US Justice Department says Google deemed ad startup AdMeld a threat and bought it

Google bought AdMeld for more than $400 million and, after integrating its technology with the company’s ad exchange, closed the product two years later | Photo: Bloomberg

4 minutes of reading Last update: Sep 17, 2024 | 9:15 AM IST

Authors: Leah Nylen and Davey Alba

Google bought ad technology provider AdMeld in 2011 because the search giant saw the startup as a “threat” to its online display advertising strategy, antitrust officials said during Monday’s trial.

The purchase of the company was presented by the Justice Department in its monopoly case against the Alphabet Inc. unit as an example of so-called killer acquisitions. The government alleges that Google bought up upstart rivals, starting with DoubleClick in 2008 and then AdMeld and Invite Media, to build a dominant position and stifle competition for its online advertising tools.

After buying DoubleClick, maker of the leading ad server on the web, Googlers considered whether to buy a company that makes “performance management tools” that help websites analyze data for advertising prices. The leading performance management companies at the time were AdMeld, PubMatic Inc., and Rubicon Project.

In an internal presentation presented in court on Monday, Google employees called the technology “non-essential” but said the tools make it harder for the search giant to include more online ads on its ad exchange platform.

Google acquired AdMeld for more than $400 million and, after integrating its technology with the company’s ad exchange, discontinued the product two years later.

The Justice Department and a group of states allege that Google has cornered the market on ad technology tools used by websites and advertisers to buy and sell online display ads. Law enforcement is trying to show that Google bought competing companies to strengthen its position in the online advertising market.

In October 2010, YouTube CEO Neal Mohan, then the leader of Google’s display advertising business, sent an email to a colleague saying the company had “overlooked the yield manager threat.”

Mohan, who joined the search giant after it bought DoubleClick in 2008, suggested in a message to colleagues that Google should buy one of its leading products, “taking the one that’s most popular and putting it somewhere.”

In court on Monday, Mohan denied suggesting Google buy AdMeld to eliminate competition.

“Absolutely not,” he said. AdMeld’s technology “was a gap in our portfolio.”

“Close that gap”

“We had to make up for this loss as soon as possible,” Mohan added.

In the same presentation on whether the company should acquire the performance manager, Google said buying AdMeld or PubMatic would close “product and service gaps” and is “an urgent need for publishers.” The acquisition would also provide “fair access to publisher resources.”

In his testimony, Mohan said AdMeld was a “complement” to Google’s ad exchange, AdX, a platform that connects advertisers with websites looking to sell ad space.

“Performance management did something similar to what AdX did, but different at the same time,” he said.

Mohan said he felt Google products were more advanced than performance management tools, comparing AdX to streaming video, while AdMeld and PubMatic were DVDs designed to “solve yesterday’s problems.” But many sites were “more cautious” in their decisions to switch to Google products, Mohan said, and were more comfortable adopting tools like AdMeld and Pubmatic, which he described as “small steps” away from the technology they were used to.

At the same time, Mohan admitted that Google’s acquisition of DoubleClick and ultimately AdMeld was intended to keep the tech giant from “falling behind” in terms of ad technology offerings.

“If we lose platform share, we can build the best ‘ad platform’ in the world, but we still run a significant risk of being squeezed out” by large competitors, Mohan wrote in a March 2009 email to colleagues, referring to companies like Yahoo Inc. and Microsoft Corp. that were working to build their own ad offerings. In the same email, he later added that Google needed “tight packages” in its ad offerings that it could offer both publishers and advertisers to remain competitive.

Google employees estimated AdMeld was worth between $182 million and $355 million. Mohan admitted that Google ultimately paid $100 million more than the search giant estimated AdMeld was worth.

First published: Sep 17, 2024 | 9:15 AM IST