Day Two: “It’s Impossible to Negotiate with Google"

The government is presenting its case, and brought up three witnesses describing what they argue inflexible and/or unethical practices by Google.

The second day of Google’s ad tech antitrust trial began with testimony from Stephanie Layser, a former advertising executive with multiple media organizations, with much of the questioning focused on her time at mass media and publishing company News Corp. from 2017-2022. (She’s now at Amazon.)

The point of Layser’s testimony was to help the Court to understand the realities that publishers face with Google, particularly its unwillingness to negotiate on nearly any contract terms, its lack of responsiveness to support and feature requests, and the paucity of data it was willing to provide to publishers.

After laying a broad foundation, the government turned to examining the realities publishers face in working with, or attempting not to work with Google with respect to advertising technology. Ms. Layser discussed a 2017 study News Corp. did to determine the feasibility of switching away from Google’s software for publishers, DFP (now called Google Ad Manager, or GAM).

After studying the issue for six months, the company concluded that the “revenue risk” was too high, meaning, as she would describe, the potential to lose money and having to lay off journalists and employees by trying to move away from Google, given its dominant supply of advertising, was simply too great. “It’s impossible to negotiate with Google,” she said.

In discussing paywalls used on News Corp. sites, Ms. Layser explained that a 60 variable algorithm was used to determine whether a potential visitor to one of the company’s sites would see a paywall, or instead be allowed to read an article, taking into account factors such as potential high ad value (i.e. that based upon a visitor’s demographics, ads could be shown to them for higher prices) as well as characteristics that correlate with a low propensity to subscribe.

Ms. Layser described how over time Google restricted the amount of this critical data it would provide that was needed to power such decision making. She told the Court that she could think of three publishers out of a hundred that were not using Google’s DFP, because Google simply controlled so much ad demand.

Significantly, Ms. Layser attested that DFP was not preferred because it was innovative, in fact she told the Court it is “slow and clunky” using “decades old technology” but simply had so much ad inventory, one could ill afford not to go with Google. After two years of begging Google for “log level data” from its platform that was needed for ad executives like Ms. Layser to run analyses and develop insights into the performance of their advertising efforts, Google finally agreed, only to then “break the keys” that were needed to actually use the data she had been requesting.

When providing redlines during contract negotiations, Google essentially operated with a take it or leave attitude.

Ms. Layser attested that Rubicon (now called Magnite), Index, PubMatic, and other ad exchanges are not viable alternatives to Google’s DFP. The government then asked if Facebook and TikTok (companies Google has consistently framed as its competitors) had ad exchanges News Corp. could switch to, and Ms. Layser said this was not possible, as they do not operate publisher ad servers. This came across as effective impeachment of Google’s framing of these firms as its competitors.

Later, Ms. Layser said that she felt Google was “holding us hostage” because her ad server “did not have the functionality I needed, and we couldn’t switch given Google’s ad demand.”

Strikingly, Ms. Layser said she was called “emotional and unproductive” for expressing her frustrations with Google.

Then began Google’s cross examination.

Ms. Layser was asked a series of questions aimed at highlighting ways in which Google competes with Amazon.

Google’s counsel cited 2017 remarks from Ms. Layser when she said she believed digital advertising would become a triopoly of Facebook, Google, and Amazon—as counsel continued to beat the drum of a framing in which Google faces stiff competition.

Ms. Layser was then asked if Amazon (her current employer) has customers building their own ad servers using Amazon technology, to which she replied yes, the question apparently aimed at cultivating the notion that it is possible for there to be new entrants to the market.

On cross examination Google’s counsel made much of the 2017 News Corp. analysis of switching from Google, which identified AppNexus as the only possible alternative.

To this point, things had been going quite well for the government.

Google however made significant use out of what lawyers will refer to as a “bad fact”—unfavorable information that while it does not doom one’s arguments, can complicate things.

The information in this case was that News Corp. was able to deprioritize Google, while also seeing its revenue go up. This is significant because it can be used to impeach the argument that publishers are wholly dependent on a dominant Google.

On redirect, the government underscored earlier testimony, that publishers felt trapped with Google. On a very brief re-cross, Google simply reiterated the aforementioned bad fact—that revenue could go up without Google.

The next witness called was Jay Friedman, CEO of the Goodway Group. Friedman testified that Google’s AdX was in fact the only ad exchange with which they could not negotiate take rates, underscoring Ms. Layser’s earlier testimony with respect to Google’s inflexibility.

The government next presented the read out of deposition testimony and a video containing testimony from multiple individuals, with Judge Brinkema’s clerk standing in to read the past testimony of the declarant.

First was the testimony of Eisar Lipkovitz, a Google engineer. While reading out transcripts of spoken testimony is incredibly wonky, it revealed deep insights as to how coders, engineers, and businesspeople (which Mr. Lipkovitz testified in the older days of Google could sometimes be the same person) thought about these issues.

Mr. Lipkovitz’s testimony turned explosive: “I was trying to do the right thing. The machine won. I lost. Google is a very strange organization.”

He went on to say he recommended a 7-10% reduction in Google’s take rate when header bidding forced competition with other agencies, to compete on price. Instead, Google ran a “dirty auction,” a decision “made by people I no longer want to work with,” Lipkovitz said.

It makes one wonder what other internal evidence Google may have been hiding in chat logs or otherwise where employees were having discussions on these very topics. Recall Judge Brinkema admonished Google over deleted evidence.

Keep in mind, the government is presenting its side of the case, so it’s going to look worse for Google. Eventually, Google will tell its side of the story.

And onward to Day Three…