Google’s ‘my way or the highway’ approach takes center stage in antitrust trial

Testimony after testimony during day two of the Justice Department’s antitrust showdown — dubbed “ad tech’s trial of the century” — painted a vivid picture of Google’s stubborn refusal to budge at the negotiation table.

Kicking things off was vocal Google critic Stephanie Layser, now at AWS but formerly a top exec at News Corp. She shed light on her former employer’s attempts to break free from Google’s ad server in a 2017 project known internally as “Project Cinderella,” which was introduced as evidence by Google during cross-examination. (The publisher of The Wall Street Journal and New York Post considered switching to the alternative offered by AppNexus, another vocal Google adversary.) Spoiler alert: it didn’t happen.

Layser explained why — the deck was just too stacked in Google’s favor. According to court evidence, the potential for lost revenue, technical complications, and a host of other hurdles made leaving Google’s ad server huge risk. Ultimately, untangling News Corp from Google’s ad tech web proved too daunting, testimony that’s likely to add weight to the DOJ’s allegations of “tying.”

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For those unfamiliar, “tying” is at the heart of the antitrust allegations: Google allegedly tied its tools for publishers and advertisers together, securing itself a “privileged position as the middleman”.

Predictably, Google had a different take. Throughout the day, it tried to downplay the issue, insisting the ad tech market is brimming with choice — a claim it has been pushing since pre-trial and doubled down on during both the pre-trial and on the opening day of proceedings. 

In fact, Google’s lawyers brought News Corp into the mix during cross-examination. They pounced on the fact that News Corp, the biggest legacy publisher, seriously considered moving to a rival ad server like AppNexus (later acquired by AT&T, and now Microsoft), using this as evidence that the market is far more competitive than the DOJ suggests.

To underscore their point, Google’s defense highlighted how publishers, including News Corp, leveraged the prospect of switching to a rival ad server to push down Google’s AdX pricing — arguing this as evidence of real market competition.

But Google’s lawyers didn’t stop there. 

They presented evidence from a 2019 News Corp analysis showing that when the media conglomerate deprioritized Google’s AdX for a four-week test, Amazon’s Transparent Ad Marketplace saw a 94% revenue increase, Facebook’s Audience Network shot up by 75%, and AppNexus enjoyed a staggering 115% bump. This, according to Google, undercuts the DOJ’s claim that the ad tech market is locked in Google’s favor.

However, Layser countered this argument with evidence suggesting that disconnecting AdX and DFP from News Corp’s ad stack would have had a devastating eight-figure impact on the publisher’s programmatic revenue, further reinforcing the DOJ’s position.

As witnessed described, publishers were hesitant to sever ties with Google entirely — preferring to negotiate rather than risk such costly moves. But, as Layser pointed out, negotiation was never really an option for them.

This point was reinforced by separate testimony from Jay Friedman, president of Goodway Group, another prominent ad tech figure. Friedman testified about the unique difficulty of negotiating with Google, noting that its market power made it an outlier in the industry.

He explained that Google was the only ad exchange his media agency couldn’t negotiate lower rates with. Furthermore, Friedman challenged Google’s defense that publishers could simply turn to alternative platforms, like social media, if they found Google’s terms unfavorable. 

That argument, he said, was unrealistic.

Friedman emphasized that Google’s display ad stack, particularly AdX, was unrivaled in its reach. He pointed out that AdX was the one exchange advertisers and agencies couldn’t walk away from because the sheer volume of ads it provided was too significant to ignore, cementing Google’s dominance in the market — another example of how deeply entangled the ad industry had become with Google, leaving many players feeling inextricably tied to its ecosystem.

Layser echoed this sentiment, adding her own account of Google’s uncompromising attitude. She recounted how News Corp’s repeated requests for additional services, like real-time data reporting, were initially met with silence. When Google finally relented, the data it provided was so fragmented and incomplete that it was practically useless, further demonstrating Google’s lack of flexibility with its partners.

Many marketing experts have noted it’s not hard to see why Google might behave this way — years of coverage on Digiday have documented similar patterns. Yet, in a trial, nothing is left to chance, and the DOJ’s lawyers ensured as much.

In the latter half of the day, the DOJ brought forward a pivotal testimony from its first non-party witness, Eisar Lipkovitz, a former Google vp of engineering for display and video ads. During an hour-long, pre-recorded video testimony played in court Tuesday afternoon, Lipkovitz suggested that Google’s DFP strategy likely made AdX the default exchange, even if unofficially. He also pointed out that publishers would benefit from being less dependent on a single ad exchange as a strategy to mitigate risk.

The subtext here? Google may have strategically integrated its products in a way that quietly reinforced its dominance. By making AdX the default within DFP, even unofficially, Google likely limited competition by nudging publishers toward its own exchange rather than encouraging them to explore alternatives. This cuts to the heart of the antitrust allegations: Google is accused of using its ad server (DFP) to lock in its ad exchange (AdX), creating a tightly woven system that entrenched its monopoly over the online advertising space.

According to Lipkovitz, the AdX team was “very entrepreneurial” and “very aggressive,” further noting internal divisions between the AdX and DFP teams, which he described as “lazy and slow” when it came to innovation. While shedding light on why Google pursued projects like Jedi and Poirot, he also answered DOJ questions about an email from Google execs explaining the company wanted to “drain the swamp” by “fixing the ecosystem.”

Lipkovitz also provided context about internal Google discussions about reducing its take rates from 20% down to what some execs suggested should be as low as 5% to compete.

The DOJ also gave a preview Wednesday witness roster. Day 3 will start with morning testimony from Brad Bender, former vp of product for Google’s news and search ecosystems. Others expected for today include The Trade Desk chief revenue officer Jed Dederick.

The subtext

Google’s ad tech stack is slow and clunky, with less-than-desirable customer service, according to the DOJ’s witnesses. Given the online advertising behemoth’s breadth of services, this has become a harsh market reality for buyers and sellers alike. 

These services are intimately woven together, and the argument that its services are interchangeable in a competitive market whereby rival platforms such as CTV and social media also vye for ad dollars on a level footing is unrealistic, according to the multiple witnesses on Day two of proceedings. — Ronan Shields

Quote of the day

“The Ritz Carlton and a Ramada Inn are both on a square of land in a different part of town…” — Goodway Group’s Jay Friedman attempts to explain why social media ad units just aren’t the same as display ad units when it comes to utility in the marketing mix. To which Judge Leonie Brinkema noted, “… and they both serve different clientele.” A retort that solicited notable chuckles in the court.

ICYMI

In legal matters elsewhere, Google was dealt a blow earlier in the day with the European Court of Justice upholding an earlier 2017 ruling that dealt a €2.4 billion ($2.6 billion) for self-referencing on its Google Shopping page.

While the matter is likely to have little direct bearing on the outcome of the case currently being held in a courtroom in the Eastern District of Virginia over the next four to six weeks, this development, in the context of the recent search antitrust ruling, augurs ominously for parent company Alphabet.