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 22 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 1. The Industry Attempts to Rebel Against Google’s Exclusionary Practices 163. By 2015, Google’s publisher customers and ad exchange competitors had grown so frustrated with Google that they attempted to implement a form of open, real-time competition with Google’s ad exchange that evaded Google’s exclusionary restrictions. This innovative technology was called header bidding. 164. Header bidding worked as follows: publishers inserted certain computer code into the “header” section of the HTML code of a web page. This code triggered a real-time auction among ad exchanges before the publisher’s web page called the publisher ad server. [18] The highest bid from the header bidding auction was then sent to the publisher’s ad server. Because of the way Google configured DFP, the winning bid from the header bidding auction was then sent to Google’s ad exchange to see if it could beat that price. Critically, through dynamic allocation, Google’s ad exchange always received this “last look” advantage, essentially a right to buy any impression as long as it had at least one advertiser willing to match the competing bid price from the header bidding auction. 165. As originally designed, header bidding had limitations that stemmed from Google’s restrictions on how publishers could sell their inventory through Google’s publisher ad server. For example, publishers had to configure thousands of entries into the publisher ad server and recode their pages to implement a workaround to enable header bidding. Web pages also ran somewhat more slowly because publishers had to run multiple auctions sequentially: the header bidder auctions first, and then Google’s ad exchange auction, which always ran last. Despite these limitations, for the first time, Google’s ad exchange was forced to compete, at least in some fashion, against real-time bids from rival ad exchanges rather than against static, historical average prices from those ad exchanges. In assessing the impact of header bidding, a 2016 Google internal presentation noted “header bidding and header wrappers are BETTER than [Google’s platforms] for buyers and sellers.” Google explained that competition between AdX and buyers using header bidding increased publisher revenues by 30 to 40%, and provided additional transparency to advertisers. In essence, header bidding allowed publishers, advertisers, and Google’s rivals an opportunity to at least partially circumvent Google’s restrictions against real-time competition. Market participants had demonstrated their preference for improved choice, flexibility, and competition, even if it came at the cost of burdensome computer workarounds and slower load times for end users. 166. In practice, header bidding dramatically improved the competitiveness of rival ad exchanges. Header bidding provided a real opportunity for rival ad exchanges to see and compete for more publisher inventory, and potentially gain scale to compete effectively with Google. By allowing a publisher to call multiple ad exchanges in real time—effectively multihoming at the ad exchange level—header bidding vastly increased the amount of inventory rival ad exchanges could offer their advertisers. In turn, advertisers had the opportunity to see and bid on more inventory—potentially through lower-cost channels than Google’s ad tech tools— increasing their chances of winning inventory. By improving the ability of advertisers and publishers to connect, these rival ad exchanges were able to clear more transactions, increase revenues for publishers, and improve the quality of matches. In turn, header bidding had the potential to attract more advertisers and publishers to these rival ad exchanges by increasing the incremental value they could offer. 167. Due to this increased competitiveness, non-Google affiliated buyers began to buy more advertising inventory through third-party ad exchanges using header bidding. Google’s internal analysis showed a deceleration in spend by non-Google advertiser buying tools on AdX as “header bidding removed AdX inventory exclusivity . . . [and] buyers shift[ed] spend as other inventory sources delivered equal/better value.” A large buyer explicitly indicated to Google that they were “shifting spend over to HB partners” because they were “seeing better performance.” 168. More transactions flowing through rival ad exchanges made it easier for those ad exchanges to offset the massive cost of processing billions of ad requests each day; ad exchanges are only compensated for requests that result in a won transaction. These new transactions also provided ad exchanges with additional data on the universe of publisher inventory, user targeting data, and the competitive landscape. 169. Building on the success of early client-side header bidding, several companies invested to develop new innovative free or low-cost tools (called “wrappers”) that enabled “server-side” header bidding. This new form of header bidding allowed the header of a web page to call a single server, which then sent calls to multiple ad exchanges, each of which returned a bid to the server, which in turn passed on the winning bid to the web page. Server-side header bidding turbocharged the scale benefits of header bidding by decreasing integration costs and improved the internet user experience by reducing latency introduced by header bidding. 170. Internally, Google recognized that header bidding substantially benefited every market participant except one: Google. For that reason, Google refused to participate and instead chose to stifle any competitor that dared employ header bidding. As one Google employee explained, “[Header bidding] gives many publishers better yield, so it’s a no-brainer for a publisher to adopt it.” A late 2015 internal discussion somberly noted that Google “[did] not have incredibly robust arguments to discourage header bidding” and conceded that header bidding offered the competition Google had publicly preached but privately precluded: With AdX we’ve always advocated the more competition a pub has being considered with real time price competition the better the yield. Our competition is using this same argument for why header bidding makes sense. If they can submit a near real time price into DFP the[] competition with AdX is improved. As another Google employee observed, “[Google’s ad server] has historically made it difficult for [ad exchanges] to compete on a level playing field with AdX.” 171. Google viewed header bidding—and particularly server-side header bidding—as a direct and, in the words of a 2016 internal strategy paper, “existential threat” to the market power Google had amassed. Internal Google documents confirm that Google understood header bidding to be a direct response by its customers and competitors to counteract Google’s increasing dominance and its “unwillingness to open our systems to the types of transactions, policies and innovations that buyers and sellers wish to transact.” Header bidding was an attempt to “circumvent dynamic allocation,” one Google employee noted in late 2015. Another employee recognized that “[p]ublishers felt locked-in by dynamic allocation in [Google’s ad server] which only gave [Google’s ad exchange the] ability to compete, so HB was born.” Another described header bidding as a “world of true, multi-sourced [real-time bidding]” without Google as the “authoritarian intermediary.” 172. Beyond breaking the restrictions Google had put in place, header bidding also represented a pervasive threat to Google’s market power stemming from its unique and substantial advertiser demand. If header bidding could bring together a critical mass of nonGoogle advertising demand into a single real-time auction (e.g., a server-side header bidding auction), it might be able to undermine the power Google wielded through its Google Ads’ advertising demand, thereby weakening the need for publishers to use Google’s publisher ad server and ad exchange in the first place. 173. While header bidding was an important step toward more competition among ad exchanges, it could not displace Google’s dominance overnight. Google had hard-coded into the ad selection rules of its publisher ad server several advantages for its own ad exchange that would prevent rival ad exchanges from competing. Absent toppling Google’s monopoly position in the publisher ad server market, header bidding could offer publishers and advertisers only incremental gains. Thus, in the wake of header bidding, Google implemented still further measures to limit the growth of both header bidding and the rival ad exchanges deploying this technology. [18] Because early versions of the header code were run on the device of the user, or client, they were referred to as “client-side” header bidding. [19] “SSPs” refers to non-Google ad exchanges. 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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