,” according to the Texas lawsuit. (This was named after a Star Wars character, although the name was redacted by the state.)
Go to Facebook. The social network introduced header bidding for its own ad sales tools in 2017. A year later, it took it to mobile apps. This tool allowed Facebook to grab small amounts of ads sold on the web and on mobile phones, not just on its own properties like Instagram.
It also competed directly with Google. But Facebook soon withdrew from the practice. It did so, according to the Texas lawsuit, because Google struck a deal, signed at the “highest level,” that allowed Facebook to sell ads on mobile apps more quickly and gave it other advantages in ad auctions. This deal was also given a codename related to Star Wars. The suit wrote the name, but the Wall street journal reported that it was “Jedi Blue”.
“Google understood the seriousness of the threat to its position if Facebook entered the market and supported the headline offerings,” Texas said in the complaint. “To spread this threat, Google made proposals to Facebook.”
The lawsuit, backed by several other states, also accused Google of tricking publishers into buying ads through Google services rather than bidding on the header.
“If AGs can back up those kinds of claims, well this is an incredible case and I think there could be a huge liability,” said Chris Sagers, a law professor at Cleveland State University. The accusations over the Facebook settlement distinguish “this complaint significantly from any other major litigation pending against dominant online platforms.”
Still, the lengthy redactions make it difficult to judge the strength of the evidence. If the details of the case turn out to be weak, the agreement could be seen “as a fairly mixed collaboration agreement in which Facebook got some kind of functionality it needed from Google,” Sagers added.
Header bidding is an arcane process in ad technology, an industry replete with suppliers, intermediaries, and marketers. While it is automated, there are often tailored offers. Major vendors like Google, for example, often offer discounts to auction website and ad buyers if enough money flows through.
It’s a fairly common mechanism called “tagging,” which gives one company an edge over others, according to Bob Walczak, an industry veteran and president of Lemma Media. A deal between two companies, even giants like Google and Facebook, could be standard practice, he said.
“Maybe they are manipulating a game a bit. But in the reality of ad tech, that’s commonplace, ”Walczak said. “These are just auction dynamics. These are commercial agreements. “
A Google spokeswoman said Facebook is one of 25 companies in an “open bidding” service offered by the company’s exchange and does not receive special data. The company declined to reveal the name of the Star Wars character. – Bloomberg
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