Google in an ad world of its own

Having been brought to heel by news companies and forced to pay for content it was taking for free previously, Google is back in the sights of regulators. The tech giant has been accused of insider trading in digital markets as part of antitrust action led by the US state of Texas. Google denies the allegations and says it looks forward to putting its case in court. The complaint against Google alleges the company has monopoly power and forecloses competition in US markets for the supply of ad tech services. The alleged anti-competitive conduct includes unlawful tying arrangements, exclusionary conduct, market allocation and price fixing.

Details of the allegations against Google are included in documents filed in court by the company in response to the charges against it. They paint a picture of a company able and willing to profit from its dominant position in the online advertising market. Google is accused of giving its own ad-buying system an advantage over competitors. As reported in The Wall Street Journal on Monday, a secret program known as Project Bernanke used data from past bids in the company’s digital advertising exchange to benefit the company over rival bidders. The Texas-led antitrust lawsuit, which has been joined by 14 US states and territories, accused the search giant of running a digital-ad monopoly that harmed ad industry competitors and publishers.

According to the most recent filing, Project Bernanke used data about historical bids made through Google Ads to adjust bids and increase chances of winning auctions for ad impressions that otherwise would have been won by rival ad tools. The company also has acknowledged as accurate an internal 2013 presentation showing that the project was expected to generate $US230m in revenue that year. Texas has cited that presentation as proof that Google benefited from its advantage.

The Wall Street Journal reports that the court filing outlines a secret deal, dubbed Jedi Blue, between Facebook and Google that allegedly guaranteed Facebook would bid in — and win — a fixed percentage of ad auctions. Google acknowledged in its responses to the court that it had agreed to make “commercially reasonable efforts” to ensure Facebook was able to identify 80 per cent of mobile users and 60 per cent of desktop users, excluding users of Apple’s Safari web browser, in ad auctions. Google further acknowledged in the filing that Jedi Blue required Facebook to spend $US500m or more in Google’s Ad Manager or AdMob auctions in the fourth year of the agreement, and that Facebook committed to making commercially reasonable efforts to win 10 per cent of the auctions in which it had bids.

The Texas action is part of a global clampdown on the digital giants that includes investigations by the Australian Competition & Consumer Commission. Regulators are challenging the market power of companies such as Google and Facebook to release business and consumers from the constraints of unfair trade online. The ACCC interim report says exploiting market dominance, even in highly technical areas that most people do not know exist, such as ad tech, has real costs for everyday consumers. In Australia, ad tech is a $3.4bn-a-year industry that enables the near instantaneous delivery of digital display advertising opportunities on news, entertainment and other websites and apps.

Digital advertising is how consumers’ attention and data are monetised. According to ACCC chairman Rod Sims, if advertisers are forced to pay too much for digital advertising, the costs will be passed on to consumers in the form of higher prices for goods and services. If publishers receive too little revenue for their advertising inventory, consumers will face a reduction in the quality and variety of online content. Mr Sims says the ACCC is watching the latest developments in Texas. As with the campaign to make tech giants pay for news content that was led by Australia, the impact of the Texas suit regarding online advertising markets is likely to have a big impact around the world.