There is good reason why 50 attorneys general, the Department of Justice and regulators around the world are investigating Google for anticompetitive conduct in the digital advertising marketplace. It seems like new reports are issued almost every month that offer a clearer understanding of Google’s dominant position in the data and pipes underlying the buying, selling, serving, and measuring of ads across the open web.
Google generates the most revenue and retains the most profit in the ad industry. DCN has long espoused the viewpoint that Google is able to do this because of its market power and ability to see large amounts of data on consumers’ online interactions. This data and market power wasn’t achieved through superior service and innovation but instead through orchestrated acquisitions beginning with the purchase of Doubleclick in 2007.
Now, a little over a decade later, 95%+ of DCN’s member publishers use Google’s ad platform when selling their ad space on real-time electronic exchanges. These exchanges primarily target audiences (using cookies as their proxy) while mostly dismissing the value of the publisher brand and the quality of the content ushering in the user (cookie). They intermediate scale but diminish the value of what differentiates it. No doubt there is a lot of profit in marrying the data exhaust with cheaper inventory rather than having to subsidize the expense and liability of the content itself.
Google wins out most often, on all sides of the market, simply because it knows more about the audience, the advertiser, and the transaction to be made. With Google’s machines looking into all parts of the supply chain, Dina Srinivasan rightly compares this to insider trading in a recent report. In the securities trading market, the intermediaries that trade on behalf of third parties and on behalf of themselves must manage their conflicts of interest. These same competitive principles must apply here and assure other exchange entities to the fair access to data and speed that Google currently controls.
Muddying the waters
The good news is that antitrust regulators also appear to be on the right track as press reports and global investigations release preliminary findings that investigate this intersection of market dominance and data. Make no mistake though, Google is also ramping up its efforts to muddy the waters. This includes documenting for the press and regulators the long history of re-brands and repackaging of Google’s various platforms along with the incredibly complex market that is “adtech” in a way that favors their chosen narrative of market efficiency for all.
In a recent filing In a recent filing in Australia, Google attempts to argue that the entire adtech ecosystem really isn’t even that important for the company by pointing out that most of its ad revenue is derived via Google Search. This may be true in terms of direct dollars. However, this entirely discounts the value of the data that Google collects across nearly 80% of the web, which bolsters the value of Google’s owned and operated businesses along with the value of its own inventory. The German Federal Cartel Office decision against Facebook, which was reinforced by a court earlier this week, is relevant to how this data across the web ties back to the value of the core platforms. Google plays the same game as Facebook.
It’s not the money but the impressions
In the same Australia filings and Google blog posts earlier this week, Google also tries to dismiss the value of the adtech ecosystem for publishers. Google implies that this type of advertising is a very small percentage of the revenue for publishers: At only 15% of their revenues, they suggest that there’s “nothing to see here.” Google even invented a new term “intermediated open auctions” to describe it. (And, as everyone knows, any antitrust investigation deeply depends on defining the market).
Readers of Google’s filings need to ask 15% of what? Who falls into this new market definition set by Google? You’ll soon find out that it includes social networks that operate their own private, closed markets including, significantly, Facebook.
More importantly, DCN’s own benchmark analysis shows that a whopping 75% of the impressions across its medium to large premium news publishers are sold in these same auctions.
So yes, we agree that these auctions end up being a minority of premium news publishers’ actual revenues but a significant majority of their inventory. Google has devalued the inventory for premium publishers using its data and pipes underlying the buying, selling, serving, and measuring of ads across the open web. Google has essentially made the point for regulators.
 DCN 2019 Benchmark Report, Proprietary Analysis.