Google allegedly used 'jedi mind trick' to shut out competition from header bidding

Google has been accused of playing a "jedi mind trick" on the ad industry to get publishers to cut off exchanges in header bidding, according to a newly unredacted court document. The unredacted court filing alleged that Facebook engaged in anti-competitive tactics to shutdown competition from header bidding since it was allowing advertisers to bypass Google's ad auctions. The unredacted 173-page long document was recently released by the Southern District of New York and was first filed by 10 states in late 2020. They had sued Google for reportedly running "an illegal digital-advertising monopoly" and bringing on board Facebook for "an alleged deal to rig ad auctions".

To win in the exchange race, the tech giant created a programme named Open Bidding, which allowed publishers to route their inventory to more than one exchange at a time. It then secretly devised the programme to shut down exchange programme and codenamed it Jedi, the unredacted filing revealed. According to the filing, Jedi's success was measured not by financial targets or output increases, but by how much it stopped publishers from using header bidding. 

At the same time, Google also partnered with Facebook for a programme named "Jedi Blue" to prevent the latter from getting involved with header bidding in return for Google giving Facebook information, speed and other advantages in the auction it runs in the US. Quoting Google, the lawsuit said the Jedi programme "generates suboptimal yields for publishers and serious risks of negative media coverage if exposed externally". 

Google employees discussed playing a trick - a 'jedi mind trick' - on the industry to nonetheless get publishers to cut off exchanges in header bidding. Google wanted to 'get publishers to come up with the idea to remove exchanges...on their own'.

Ad exchanges typically charge publishers a share of transaction value, which is currently 5% to 20% of the inventory's clearing price. Google's exchange, however, chargers publishers 19% to 22%, which the lawsuit said is "double to quadruple the prices" of some of its nearest exchange competitors.

"Having reached its monopoly position, Google now uses its immense market power to extract a very high tax of 22% to 42% of the ad dollars otherwise flowing to the countless online publishers and content producers such as online newspapers, cooking websites, and blogs who survive by selling advertisements on their websites and apps," the lawsuit said. 

Meanwhile, one senior Google employee likened the company's monopoly power to "if Goldman or Citibank owned the NYSE", the lawsuit stated. Aside from Jedi, Google also invented "other creative ways to shut out the competition" from exchanges in header bidding. One Google employee suggested a "nuclear option" of reducing Google's exchange fees to zero, while another pointed out that simply competing on price "does not kill header bidding".

Google's spokesperson told MARKETING-INTERACTIVE that just because Texas Attorney General Ken Paxton asserts something does not make it true. "This lawsuit is riddled with inaccuracies. In reality, our advertising technologies help websites and apps fund their content, and enable small businesses to reach customers around the world. There is vigorous competition in online advertising, which has reduced ad tech fees, and expanded options for publishers and advertisers. We will strongly defend ourselves from his baseless claims in court," the spokesperson said. The lawsuit is currently led by Paxton. Facebook declined to comment on MARKETING-INTERACTIVE's queries.

Facebook announced in March 2017 that it will support header bidding, and Google understood the threat Facebook could pose since the latter could use header bidding to operate an electronic marketplace for online ads in competition with Google's platform. In an internal memo titled "FAN deal discussion", the lawsuit quoted Google saying that "FAN requires special deal terms, but it is worth it to cement our value". Google's director, economic policy, Adam Cohen, said in a blog post in January this year that Facebook Audience Network's involvement in Google's open bidding programme is not a secret. 

"In fact, it was well-publicised and FAN is one of over 25 partners participating in Open Bidding. Our agreement with FAN simply enables the platform (and the advertisers it represents) to participate in Open Bidding," he added. Cohen also clarified other myths about its ad buying arrangement in a blog post, explaining that the company's adtech fees are lower than reported industry averages, with publishers keeping about 70% of the revenue when using its products. For certain types of advertising, Google explained that publishers keep up to 95% of the revenue. 

Google was also accused in August by two Massachusetts firms of inking "a cozy deal" with Facebook to offer it an edge over competitors in online ad buying. According to Bloomberg, the deal was to reportedly allow Google to "retain its dominance" in digital advertising.

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Photo courtesy: 123RF

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