USA v. Google LLC Court Filing, retrieved on January 24, 2023 is part of . You can jump to any part in this filing . This is part 25 of 44. HackerNoon’s Legal PDF Series here IV. GOOGLE’S SCHEME TO DOMINATE THE AD TECH STACK D. Google Responds to the Threat of Header Bidding by Further Excluding Rivals and Reinforcing Its Dominance 2. Google Blunts Header Bidding By “Drying Out” the Competition b) Google Further Stunts Header Bidding by Working to Bring Facebook and Amazon into Its Open Bidding Fold 187. Even before the rise of header bidding, Google had identified Facebook as a potential competitive threat. Facebook had at one point shown ambitions to challenge Google as a full-stack ad tech competitor, acquiring a publisher ad server in 2013 and a video advertising SSP in 2014, though both products were later shuttered. Years later, Facebook recognized that any full-stack ad tech strategy “is subject to one bottleneck and intermediary—Google. They ‘own’ the Ad Server, and hence the last mile relationship with publishers.” Facebook further observed that “[o]ther players in the market, such as Amazon, recognize that unseating Google, and its relationships with publishers is hard, and are also choosing to build on top of Google’s rails.” 188. Though it had abandoned its efforts to be a full-stack competitor, Facebook still aimed to grow its advertising business beyond its owned and operated (“O&O”) digital properties (e.g., Facebook Blue and Instagram apps), which were increasingly supplyconstrained. As the number of advertisers on these properties grew, demand threatened to outpace available inventory; Facebook sought publisher inventory outside Facebook to satisfy this unmet advertising demand. In 2014, it launched Facebook Audience Network (“FAN”), which Facebook described as the “power of Facebook ads, off-Facebook.” FAN allowed Facebook advertisers to extend their campaigns outside of Facebook O&O properties with a oneclick, opt-in button. 189. At launch, FAN primarily worked with mobile app advertisers to place ads in other mobile apps in order to drive app installs and engagement. It later expanded to open web on mobile devices. By 2016, FAN was participating in the growing header bidding movement, partnering with header bidding wrappers to submit real-time, simultaneous bids, and eventually launching full-scale header bidding in 2017. 190. As a large ad network connected to millions of Facebook advertisers, FAN also competed with Google to lock up available publisher inventory for its advertisers. Prior to joining Open Bidding, Facebook executives foresaw a status quo of “hand-to-hand combat” between the companies to secure access to sufficient inventory from publishers. Google feared such competition with Facebook would end up “eat[ing] margin,” and that Google might “respond identically” through deals with top publishers, thus “driving a price war.” Facebook was equally leery of such a future, with one executive fretting that the “significant investment required to lock up inventory through direct deals” with publishers would “[l]ikely start a race to the bottom on margin.” 191. Google took note of FAN’s launch and kept a wary eye on FAN as it grew, describing Facebook as “a unique competitive challenge for us, both short- and long-term” because of its “strength in ad formats and targeting.” Google understood Facebook’s reach with over a billion users, and it understood that just as Google had valuable targeting and demographic data from its O&O properties—including Search, Gmail, YouTube, Android, and Play Store—Facebook, too, had a massive amount of valuable data from its O&O properties. Even though Facebook had largely given up on building a direct competitor to Google’s publisher ad tech stack, Google saw looming “[d]isintermediation [t]hreats” to DFP from “[l]arge [n]etworks with unique data and advertiser scale seek[ing] direct inventory access[,] [g]oing direct to pubs or using existing [third-party] channels like Header Bidding.” By contrast, Google characterized full-stack competitors as “historical competition” of little concern: “This is a short-term threat and we are well positioned here.” 192. As FAN began to test and use header bidding, Google grew increasingly alarmed at “the existential threat posed by Header Bidding and FAN.” Google strategized over how to respond to FAN’s entry into header bidding, and in September 2016, Google laid out a plan to bring FAN into Google’s Open Bidding program. Significantly, Google concluded that bringing FAN demand into Open Bidding was a better alternative to slow publisher adoption of header bidding than “[a]ggressively mak[ing] [Open Bidding] much better than [header bidding].” 