How Google harms search advertisers in 20 slides

Google manipulated advert auctions and inflated prices to extend income, harming advertisers, the Division of Justice argued final week within the U.S. vs. Google antitrust trial.

What follows is a abstract and a few slides from the DOJ’s closing deck, particular to look promoting, that again up the DOJ’s argument.

Google’s monopoly energy

This was outlined by the DOJ as “the ability to manage costs or exclude competitors.” Additionally, monopolists don’t have to contemplate rivals’ advert costs, which testimony and inner paperwork confirmed Google doesn’t.

To make the case, the DOJ confirmed quotes from numerous Googlers discussing elevating advert costs to extend the corporate’s income.

• Dr. Adam Juda mentioned Google tried to give you “higher costs or extra honest costs, the place these new costs are greater than the earlier ones.”

• Dr. Hal Varian indicated that Google had many levers it might use to alter the advert public sale design to attain its desired consequence.

• Juda and Jerry Dischler confirmed this. Dischler was quoted discussing the impression of accelerating costs from 5% to fifteen% in two slides:

Different slides from the deck the DOJ used to make its case:

• Google Search advert CPCs greater than doubled between 2013 and 2020.

Advertiser hurt

Google has the ability to lift costs when it needs to take action, in accordance with the DOJ. Google known as this “tuning” in inner paperwork. The DOJ known as it “manipulating.”

Format pricing, squashing and RGSP are three issues harming advertisers, in accordance with the DOJ:

Format pricing

• “Advertisers by no means pay greater than their most bid,” in accordance with Google.
• Sure, however: What Google failed to say is “Mission Momiji,” which very quietly launched in 2017.
• What’s Momiji: It artificially inflated the bid made by the runner-up.
• The outcome: A 15% enhance for the “successful” advertiser. Extra advert income for Google.
• Related slides: From the DOJ’s deck:

Squashing

• The way it labored: Google elevated an advertiser’s lifetime worth based mostly on how far their predicted click-through charge (pCTR) was from the best pCTR. In response to a 2017 doc introducing a brand new product known as “Kumamon,” Google had been doing this utilizing “a easy algorithm consisting of bid, three high quality alerts, and a few (largely) hand tuned parameters.” (A screenshot of this doc appeared to point Kumamon would add extra machine studying alerts within the public sale.)
• In different phrases: Google raised “the worth in opposition to the best bidder.”
• Google’s aim: To create a “extra broad value enhance.”
• The outcome: The Google advert public sale winner paid greater than it ought to have if squashing wasn’t a part of the advert public sale.
• And: The DOJ indicated this all led to a “detrimental person expertise” as Google ranked adverts “sub-optimally in trade for extra income.”
• Related slides: From the DOJ’s deck:

RGSP

• What’s it: The Randomized Generalized Second-Worth was launched in 2019. (Dig deeper. What’s RGSP? Google’s Randomized Generalized Second-Worth advert auctions defined)
• The way it labored: Google referred to it as the power to “elevate costs (shift the curve upwards or make it steeper on the greater finish) in small increments over time (AKA ‘inflation’).” It didn’t result in higher high quality, in accordance with 2019 Google emails.
• How Google talked about it: “A greater pricing knob than format pricing.”
• The outcome: It incentivized advertisers to bid greater. Google elevated income by 10%.
• Related slides: From the DOJ’s deck:

Search Question Reviews

The shortage of question visibility additionally harms advertisers, in accordance with the DOJ. Google makes it practically inconceivable for search entrepreneurs to “establish poor-matching queries” utilizing detrimental key phrases.

The DOJ’s presentation. You possibly can view all 143 slides from the DOJ: Closing Deck: Search Promoting: U.S. and Plaintiff States v. Google LLC (PDF)