US v. Google: How Ad Tech Tools Work

III. DISPLAY ADVERTISING TRANSACTIONS

A. How Ad Tech Tools Work[4]

43. The content creator or owner of a website is called a publisher. Each website can be programmed by its publisher to create slots where ads can be displayed. A graphical ad displayed on a website that is viewed in an internet browser is called a display ad. A display ad may contain images, text, or multimedia. A single display ad shown to a single user on a single occasion is called an impression.

44. An ad tech transaction begins when a user opens a website. While the website’s content loads, the website uses a publisher ad server to select which ads will fill each ad slot on the page. The publisher ad server is an ad tech tool that evaluates potential ads from different advertising sources and applies a decision-making logic to determine which ad will be displayed to the user opening the website. Since 2008, Google has owned the industry’s leading publisher ad server, Google Ad Manager, which is often still referred to by its former name, DoubleClick for Publishers (“DFP”).

45. For a typical medium-to-large website, the publisher ad server first determines whether the ad spaces on the webpage opened by the user have already been sold to a specific advertiser directly by the publisher. Such direct sales result from one-on-one negotiations between website publishers and advertisers and typically involve premium ad placements (e.g., ads at the top of a webpage) that command the highest prices from advertisers. For any ad space not filled through direct sales, the publisher ad server then tries to sell the ad space through indirect sales channels. Indirect sales allow publishers to sell remaining or “remnant” ad space (i.e., space not sold through direct sales). Many website publishers, especially smaller ones, only sell ad space through such indirect sales.[5]

46. Indirect sales are typically made via a series of interactions between ad tech tools. These technologies allow website publishers and advertisers to transact through lightning-fast automated processes, known as programmatic buying. Today, most programmatic transactions take place on an ad exchange. An ad exchange (sometimes called a supply-side platform or SSP) is a software platform that receives requests—often from a publisher ad server—to auction ad impressions on a particular webpage. The ad exchange solicits bids on the impression from advertiser buying tools, chooses the winning bid, and transmits information on the winning bid back to the publisher ad server. Google presently owns the industry’s leading ad exchange, called AdX (now packaged as part of Google Ad Manager)

47. When a publisher ad server sends an auction request to an ad exchange, the publisher ad server provides certain information about the impression for sale. This can include information about the website itself, the ad space on the webpage (e.g., where the ad is placed), and the user that will view the impression. [6] After receiving this information from the publisher ad server, the ad exchange may supplement the information with any additional information the ad exchange might independently have about the user viewing the ad, including information about the user’s browsing history, location, and age.[7] The ad exchange then transmits the bid request, along with information gathered about the user and the website, to various advertiser buying tools, described below. The detailed information concerning the user’s location and browsing history is highly valuable to advertisers because it helps advertisers assess the value of the particular impression to its overall advertising campaign. For example, if the information tells a particular retail advertiser that the user had previously browsed that retailer’s website but did not complete a sale, then that retailer may be willing to pay a premium for the particular impression.

48. Advertisers receive and respond to bid requests using advertiser buying tools. These advertiser buying tools assist advertisers with connecting to ad exchanges, selecting impressions to bid on, submitting bids, and tracking the purchased impressions against the advertiser’s advertising campaign goals.

49. Large ad buyers, such as major ad agencies or large businesses, frequently use a type of advertiser buying tool called a demand side platform. Demand side platforms provide sophisticated and customizable tools that allow the ad agency or business to manage their advertising purchases. Advertisers using demand side platforms have extensive control over where and how they bid for ad inventory. They often use their own data, or data purchased from other entities, to target particular users for their ad campaign. Google owns the United States’ leading demand side platform, Display & Video 360 (“DV360”).

50. Smaller advertisers often rely on a type of advertiser buying tool with fewer, simpler options that are less customized. These advertiser buying tools are called advertiser ad networks. [8] Today, most ad networks bid for and buy advertising space on an impression-byimpression basis, submitting bids alongside other ad networks and demand side platforms. Advertiser ad networks offer a self-service, easy-to-use technology solution, which as a practical matter is the only viable option for smaller advertisers, advertisers that prefer a simple “handsoff” approach, or advertisers that need the ad network’s targeting data to buy ads effectively. Google offers the industry’s leading ad network, Google Ads.

