The Justice Department’s second monopoly case against Google got underway Monday in a Virginia court, with federal prosecutors taking aim this time at the internet giant’s lucrative business as the middleman for online ads.
By Eva Dou
and Prosecutors say Google has abused its monopoly power over the online ad market, dominating it to such an extent that a Google executive once ventured to ask in an internal email whether it presented a legal problem, saying, “The analogy would be if Goldman or Citibank owned the NYSE,” referring to the New York Stock Exchange.
The result, prosecutors said, is higher prices for advertisers, yet fewer dollars for publishers, which in turn has meant poorer offerings of news and other content for readers.
In her opening statement Monday, Justice Department attorney Julia Tarver Wood said Google has dominated the sector through acquisitions until it could manipulate the rules of ad auctions to its own benefit.
“Publishers were understandably furious,” Wood said. “The evidence will show that they could do nothing.”
Google has called the allegations “wrong on the facts,” declaring to Judge Leonie M. Brinkema of the U.S. District Court for the Eastern District of Virginia that “success is not illegal.” The company says that customers choose Google because its services are the best and that it faces a robust field of competition.
Google’s lead attorney, Karen Dunn, said in her opening statement that the company has pushed the sector forward through its investments in research and development and that it faces a wide field of competitors, ranging from big names such as Microsoft and Disney to smaller ones like Criteo and the Trade Desk.
“We are a big company among many others, intensely competing,” said Dunn, adding that the market for online ad sales has grown exponentially, from $8 billion in 2008 to $140 billion in 2022. Dunn, who is overseeing Democratic presidential candidate Kamala Harris’s preparation for Tuesday’s debate with Republican Donald Trump, left the Alexandria courtroom after delivering her opening statement in the morning.
If the Justice Department’s arguments prevail, the winners would be Google rivals Microsoft, Amazon, Meta and TikTok, Dunn said. “They are all ascendant while Google’s share is falling,” she said. (Amazon founder Jeff Bezos owns The Post.)
While Google is the target of the trial, the proceedings are also expected to shed some light on how businesses such as the New York Times and Wall Street Journal actually make their money these days, and how they depend on arcane marketplaces run by internet giants to do so. Wood said prosecutors intend to call executives from companies including USA Today, Journal parent company News Corp. and the Daily Mail to testify in the coming weeks.
The trial means Google is fighting the Justice Department on two fronts, with a potential breakup of its business at stake in both cases. The legal actions are seen as a weather vane, with a string of federal antitrust cases against other Big Tech companies in the pipeline.
The Justice Department and the 17 states that joined the lawsuit enter this trial with the wind in their sails, after Google lost two other antitrust legal battles in a year. A federal court in D.C. ruled last month that Google maintains an illegal monopoly over online search. In December, a jury in San Francisco declared Google’s app store an illegal monopoly in a separate case brought by Epic Games.
Before the online ad trial began Monday, the pretrial hearings already generated fireworks, with Brinkema castigating Google for deleting internal records that could have been relevant in the case.
“An awful lot of evidence has likely been destroyed,” Brinkema said in a hearing last month, calling it a “very serious” problem for Google’s credibility in the trial. Brinkema will rule on the dispute without a jury.
A number of media executives have sat for depositions. Among them is Ken Blom, executive vice president of strategy and operations at BuzzFeed, who told attorneys that his company’s online ad sales through Google’s exchange are three to four times those from the next largest vendor.
The Justice Department is asking Brinkema to order a divestment of Google’s Ad Manager suite of services, which is responsible for many of the rectangular ads that populate the tops and sides of webpages across the internet.
Prosecutors allege that Google has been able to manipulate the online ad market by buying out rivals until it was the go-to representative for both the buyers and sellers of ads, acting like a real estate agent representing both parties in a home sale. The company also owns a major exchange that sits between the buyers and sellers. The result, prosecutors say, is that Google keeps at least 30 cents of each advertising dollar crossing its service. Google has argued that customers prefer the convenience of a one-stop shop.
Fiona Scott Morton, former chief economist of the Justice Department’s antitrust division, said there are few close parallels of a single company dominating the buy side, sell side and the exchange of a market. The technical obscurity of this sector, she added, helped Google build out this footprint without officials and the public understanding what was happening.
“I don’t think if that happened in, say, cars or steel, that it would take very long for policymakers, enforcers, governments and consumers to say, ‘Wait, something’s wrong,’ ” she said.
According to eMarketer, Google has been consistently No. 1 in the U.S. digital ads space, commanding a 25.6 percent share of the $303 billion market, followed by Meta with 21.3 percent and Amazon with 13.9 percent. Prosecutors say Google’s market share is even higher in certain subsectors, with about 90 percent of online publishers using Google to source their websites’ display ads.
Google has boasted of helping a long list of news organizations and other companies boost advertising revenue. Its promotional materials say Google’s Ad Manager helped Time magazine increase user time spent on its website by 40 percent, and helped the Wall Street Journal target website ads to readers, resulting in a 37 percent improvement in advertisers renewing their campaigns in 2021.
Google said in 2018 that it drove “seven-figure additional revenue” for The Post over the previous year, through methods such as allowing buyers to bid for ad space on an exchange, and native advertising, which blends in ads that resemble news content. The Post declined to comment.
The internet giant also has said it once helped Politico land 25 new advertising clients. It quoted Jeff Daker, Politico’s executive director of audience solutions, as saying that the company would have otherwise left “millions of dollars on the table.”
A person familiar with Politico’s advertising operations said that Google’s upbeat report was from nearly five years ago and that Politico could adapt to any market changes.
Other Google Ad Manager customers have included the Guardian, Al Jazeera, the Canadian Broadcasting Corp., Best Buy, AccuWeather, Spotify and NASCAR.
Not all of them are satisfied customers. Gannett, the largest U.S. newspaper publisher and owner of USA Today, sued Google in 2023, blaming the tech firm’s hefty cut of Gannett’s ad revenue for contributing to the publisher having to shutter more than 170 publications since 2019.
“The result is less news where it is needed most,” Gannett’s complaint said. “Communities throughout the United States now do not have a suitable local paper to advise on local events.”
Tim Wolfe, Gannett senior vice president of revenue operations, was the Justice Department’s first witness Monday. He said an online ad bidding system is too complex for Gannett to build in-house. And for the publisher to change vendors now, he said, would be like “changing the tires on the racecar midrace.”
Wolfe acknowledged on cross-examination that Gannett also uses some smaller ad intermediaries alongside Google.
Andrew Casale, president of Index Exchange, Google’s much smaller rival in ad brokering, told the court his company once lowered its fee to zero, expecting a flood of orders to result. But the rise in sales was “nominal at best,” he said, reflecting what he saw as Google’s control over the market.
Arielle Garcia, director of intelligence for the industry watchdog Check My Ads, said she thinks many publishers large and small have been reluctant to criticize Google publicly, since their incomes depend on Google Ad Manager.
“You see the hesitancy of the publishers,” she said. “Google still holds the keys to their businesses.”
