The Department of Justice’s antitrust case against Google is increasingly focused on its advertising technology software, and whether it couples those tools with its dominant position in search to gain an unfair edge over rivals, according to nearly a dozen industry executives who have answered multiple questionnaires from the federal government.

While preliminary questions were general in nature, they have become more sophisticated and specific. “When they first started they didn’t know much," says one of the executives. "But as they dug into it, I must say they have come a long way and some of them are excellent,” says one publishing executive. “They are looking more broadly at the advantages Google has at ad tech monopolization.”

Among DOJ's questions: How much of a publisher's revenue and ad inventory goes to Google? What are the publishers' different revenue streams? How does advertising impact their newsrooms?

“What they are trying to do is round out the story with publishers and say, ‘How does this affect publisher survival’," says one publisher. For another publisher, the answer is already clear: "It’s just not a fair marketplace." 

The sources—including large publishers and ad tech executives—spoke with Ad Age on condition of anonymity since they are not permitted to publicly discuss the Department of Justice inquiries. Many said they filled out dozens of questionnaires that were emailed to them as Word documents, while a few spoke directly with Department of Justice staff. 

The Department of Justice did not respond to a request for comment. 

The government is also asking questions about "Average Revenue Share," a relatively new payment system for publishers, and "Target CPM," both of which give the company greater price flexibility than rivals in purchasing ad space from publishers under certain circumstances.

Thicket of automation

The automated processes that drive the buying and selling of digital ads programmatically can be dizzying—which might explain the government's initial interest in understanding the basics.

Automation includes sell side platforms (SSP), used by publishers to sell ads; demand side platforms (DSP), used by marketers to buy ads; the advertising exchange, a marketplace where digital ads are bought and sold; and the ad server, used to manage ad inventory and programmatic campaigns.

Google owns each of these components, having acquired the parts over the years. In addition, Google is especially powerful because of the unique demand it brings from its search advertising business. With a nearly 92 percent market share in search, Google is able to bring massive volume to a programmatic marketplace that is unique to it.

In 2019, Google reported Search and “other” advertising revenues of $98 billion for the calendar year, up 15 percent year-over-year. It’s unclear exactly how much falls into the “other” category, but the bulk of the company’s earnings derive from its Search business. 

Further, if publishers want access to the unique demand Google brings to the table, such as Adx, they must use Google tools. The Department of Justice is examining how that requirement, combined with how the company pays publishers, gives Google an unfair edge over competing platforms, including Magnite or Index Exchange, for example, according to publishers and ad tech executives interviewed by Ad Age. 

Google denies competition is lacking in ad tech. “Ad tech is a crowded industry and we compete and collaborate with thousands of other companies in this space," a Google spokeswoman said in an emailed statement. "This competition provides publishers and advertisers with great value and choice: the average large publisher uses five or more SSPs and smaller publishers use four.

"Independent studies show that first-price auctions benefit most publishers and we’ve seen positive feedback that reflects how this transparent auction process benefits the interests of publishers, advertisers and users," the Google spokeswoman said.

Google recently restructured its programmatic business, which features a payment model for publishers called Average Revenue Share. Although percentages can slightly vary, publishers keep roughly 80 percent of their programmatic sales revenue when using Google Ads Manager, according to an analysis of the top 100 publishers performed by Google last month. Google keeps, on average 20 percent.

The Department of Justice is exploring whether Google is using its Average Revenue Share agreement to give itself little to no cut when competing for impressions on a publisher’s website, according to the executives. If true, this means a rival SSP cannot compete with Google on price for each impression up for auction through Google’s own network. Demand side and data management platforms are also impacted, as SSPs fuel their business. 

Investigators are also exploring whether Google's revenue-sharing practices, combined with its tools and unique demand from its search business, represent an unfair business advantage over competitors.

'A huge advantage'

As one publishing executive puts it, “Google can win more impressions when they want to and take a higher share of the win rate by beating out the next highest bid by managing their commission. That is a huge advantage.”  

Walking away from Google is hardly an option for publishers, as the search giant often represents nearly 30 percent of their digital ad revenue.

"Through the control of both key ad inventory sources and of the deal-making apparatus, Google is in a position to massively influence publishers' revenue," says Romain Job, chief strategy officer at Smart, a Paris-based ad serving company. "This is a huge advantage against other technology vendors, but most of all, it limits publishers' freedom of choice in their monetization efforts."

In its lawsuit against Google—expected in late July or August—the Department of Justice will argue that rival ad technology companies cannot compete with Google on price for all impressions given the dynamics of Average Revenue Share and that it owns each critical link in the ad tech ecosystem, the executives told Ad Age.

“First and foremost, publishers want regulators to do their jobs," says Jason Kint, CEO of Digital Content Next, a trade body that represents publishers such as the Wall Street Journal, Conde Nast and Complex. "It’s clearer than ever which company has benefited the most from Google’s aggressive data practices and dominance on all sides of the market. Before there are solutions, regulators need to determine Google’s practices to be illegal including consideration of data practices in competition analysis. In all cases, solutions should  dictate more competition and welfare participation for the rest of the market.”

Google is likely to point out that it isn't the only tech titan with unique demand. Amazon, for instance, has a lucrative ad business enhanced by its commerce offering. Facebook has 2 billion users. Advertisers can also purchase Google search ads through other platforms including Adobe. And The Trade Desk is widely regarded as formidable competitor to Google's DSP. On the sell side, publishers can also fine-tune the specifics of how their inventory is sold through Google software, including accepting a lower amount of money when the demand for it is very low, for example.

Still, Google’s ad server, its ad exchange and its DSP are the largest in the industry. And the demand it brings to the table from its search business is unrivaled.

What percentage of revenue Google collects each time an impression appears on a publisher’s page is unknown, but it would be data pursued during the discovery process—something the search giant would want to avoid, according to Rahul Telang, professor of information systems at Carnegie Mellon University's Heinz College. “Google might be willing to compromise and instead pay a fine,” he says. “But nobody knows what the consequences will be.”

Microsoft's antitrust settlement

The most well-known antitrust case involving a technology company came against Microsoft in 1998. The Department of Justice accused the company of making it too difficult for consumers to install competing browsers, including Netscape Navigator, through its dominant position in the PC market. A district court judge ruled against Microsoft in 2000 and said the company would be divided into two parts. Microsoft won an appeal in 2001 and settled with the Justice Department by further opening its platform. 

The Carnegie Mellon University professor agrees that Google will likely point out its robust competition, which includes powerhouses including The Trade Desk, Amazon and Facebook. “Google is going to say that there’s no way that it’s abusing its monopoly,” says Telang. “They will say that they have competitors, that prices for ads have gone down and they will say that they are simply so much better at what they do.”

In 2017, Google was fined $2.7 billion by the European Union for violating antitrust laws through search and the following year, in 2018, it was fined a record-breaking $5 billion for unfairly leveraging its Android operating system to favor its own apps. And in 2019, the E.U. fined Google $1.7 billion, bringing the grand total for all three fines at $9 billion.

“When you file a lawsuit against a firm it suggests that it used its monopoly power to harm consumers or competitors,” Telang says. “The price for search results is zero, the consumer pays no money. But because [Google] dominates the advertising space, they are able to control the whole value chain because they are both the provider and supplier.”  

"The question will be, can the Justice Department show data that this is happening?” Telang says.