3. Rather than making a better product and competing on the merits, Google sought a deal with Facebook to bring FAN into Google’s Open Bidding—away from rival exchanges’ header bidding auctions—to “dry out” the nascent threat posed by header bidding. If competition with Facebook was inevitable, it would be better for Google to compete on a field it still controlled, with the many advantages it had constructed for itself, thus protecting DFP’s market dominance. Indeed, Google concluded that while it “[c]annot avoid competing with FAN,” it could, through a deal with Facebook, “build a moat around our demand.” And as Google’s product leadership would ultimately recommend to CEO Sundar Pichai, with a Google-Facebook deal, “[f]or web inventory, we will move [FAN’s] demand off of header bidding set up and further weaken the header bidding narrative in the marketplace.” Facebook, meanwhile, was frank in its assessment of Google’s motivation for the deal: “What Google wants: To kill header bidding (us baptizing [Open Bidding] will help significantly).” 194. Ultimately, in September 2018, after a long negotiation and approvals by each company’s top brass—including Pichai, Mark Zuckerberg, and Sheryl Sandberg—Google and Facebook entered into a “Network Bidding Agreement” (“NBA”). The deal provided Facebook with unique terms, including a contractual promise of no last look and direct remittance to publishers, ensuring that Facebook would continue to maintain its publisher-facing relationships. In exchange, Facebook committed to a minimum annual spend on Open Bidding and was incentivized, through an all-units, tiered volume discount, to shift spend to Open Bidding and away from possible alternative header bidding avenues. 195. Having tried and failed to challenge Google as full-stack competitor—in part because of Google’s anticompetitive conduct described above—Facebook ultimately resigned itself to operating on top of Google’s rails. While the NBA satisfied Facebook’s need for increased access to publisher inventory, Facebook recognized that it would also “reduce our future optionality to build our own ad tech and the likelihood of a newbie like Amazon[, which had introduced a header bidding wrapper,] succeeding.” Facebook believed that, while perhaps “inevitable,” the deal would nevertheless “accelerate Google’s stranglehold on ad tech.” Facebook’s then-VP of Partnerships opined that “by doing this deal, we will cement [Google’s] position of power.” 196. Amazon’s TAM posed a different competitive threat to Google’s dominance. It allowed publishers to solicit bids from multiple ad exchanges via a single call from a webpage to Amazon’s extensive network of servers. And Amazon took only a small one cent CPM fee— much lower than Open Bidding’s 5% fee—for every transaction that flowed through TAM. Google initially feared TAM could aggregate advertising demand in a way that challenged Google’s ad exchange and publisher ad server, leading Google to ask Amazon what it would take for Amazon to stop investing in its header bidding product. However, Amazon rebuffed such requests and continued to develop and deploy TAM. But as with other header bidding solutions, TAM could not fully circumvent all of the restrictions and preferences baked into Google’s ad tech products, which website publishers still relied upon. For example, TAM remained subject to a “last look” by Google’s ad exchange, allowing Google’s ad exchange to win any impression that would otherwise flow through TAM by matching the competing price from TAM. 197. Google’s Open Bidding—and Google’s efforts to shift the focus of other major ad tech companies like Facebook from header bidding toward Open Bidding—stunted header bidding’s adoption, leaving header bidding unable to pose a true threat to Google’s monopoly power. In doing so, Open Bidding achieved its goal of blunting the growth of header bidding and protecting Google’s publisher ad server. Today, Google still has its publisher ad server monopoly. Header bidding persisted, but its adoption stagnated. And Google turned to other, more surreptitious methods to restrain competition and “dry out” ad exchanges using header bidding. Continue Reading . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case 1:23-cv-00108 retrieved on September 8, 2023, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. justice.gov

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