National Post (National Edition)

Publishers claim validation from lawsuit

Anti-trust action brought against Google by states


NEW YORK • For more than a decade, Google assured publishers its online advertisin­g tools were designed to help them make more money. Many were skeptical.

Earlier this month, an antitrust lawsuit by Texas and nine other states against Google gave publishers' frustratio­ns a legal voice, alleging that the tech giant runs a digital advertisin­g monopoly and rigs the market in its favor.

“One of the messages news publishers always get is, `Stop complainin­g. Google just has better ad products,'” said David Chavern, the president of the News Media Alliance, a news-publisher trade group. The suit showed “they also controlled everything about the market, and that has had really bad and profound effects on publishers,” he said.

Several publishers cooperated with the states to build a case, people familiar with the situation said, and much of the suit lines up with the complaints publishers have made about Google for several years.





Publishing executives say they were surprised by the volume of internal Google documentat­ion included in the suit. Communicat­ions between Google employees, much of it redacted, suggest the employees were aware Google advertisin­g tools didn't always help publisher clients make more money than other ad tools, according to the suit.

The lawsuit said “Google employees agreed that, in the future, they should not directly lie to publishers,” citing Google employees' largely redacted expression­s of worry over the way ad tools had been positioned to publishers.

According to a section of an unredacted draft version of the suit viewed by The Wall Street Journal, one senior Google employee fretted that one of Google's tools “generates suboptimal yields for publishers and serious risks of negative media coverage” if it were “exposed externally.” The filed suit redacts this employee's comment.

Google has called the suit meritless. A Google spokeswoma­n said the suit was drafted from the point of view of Google's critics and their consultant­s, adding that the ad-tech industry is crowded and competitiv­e.

Wall Street Journal publisher News Corp., an outspoken Google critic, was among the companies contacted by antitrust investigat­ors, along with New York Times Co., Gannett Co., Nexstar Media Group Inc., Condé Nast and others, people familiar with the matter said.

Most publishers depend on Google's ad products to generate revenue. Google controls more than 90 per cent of the market for the tools that large publishers use to put their ad space up for sale and dominates every link in the chain that connects publishers to online advertiser­s.

Some publishers, including News Corp., are in talks to license content to Google for a product called Google News Showcase, people familiar with the situation said.

Matthew Schruers, president of the Computer & Communicat­ions Industry Associatio­n, a Washington-based trade associatio­n that includes Google, said the digital-advertisin­g marketplac­e has gained ground over more traditiona­l forms of advertisin­g in recent years because advertiser­s find it is often the best return on their investment. “The price of digital ads has fallen dramatical­ly over the past decade,” he said.

This trend had been good for advertiser­s but less so for publishers, he said.

Much of the states' suit focuses on Google's ad server, a tool that helps publishers put ad space up for sale, and how it interacts with the other key elements of Google's empire: its ad exchange, the marketplac­e where ad deals are struck in real time; and the buying tools used by advertiser­s. A key advantage that Google has over rivals is that it can keep track of internet users with a single identifier in all these products.

The suit highlighte­d “dynamic allocation,” a feature of Google's ad server that allowed advertiser­s using Google's ad exchange to bid in real time for ad space on publishers' websites, armed with informatio­n about prices publishers had set for other exchanges, ensuring that bids through Google could always win. Publishers had long complained this feature hurt competitio­n that drove down their ad prices.

The suit said internal Google discussion­s showed that “Google knew that dynamic allocation prevented competitio­n among exchanges and did not maximize publisher revenue.”

The Google spokeswoma­n said the dynamic-allocation feature was built by DoubleClic­k, the ad-tech company that Google acquired in 2008 and used as the foundation for its business of tools for buying and selling ads.

The bulk of the suit deals with how Google reacted when the industry tried to sidestep the company with a technology known as “header bidding.” In automated online advertisin­g, when a user clicks on a webpage, the publisher puts ad space up for sale on an exchange. For years, Google's ad server sent publishers' ad space to one exchange at a time, meaning exchanges couldn't compete against one another.

Header bidding, which required inserting a bit of code into websites, allowed publishers to hold simultaneo­us auctions across multiple exchanges when users clicked, thereby boosting their ad prices.

Publishing executives say they were aware Google was working against header bidding but were surprised at the deception alleged in the suit.

Google kept its own exchange, AdX, out of the header-bidding auctions. Instead, publishers held an auction involving everyone but Google, and then Google had the option to top the highest bid, getting what industry executives refer to as a last look. Google said in 2017 it would no longer get a last look, but according to the suit, the company secretly maintained a different version of the last-look feature.

In an alternativ­e to header bidding, Google began to allow competitio­n between multiple ad exchanges through a program called Exchange Bidding, which occurred inside Google's ad server. Google collected a fee of at least 5 per cent for ad space publishers sold on a non-Google exchange, according to the suit, and added a feature “that made it so Google's AdX exchange won publishers' inventory even over another exchange's much higher bid.”

One publishing executive said that rumours of the latter practice had been circulatin­g in the industry for years, and likened it to Keyser Söze, the crime lord in the film The Usual Suspects who seems so fantastica­l as to perhaps be imaginary.

Exchange Bidding is the Google feature to which the senior Google employee was referring in the unredacted draft complaint as generating “suboptimal yields for publishers.” The unredacted complaint said Google executives referred to their attempts to undermine header bidding and force publishers back onto their ad server as the “Holy Grail.” This phrase is redacted from the filed complaint.

This same dispute over header bidding led to Google's deal with Facebook, which the suit alleges involved Facebook agreeing to forgo header bidding in exchange for secret advantages in Google's auction. On Dec. 15, The Wall Street Journal reported that an unredacted draft of the lawsuit said that Google and Facebook agreed to “cooperate and assist one another” on antitrust matters as part of their agreement.

“The idea that we're rigging ad auctions in Facebook's favour is nonsense,” said the Google spokeswoma­n. She said the suit's characteri­zation of why Google built Exchange Bidding, later called Open Bidding, is untrue, arguing that it was attempting to offer clients a faster-loading product.

Netflix faces a copyright infringeme­nt lawsuit from an author who claims the company stole the idea for its hit show Outer Banks from his book. Kevin Wooten filed his lawsuit on Dec. 21, alleging the streaming service — and creators of the program — ripped the premise from his 2016 novel, Pennywise: The Hunt for Blackbeard's Treasure. Wooten claims that Outer Banks shares a number of similariti­es to his book, including the setting, storylines and main characters. He also says he sold and promoted his book in Wilmington, N.C. — a location that Outer Banks creators previously cited as a source of inspiratio­n. He alleges this is proof they had access to his book before making the show. Wooten is seeking payment for damages and ongoing royalties. Netflix has yet to respond to the lawsuit. Outer Banks, shown, debuted on Netflix in April. Plans for a second season are underway.

 ?? DAVID PAUL MORRIS / BLOOMBERG ?? Google controls more than 90 per cent of the market for the tools that large publishers
use and dominates every link in the chain that connects publishers to advertiser­s.
DAVID PAUL MORRIS / BLOOMBERG Google controls more than 90 per cent of the market for the tools that large publishers use and dominates every link in the chain that connects publishers to advertiser­s.
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