51. Most ad networks, including Google Ads, are a “black box” to advertisers. Advertisers have almost no control over the process by which the ad network bids for impressions. Nor do the networks provide advertisers with information about how or why the network bids for particular impressions on particular websites at particular times. Most ad networks charge advertisers primarily on a “cost per click,” or “CPC” basis. The advertiser thus has no insight into how much the ad network spent to purchase a particular impression; the advertiser is charged a fee only when an internet user clicks on the ad. Google’s ad network, Google Ads, sets this fee based on the actual cost incurred to buy advertising inventory plus a markup. This prevents Google’s advertising customers from knowing how much Google is charging them, over and above Google’s costs, for the inventory.

52. These ad networks are particularly important to businesses that do not have the expertise, advertising budget, or targeting data required for a demand side platform to be a viable option. Ad networks are also critical to website publishers. These ad networks are the only way for publishers to reach and sell ad space to smaller businesses that rely exclusively or primarily on ad networks to buy ad space. Further, the type of advertising space these ad networks seek to purchase from website publishers is often distinct from the advertising space sought by other advertising tools. That is because the advertisers using these networks often have unique advertising objectives. Further, these ad networks, and in particular Google Ads, have access to unique user data that allow them to target very specific advertising opportunities.

53. The flow of display ad transactions through these platforms—collectively called the ad tech stack—is depicted again below.

54. The publisher ad server is referred to as the “sell-side.” The advertiser buying tools are referred to as the “buy-side.” Impressions offered for sale by publishers are referred to as publisher “inventory” and advertisers’ interest in buying impressions is referred to as advertiser “demand.”

55. Whether the advertiser uses a demand side platform or an ad network as its advertiser buying tool, the tool evaluates the bid request received from the ad exchange and, if the impression meets the advertiser’s criteria (e.g., targeted audience, website category), the tool determines an amount to bid on the impression. Because each impression is filled within fractions of a second while the website loads for the user, an advertiser could never evaluate each impression individually. Instead, advertisers rely on these automated advertiser buying tools to evaluate impressions and bid on their behalf based on parameters pre-configured by the advertiser ahead of time. The advertiser buying tool then sends its highest bid for the impression—as calculated by the tool—back to the ad exchange for consideration.

56. After receiving bids from multiple advertiser buying tools, the ad exchange holds an auction to determine the winning bidder. Historically, most ad exchanges ran a second-price auction in which the winning bidder paid a price one cent higher than the bid of the second highest bidder. Today, however, most ad exchanges run first-price auctions where the highest bidder simply pays the price of its winning bid. The ad exchange sends information about its winning bid back to the publisher ad server, which evaluates the ad exchange’s bid under a set of rules defined by the publisher ad server. The publisher ad server then makes the final decision regarding which ad to “serve” to the user. The publisher ad server sends a message to the winning advertiser to provide the content of the ad to be displayed.

[4] The process described herein governs the sale of display ads on the “open web,” meaning websites whose inventory is sold through ad tech intermediaries that offer inventory from multiple websites. Some websites, especially social media companies like Facebook and Snapchat, operate under a different “closed web” (or “walled garden”) model in which inventory is sold directly to individual advertisers using a proprietary tool employed by that website. Other types of advertising distinct from open web display advertising include search ads (e.g., sponsored results in a search engine), video ads (e.g., commercials that play before, during, or after a streaming video), and mobile app ads (e.g., ads shown within a game or other nonbrowser app downloaded from an app store to a user’s mobile device). The focus of this Complaint is on Google’s anticompetitive conduct in the market for open web display advertising transactions.

[5] For both direct and indirect sales, ad impressions are generally priced on a CPM basis, referring to cost-per-thousand (in Latin, “mille”) per impression. For example, an impression with a $1 CPM would cost $0.001, or one-tenth of a cent.

[6] Because the publisher ad server historically transmitted this information to the ad exchange, the publisher ad server controlled what information was sent to prospective advertisers and in what form.

[7] Information concerning the user’s location and browsing history can be gleaned through “cookies” set in place by the user’s web browser. These cookies allow the web browser to collect information about a user’s internet location and browsing history which can then be passed along, or sold, to interested parties.

[8] These advertiser networks are referred to as “networks” because they originally operated on a network model whereby the ad network would agree to buy a portion of a publisher’s advertising space in bulk at a pre-set price. The ad network would then distribute the publisher’s advertising space among a network of advertisers. The prices charged to those advertisers were not necessarily derived from the bulk price the network paid to acquire the space.