Google’s alleged plan to monopolize the online advertising market

In 2010, a Google Product Manager Scott Spencer gives a interview Explain Google’s practice of using “second price” auctions to advertise on the web.In a second-price auction, the highest bidder wins, but only pays any second The highest bid is. Economists like this setup — guy Whoever speculated about it won the Nobel Prize—because it encouraged participants to bid on whatever the item was truly valuable to them, without worrying about overpaying. As Spencer explains, “It minimizes the need for a ‘gaming’ system.”

But what if Google was the one to play with the system?

that’s in a Antitrust Litigation Proposed by a state coalition led by Texas Attorney General Ken Paxton. On Friday morning, a federal judge released an unredacted version of a recent complaint in the case, first filed in 2020. The filing provides unprecedented insight into how Google has misled advertisers and publishers for years of insider information by manipulating auctions in its favor. Google’s public claims of secondary price auctions are “untrue,” as an employee said in a newly revealed internal document.

Texas case, one of Several companies face, targeting the Google-controlled auction-driven display ad market. Google has complete control over every link in the chain between advertisers and audiences. It has the largest buyer platform, the largest ad exchange and the largest publishing platform. So when you see an ad on a site, it’s best if the advertiser uses Google to place it, Google’s exchange submits it to the site, and the site uses Google to provide space. In other words, Google conducts the auction while representing the buyers and sellers of that auction.

This presents a Obvious conflict of interest. As one employee put it, citing a previously unpublished version of the lawsuit, “the analogy is Goldman Sachs or Citibank owning the New York Stock Exchange.” According to Texas, Google failed to resist exploiting its control of the market The temptation to profit for oneself. The lawsuit alleges it deployed at least three secretly designed programs to distort so-called second-price auctions. While the existence of the programs has been made public, the new, unredacted complaint provides new details about how they allegedly work.

The first project was launched in 2013, called the “Bernanke Project,” just like former Federal Reserve Chairman Ben Bernanke. Here’s how it works, according to the Texas state’s description of Google’s internal documents. Let’s say the highest bid through Google’s ad exchange, AdX, is $10, and the second highest bid is $8. In this case, the advertiser who bid $10 should win the auction and pay the publisher $8.Under Bernanke’s plan, however, Google would allegedly pay publishers anything third– The maximum bid is – let’s say $5 – while still charging the full $8 to the advertiser.

What’s up with the $3 difference? According to the complaint, Google will suck it into a “Bernanke pool” to use its own ad-buying tool, Google Ads. The filing cites an internal 2014 document in which a Google employee described the need to reverse a “worrisome 2013 trend”: rival ad-buying platforms won too many auctions on AdX. According to the complaint, Google used funds from the pool to raise bids that would otherwise be lower than through other platforms. (This would explain why the program was named after Bernanke, who advocated “quantitative easing” — injecting money into the economy — to fight the Great Depression. Google’s internal slides used the term QE.) At first, Google tracks how it withheld a lot of money from publishers and eventually gave them back. However, later versions of the program even stopped doing so, according to the complaint.

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