Google expert at antitrust trial says government underestimates competition for online ad dollars

Alexandria, Va, — Federal regulators who say Google has an illegal monopoly on the technology that connects online advertisers to publishers are vastly underestimating the competition the tech giant faces, an expert hired by Google testified Thursday.

Mark Israel, an economist who authored an expert report on Google’s behalf, said the government’s claims that Google has a monopoly on ad technology are wrongly aimed at a narrow market that the government defines as “open web display advertising,” essentially the rectangular advertisements that appear at the top and right side of a web page when a consumer is browsing the Internet on a desktop computer.

But the government’s case doesn’t take into account a variety of competition that goes on outside these rectangular boxes, Israel said. In the real world, advertisers have dramatically shifted where they spend money to social media companies like Facebook and TikTok, and online retailers like Amazon.

If you include all online display advertising, and not just the narrow segment defined by the government, Google will get just 10% of the U.S. market share as of 2022, he said. That’s down from about 15% ten years ago.

In addition, advertisers have moved away from placing their ads on the screens of desktop and laptop computers where Google would control the market, with money migrating to ads placed on the screens of apps and mobile devices. Israel cites marketing data showing that display ad spending on desktop and laptop devices has fallen from 71% in 2013 to 17% in 2022.

The government’s case “seems to ignore where the competition is today,” Israel said.

His testimony comes as Google wraps up its defense in the third week of an antitrust trial that began earlier this month in Alexandria, Virginia. U.S. District Judge Leonie Brinkema has said she expects the government to file a brief rebuttal case on Friday. The trial will then pause, with both sides filing proposed findings of fact in November and returning to court in December for closing arguments. She said she expects to make a ruling by the end of this year.

The case of the government claims that Google has built and maintained an illegal monopoly This limits choices and increases costs for online publishers and advertisers. Control of the market has allowed Google to keep 36 cents on the dollar for every ad bought and sold through its ad tech stack, the government claims.

The government says Google controls ad technology at every step of the process, including the predominant technology used by publishers to sell their ad space, the predominant technology used by advertisers looking to buy ad space, and the ad exchanges in the middle. that carry out auctions within milliseconds to match advertiser to publisher.

The government’s case alleges that Google illegally connects these markets, forcing publishers to use Google’s technology if they want access to Google’s large inventory of advertisers.

The government, based on narrower market definitions than Israel’s, has claimed that Google controls 91% of the publisher ad server market and 87% of the ad network market.

Google says the government’s case also doesn’t take into account the billions the company has invested to ensure its products, working together, generate more value for publishers and advertisers by connecting the right advertisers to the right consumers .

Israel cited data showing that publishers who work with Google generate more revenue for each piece of ad space they make available, while advertisers pay less for each click their ads generate.

That only happens, Israel says, because Google’s technology continually improves the quality of its ads by matching advertisers with consumers based on their interests and purchasing history.

Israel also disputed government claims that Google gets 36 cents on the dollar for the ad sales it facilitates. He said data shows the rate has dropped to 31% or 32% in recent years. More importantly, he said, competitors have even higher withdrawal rates, with an industry average of 42 cents on the dollar.

The Virginia lawsuit is separate from another case brought by the government alleging Google’s ubiquity search engine constitutes an illegal monopoly. In that case, a judge in the District of Columbia ruled in favor of the government and declared the search engine a monopoly, but no decision has yet been made on possible solutions. The government will make suggestions for proposed solutions next month. That could include restricting Google from paying tech companies to make Google the default search engine for gadgets like mobile phones, or even forcing Google to sell off parts of its business.