Google’s high fees for publishers become the focus of antitrust battle

The ongoing antitrust case between the Justice Department and Google has revealed significant internal discussions at the tech giant regarding its long-standing practice of charging publishers a 20% fee for ad transactions. That fee, which has been a cornerstone of Google’s advertising business for years, is now being investigated by the Justice Department as a sign of the company’s alleged monopoly on online advertising.

The trial, which began last week, is set to determine whether Google used its dominant market position to unfairly charge higher fees, placing an unjustified burden on publishers. Testimony from former Google executives has underscored growing internal discomfort with the high rate even as the company continued to charge it.

Internal Concerns About Google’s Practices

The revelation that Google charges publishers 20% for ad transactions, a concern among its own executives, drew scrutiny. Emails presented at trial revealed that Google executives privately acknowledged that the 20% fee was “not sustainable in the long term.” In 2018, former Google advertising executive Jonathan Bellack admitted that the fee was well above market rates.

Despite this internal awareness, the fee persisted, largely because of Google’s control over its massive advertiser base. Google executives, including Chris LaSala, have pointed out that the company’s access to that demand through the AdX exchange made it difficult for publishers to avoid using the platform, giving Google leverage to keep rates high.

The Justice Department uses internal communications and Google testimony to argue that the company designed its advertising practices to maintain a monopoly. The Justice Department alleges that Google charged publishers high fees because of its dominant market position. This control left publishers with no choice but to comply.

Brian O’Kelley, founder of AppNexus, testified that Google’s 20% take rate was “dramatically higher than its competitors.” The Justice Department uses his testimony and internal Google emails to argue that Google intentionally tied publisher ad servers and ad exchanges. They argue that this helped the company maintain its dominant position in the market.

According to the DOJ, Google’s control of the market prevented true price competition. While other ad exchanges charged lower fees, the company’s ability to connect its tools to a large advertiser base made it difficult for publishers to seek alternatives. This alleged lack of competition, the DOJ said, is a clear sign of Google’s monopoly in the online advertising industry.

Google’s Defense Against the Practice of Charging Fees from Publishers

In response to the DOJ allegations, Google has maintained that its fees are transparent and in line with industry standards. The company argued that publishers keep most of the advertising revenue and Google only takes a small percentage for use of its tools.

A Google spokesperson defended the company’s practices, stating, “Publishers keep the vast majority of revenue when they use Google’s advertising technology, and our fees are transparent and in line with industry rates.” Google emphasizes that publishers keep about 70% of revenue even when they use its tools to buy and sell ads.

Despite Google’s defense, internal documents presented at the hearing show that company executives were aware of growing publisher dissatisfaction with the 20% fee. LaSala noted “continued calls for transparency from buyers and publishers” in a 2019 email, acknowledging that the fee may not be “reasonable in the long term.”

As the trial continues, the Justice Department is expected to present more evidence that Google overcharges publishers through its advertising practices. The government will argue that Google’s conduct was anticompetitive and harmed both publishers and consumers by inflating costs and stifling market competition.

Key Google executives will also testify at the trial, including YouTube CEO Neal Mohan, who was involved in Google’s advertising business during the period in question. The tech giant will have the opportunity to counter the DOJ’s claims and argue that its practices benefit the entire online advertising ecosystem.