How header bidding wars led to a Google antitrust case and claims of collusion with Facebook
The antitrust case against Google and its ad business is proceeding, with damning accusations about alleged collusion with Facebook to manipulate the ad tech marketplace, and accounts of asymmetrical corporate warfare to crush rivals. To ad tech competitors that have battled Google for years, the allegations simply sound like business as usual.
One of the most stunning allegations came last month, in the case filed by the by the Texas Attorney General Ken Paxton and nine other states, in which Google was accused of working with Facebook to stymie the fast-growing space of header bidding. For those in the know about ad tech, header bidding was an ad auction technology that really took off around 2015. It was a major threat to Google’s dominance with online publishers, because header bidding enabled ad tech rivals to bid on ad space on websites while bypassing Google’s ubiquitous ad auction. The Texas AG’s case is now shining a light on how Google sought to neutralize the rise of header bidding, including striking a seemingly mysterious deal with Facebook that could have dissuaded the social network from aligning against Google in the header bidder wars.
The details presented in the case opened old wounds in the ad tech community, where companies are trying to piece together how Google and Facebook may have tilted the playing field that controls the flow of ads online. Google has mounted a public defense in which it says there was nothing unusual about its work with Facebook, and that its deal with the social network was similar to partnerships it made with dozens of other ad tech partners.
“We’ve worked to be open and upfront with the industry about the improvements we make to our technologies,” Adam Cohen, Google’s director of economic policy, said in a blog post this week defending the company. “We try to do the right thing as we balance the concerns of publishers, advertisers, and the people who use our services. Our ad tech rivals and large partners may not always like every decision we make—we’re never going to be able to please everybody. But that’s hardly evidence of wrongdoing and certainly not a credible basis for an antitrust lawsuit.”
Google declined to comment for this story beyond the public pronouncements it has already made on the subject.
Ad Age spoke with a number of CEOs and founders from ad tech partners that worked with Facebook and Google, who spoke on condition of anonymity to present their stories of what happened to header bidding, an intriguing side story to the main antitrust event. Here is a look at the case against Google and why it matters, from their perspectives:
What is header bidding?
It was not an easy task though convincing publishers to cross Google, which operates the biggest source of online ad supply in the world. The proponents of header bidding had to assure publishers their code wouldn’t slow up their websites, which was one of the arguments Google made to deter adoption; that running an ad auction would prevent websites from loading. There also were concerns that untrusted players could sneak into header bidding auctions, and that could result in data leakage. But at the same time, publishers were interested in any ad tech innovations that could lessen their reliance on Google.
How did Google respond to header bidding?
“It was very much a war,” says another ad tech CEO, who recalls Google’s posture when tackling the rise of header bidding. “There was no guarantee that header bidding was ever going to become successful.”
Google attacked header bidding as a technology. The ad tech rivals say Google unfairly characterized it as a “hack” that would slow down their websites, and tried to sow distrust about the concept. Google used similar language in its response this week to the Texas AG.
“The technology has real drawbacks: Header bidding auctions take place within the browser, on your computer or mobile phone, so they require the device to use more data in order to work,” Google’s Cohen said in the blog post. “This can lead to problems like webpages taking longer to load and device batteries draining faster. And the multilayered complexity of header bidding can lead to fraud and other problems that can artificially increase prices for advertisers, as well as billing discrepancies that can hurt publisher revenue.
“So we created an alternative to header bidding, called Open Bidding, which runs within the ad server instead of on your device,” Cohen said.
“It’s a bit of an arrogant position to say it’s OK for Google to put code for an ad server on a page, but it’s not OK for independent ad tech vendors to do the same,” the ad tech CEO says.
How did Facebook get dragged into this?
In 2016, Facebook was supposed to be an ally in the header bidding war against Google. Facebook met with many of the major players in header bidding to join forces, and the social network’s upcoming participation in the market was looked at as a major coup to counter Google. Facebook was going to help bolster the growing header bidding marketplace by uniting with Google’s rivals, a move that would have lent the space more credibility and injected billions of dollars in ad demand coming from the social network.
By 2018, Facebook seemed to drop its independent header bidding strategy, though, and signed on to a new arrangement with Google. Google developed what it called Exchange Bidding, later named Open Bidding, which seemed like a master stroke to co-opt the threat of header bidding. Open Bidding brought 25 major header-bidding players into the Google ad auction, including Facebook.
One ad tech CEO, who met with Facebook when the social network was interested in developing a header bidding competitor to Google, says that the project mysteriously evaporated after Facebook seemed to fully embrace Google’s Open Bidding play. The terms of that partnership, how Google won over Facebook, are now the source of the anticompetitive claims made by Texas and other states.
“Ultimately that program with Facebook never came to fruition, but what was interesting about it is that Google around that time was just launching Open Bidding,” says the ad tech CEO. “And [Google] wanted header bidding gone, but if Facebook brought tens of billions of dollars into the marketplace via header bidding that would virtually make [Google’s] job impossible, they could never limit header bidding.”
Why is Google’s Facebook deal a problem?
Google and Facebook both say there was nothing out of the ordinary about the arrangement that brought Facebook into Open Bidding. Google partnered with Facebook like it had all the other header-bidding partners that wound up participating in Open Bidding. But the Texas AG claims that Facebook was offered favorable terms not extended to other parties.
The details of this alleged deal were mostly redacted in the original filing, but there have been reports from The Wall Street Journal and The New York Times that spell out some of the alleged terms. There are claims that Facebook was given priority on some of the ad inventory without the other bidders knowing, according to The Times. Facebook also had more insight into the end consumer and other perks, The Times reported.
Google responded to allegations this week: “AG Paxton inaccurately claims that we manipulate the Open Bidding auction in FAN’s favor. We absolutely don’t. FAN must make the highest bid to win a given impression. If another eligible network or exchange bids higher, they win the auction.” (FAN is Facebook Audience Network, which is the social network’s ad network to third-party apps.)
Will Google’s defense convince rivals?
Not likely. The ad tech companies that were instrumental in developing header bidding were already wary without needing hints of a secret deal with Facebook. Google’s ad platform is mostly opaque, even to the participants in the auction, the rivals say. Google does not share information about the bidding process and who wins at what prices, meanwhile Google has access to all that information, and it often represents the ad buyer and seller in the transaction.
One of the challenges for any antitrust investigator will be to prove that Google blocked competition in the marketplace. Header bidding has survived as a tool available to publishers, and there is still a market for Google rivals, including giants like Amazon.
“We feel pretty good about what we accomplished,” says another ad tech CEO, who was involved in header bidding from its earliest days. “I feel so much better about the marketplace now than I did pre-header bidding. It didn’t die. If Google was attempting to kill it they failed.”
Publishers can adopt customized ad management systems that still run traditional header bidding alongside Google Ad Manager. But rivals say that Google applies subtle pressure that keeps more publishers from veering too far from its recommendations.
“What Google was doing as an ad server provider was to tell publishers how they could use that ad server,” says another ad tech CEO that competes directly with, and partners with, Google. “And as a result, because of their power and because the ad server is the heart of the ad business, they could influence the publishers’ ability to run their ad business the way they wanted, because Google would tell them what they couldn’t do, and at that point they were stuck.”