Google's Quiet Dominance Over The 'Ad Tech' Industry
Opinion 2/26/2015 @ 6:00AM
Google's Quiet Dominance Over The 'Ad Tech' Industry
Guest post written by Allen Grunes
Mr. Grunes, a former attorney with the Department of
Justice’s Antitrust Division, is cofounder of the Data Competition Institute.
A few months ago, display advertising on the Internet
mysteriously vanished for more than an hour. On more than 55,000 websites such
as BuzzFeed and Forbes, spaces that usually display advertisements went blank.
It turned out that Google’s behemoth online advertising platform, DoubleClick,
was to blame. The DoubleClick ad server had crashed, disrupting the entire
infrastructure by which advertisers buy billions of dollars of ads across
millions of websites.
Think about it: In an era of global competition, one
company’s network crash broke the Internet.
The crash was a stark reminder of how an established
player like Google has quietly achieved dominance over the so-called “ad tech”
industry, the multi-billion dollar economic backbone that supports the vast
majority of “free” content and services online.
The exponential growth of the Internet over the past
decade is the direct result of advertising that enables Internet publishers to
monetize their content. Ad tech makes this possible by helping companies track,
serve and measure the effectiveness of ads online. Without a healthy,
competitive ad tech industry, much of the free online content we use every day
would go behind paywalls or disappear altogether.
Google’s efforts to dominate ad tech and squeeze out
competitors is bringing that potentially ominous future closer to reality.
Piece by piece, Google has assembled a dominant position
at each critical juncture in the complex ad tech infrastructure. Google imposes
restrictions on publishers and advertisers alike to force them into committing
exclusively to Google’s end-to-end ad tech pipeline, making it more difficult
for smaller companies to retain their footing or for new innovative companies
to enter. Industry observers warned the Federal Trade Commission about this
prospect several years ago, and the agency vowed to keep a close watch. But the
FTC has failed to rein in Google’s aggressive behavior, at least so far.
Internet advertising has exploded in recent years, driven
primarily by technologies that allow advertisers to target ads precisely and in
real-time to specific groups (e.g., 30-year old men in Massachusetts driving
Toyotas) regardless of what sites members of those groups are visiting.
It used to be that advertisers connected directly with online
“content publishers,” a catch-all phrase for any website that has space to sell
advertising. Those publishers would decide what ads to buy and what audiences
to reach, much like advertisers directly call a particular newspaper to place
an ad. Now, advertisers bid to have their ads served to particular users or in
response to specific keywords, with ad tech companies playing match-maker
between publishers and advertisers. Winning advertisers’ ads are then served on
content publishers’ websites, videos or apps, and advertisers review and
optimize their campaigns based on data received from their ad tech tools. All
of this takes place within a few milliseconds.
Broadly, there are six critical ad tech markets, each of
which is essential to the functioning of this type of real-time advertising: Ad
Networks, Ad Exchanges, Demand-Side Platforms (DSP), Supply-Side Platforms
(SSP), Ad Servers and Analytics Platforms. The details of each are a subject
for a longer, in-depth look at how the ad-tech market works, but suffice to say
that Google is now the largest and/or dominant player in each. Google is the
world’s leading analytic platform and controls some of the leading ad networks:
AdSense, Google Display Network and AdMob. Google’s DoubleClick is the largest
ad exchange in the market. To round it out, Google’s DoubleClick Bid Manager is
the largest DSP.
When the FTC closed its investigation of Google’s
acquisition of DoubleClick in 2007, it vowed to monitor Google’s behavior in
the affected ad tech markets, saying: “We want to be clear, however, that we
will closely watch these markets and, should Google engage in unlawful tying or
other anticompetitive conduct, the Commission intends to act quickly.” Since
then, widespread concerns have been raised about Google’s engagement in a range
of exclusionary conduct, including the very same tying that the FTC had said it
would move quickly to address.
Google now locks in publishers and advertisers at both
ends. It ties services that advertisers or publishers do not want to those that
they need, pressuring them to use Google-only services all the way up and down
the pipeline. For example, Google ties its dominant ad exchange to its
publisher ad-serving tools, and it pressures advertisers to use its DSP to buy
ads on its exchange.
Another example of Google’s brazen conduct is its new
“enhanced dynamic allocation” feature, which gives Google’s own exchange a
“first look” at the advertising opportunities spit out by its dominant
DoubleClick ad server. Google tells publishers that dynamic allocation is a
“risk-free way” to “maximize revenue” by comparing bids on the DoubleClick with
other exchanges. In truth, Google compares other exchanges’ average bids with
the highest bids on its own exchange. Through this sleight of hand, Google
steers publishers into its own exchanges, maximizing its profits at publisher
expense.
Google also blocks competitors by requiring exclusive
agreements and preventing cross-platform interoperability. Publishers are
barred from using third-party tools to manage their data or to maximize revenue
by comparing bids on different exchanges. The result is that publishers commit
their inventory exclusively to Google rather than incur the additional expense
of “multi-homing.”
The FTC vowed to police Google’s behavior in the booming
“ad tech” industry. They need to live up to their commitments and start taking
action.
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