Google burned millions to bury an upcoming ad rival, court hears
DoJ alleges the search giant had a strategy of killer acquisitions, designed to buy, then shut down competitors which might hinder its domination...
Here’s a puzzler to test you on a Wednesday afternoon… What’s 27 miles high, stinks to high Heaven, and takes 694 days to disappear?
We found out yesterday in another fun day of revelations at the Google ad antitrust trial.
But before we get to that, join me in welcoming new subs from the BBC, Google, AFP, mag giant Haymarket, Aussie radio network Southern Cross Austereo, UK’s Canopy Media, the News Media Association, Euronews, the New Zealand Herald, University of Technology Sydney, the Sydney Morning Herald, Screen Queensland (congrats on Apple TV’s Monarch), and Searchr.tv, among others.
And thanks to our sponsor who helps make all this happen. Cheers 🍻
OK, let’s go…
Towering inferno
Have you figured it out yet?
The answer is a bonfire of $400 million in US$100 bills, and that’s exactly what Google did.
It bought, parked, and then killed an ad tech startup that it considered a “threat”, the court heard.
It bought AdMeld for miles over the odds, stuck it in a corner, and then shut the whole shebang down two years later.
The US Justice Department alleges AdMeld’s fate indicates a ‘killer acquisition’ strategy at Google that it used to silence rivals and protect its ad tech dominance.
The Virginia antitrust trial was presented internal Google emails sharing analysis suggesting AdMeld was a “threat” to its fast-growing display ad revenue business.
The DoJ has pointed to Google’s acquisitions of several rising stars, including DoubleClick in 2008, and later Invite Media. DoubleClick became DFP, then GAM.
The court has heard GAM now enjoys a 91 per cent share of the ad server market and is used by 90 per cent of publishers and 80 per cent of global advertisers.
It delivers 13 billion display ads a day and, two fifths of all global video ads and four fifths of News Corp’s ad revenue, with a 36 per cent take rate on every ad.
The AdMeld acquisition gave Google a foothold in yield management tools which were emerging in 2011. Competitors included PubMatic and the Rubicon Project.
Google’s mergers and acquisitions team had estimated that AdMeld was worth between $182 million and $355 million.
The deal Google finally did was for more than $400 million.
‘Park it’
Google’s long-time head of ads Neal Mohan told the court that the acquisition was intended to ensure it didn’t fall behind in emerging technologies.
But two years after merging AdMeld tech into its ad exchange AdX, Google shut it down, the court heard.
The DoJ alleges Google maintained its ad tech dominance by buying rivals, a claim that Google denies.
Mohan’s been a rising star since joining Google in the 2007 DoubleClick acquisition. He ran Google’s display ad division, before becoming YouTube CEO last year.
While leading ads, he messaged colleagues telling them to buy one of Google’s leading rivals, by “picking up the one with the most traction and parking it somewhere”.
In court, Mohan denied buying AdMeld to eliminate a competitor. “Absolutely not,” he said. “We needed to close that gap as quickly as possible.”
He said buying the best new companies in the market was a response to the risk posed by large competitors, Yahoo and Microsoft.
Return of the Jedi
The court also heard how Facebook signed a controversial ad deal with Google in 2018, Bloomberg reported.
Former Facebook exec Brian Boland testified how the social media juggernaut intended to challenge Google on display ads but concluded it would fail.
The Facebook Audience Network initiative was intended to sell ads on Facebook and Instagram, as well as on websites and apps.
But a July 2017 strategy memo concluded: “Google sits between us and the impressions we want to buy” and Google’s scale means it can “cherry pick the best”.
Boland explained it was as if Google was able to select the 30 best apples from a crate before anyone else got a look and “you’re left with the leftovers”.
He then spent six months putting together an agreement between Facebook and Google, internally nicknamed Jedi Blue. I flagged this back in July.
The controversial deal gave Facebook preferential treatment when bidding through Google’s exchange for web or mobile app ads.
Google and Facebook were the biggest players in the online ad market, and the deal was agreed by Mark Zuckerberg and Google CEO Sundar Pichai personally.
In 2020, a group of US state Attorneys General sued, claiming the Jedi Blue deal agreement violated antitrust law.
They claimed Google did the deal so Facebook would drop its plans to adopt a then new type of technology, known as header bidding, which challenged its dominance.
A New York judge threw out the allegations, saying “there is nothing inexplicable or suspicious”.
But the DoJ has brought it back to court claiming it proves that even a company the size of Facebook was unable to compete effectively against Google.
By the numbers
These are the astronomical numbers that have so far been revealed during the antitrust trials challenging Google over search and ad tech.
Google keeps 13 months of data on the two billion people using its products.
Its biggest rival Bing would need 17 years to build the same knowledge graph.
Google controls 90 per cent share of global searches, and 95 per cent on mobile.
It spent more than $20 billion paying off Apple, and others to be the default.
Google Ad Manager (GAM) has a 91 per cent share of the global ad server market.
It delivers 13 billion ads a day.
Nine in 10 global publishers rely on it.
So do eight in 10 of the world’s advertisers.
Two fifths of global video ads are traded there.
Four in five of News Corp’s ad dollars come through GAM, and
Google charges a 36 per cent levy on every ad traded globally through its tech.
The Google ad antitrust trial is listed to run for another three to four weeks. Google denies the charge.
Those numbers are depressingly insane!
Weirdly, the DOJ is getting it wrong when it comes to Invite Media and Admeld. G didn't buy rivals to kill them - neither company was the revenue leader - it bought companies it needed to help it develop its own stack. It got the brains behind that tech to help it evolve AdX to win in programmatic, which its engineers were getting wrong. Once that tech was rebuilt on Google's own stack so it was properly integrated, it deprecated the original tech. But nothing was "parked and killed"
Think there is enough to bury Google without thinking everything they did was breaking the law. Even criminals drive the speed limit sometimes.