Google emails show concern over ad dominance

ALEXANDRIA, Va. — Litigation in the U.S. government’s antitrust case against Google’s advertising business has provided a rare glimpse into the company’s internal concerns about its central role in buying and selling online advertising space.

The Alphabet unit is facing a lawsuit over its software used to place display ads, the ubiquitous digital billboards that appear in fixed boxes on millions of websites every day.

The Justice Department has spent nearly two weeks presenting evidence to support its claims that Google has complete control over this advertising technology and is abusing that position to charge anti-competitive rates to advertisers and publishers who sell ad space.

Government lawyers say the strongest evidence can be found in internal Google communications.

Among the witnesses so far is YouTube CEO Neal Mohan, who previously ran Google’s display ads division and who faced criticism for an email he wrote to coworkers in 2010, at a time when new ad tech companies were threatening Google’s bottom line.

“One way to make sure we don’t fall even further behind in the market is to pick the one that has the most popularity and park it somewhere else,” Mohan wrote.

In 2011, Google bought one such company, AdMeld, for $400 million. Google closed AdMeld two years later after incorporating some of the startup’s technology into its ad exchange, commonly known as AdX.

The Justice Department argued that AdMeld was part of a broader trend: Google acquiring new rivals to monopolize the market, then forcing customers to use its products by making access to one software tool contingent on paying for another.

Under friendly cross-examination by Google’s lawyer, Mohan denied that he suggested buying AdMeld to eliminate competition. The acquisition filled a gap in Google’s product offering, allowing it to deliver better results for customers, he said.

Instead of grabbing a bigger piece of the pie for itself, Google “made the pie bigger for every part of the industry,” he said.

In a 2016 email produced by the government, Google Chief Executive Jonathan Bellack asked colleagues: “Is there a deeper problem with us owning the platform, the exchange, and the massive network? The analogy would be if Goldman or Citibank owned the NYSE.”

Taking the witness stand, Bellack, who has since left the company, testified that he was not claiming Google had a conflict of interest but was expressing potential concerns of other market participants.

The Justice Department also cited a 2018 email from another then-executive, Chris LaSala, who raised internal concerns about the 20% cut Google takes from many of its AdX customers, saying Google was charging users “an unreasonably high rent.”

“I don’t think there’s 20% value in comparing two offers,” LaSala wrote. “AdX doesn’t provide additional liquidity to the market. It simply runs an auction.”

Another former Google executive, Eisar Lipkovitz, has testified that Google’s ubiquity in ad technology creates conflicts of interest. Lipkovitz was rebuffed when he tried to force Google to lower the amount it charged for AdX, he testified in pre-recorded testimony.

The Justice Department finished presenting its case Friday. Other witnesses included Google customers. One was Stephanie Layser, a former News Corp executive who said she felt she had no choice but to use Google’s technology because the search giant has so much market power that switching to another ad server would mean losing millions of dollars in ad revenue.

Layser now works at Amazon.com. News Corp, parent company of The Wall Street Journal, has been an outspoken critic of Google and was one of the companies contacted by antitrust investigators.

Google’s legal team in the civil case will spend the next week laying out its defense. The company says the government has painted a distorted picture of the advertising market. It makes no sense to focus on display ads, Google argues, when the industry is shifting to apps, social media and streaming services.

As Google attorney Karen Dunn said in her opening statement earlier this month, Google is not monopolizing the market; in fact, it is losing ground.

“There will be no witness in this case who can clearly tell you where this industry is going in the next five years,” Dunn told the court. “Not even in the next year.”

The case will be heard by U.S. District Judge Leonie Brinkema in Virginia. It could be several months before she issues a ruling.

If it rules against Google, it could order the company to sell part of its advertising technology business, which is worth more than $100 billion by some estimates.

Brinkema gave no indication of her views. But one question she asked the witness suggested she was considering how a Google breakup would affect the market.

During testimony from Jed Dederick, a principal at The Trade Desk, a Google ad tech competitor, Brinkema asked what would happen to the ad buying experience “if Google was broken up through this process” and the data was “scattered across 10, 15, 20, 30 small entities.”

Dederick responded that the resulting lack of scale would not be a problem for market participants.

“Publishers wouldn’t let their ads go unsold,” he said.

Write to Jan Wolfe at [email protected] and Miles Kruppa at [email protected]