Former Google Execs’ Emails Revealed in Antitriust Case Undermine Company’s Public Narrative

At the end of the first week of US v. Google, the Department of Justice presented evidence that the company’s rationale behind controversial topics, like how much to collect in fees and how much publishers can charge to sell ads, was different from what it told the public.

The DOJ has been building its case that Google operates a monopoly with tools that buy and sell ads for advertisers and publishers. During two separate testimonies, DOJ lawyers presented email evidence that Google executives saw a different rationale for policies than how Google presents its ad business and these changes to the public.

The Sept. 13 testimony of Chris LaSala, a former Google executive who worked on the sales operation of Google’s publisher-facing adtech products, focused on take rates, how much Google collects from advertisers in exchange for using its tools. LaSala testified that he raised concerns internally that Google’s tech wasn’t worth the price it charged.

And a day earlier, Rahul Srinivasan, a former Google sell-side product manager, testified about Unified Pricing Rules, a controversial policy which let Google have greater control on the prices publishers could set for their inventory. Srinivasan’s testimony implies that Google made the change for their own benefit, without telling publishers this rationale.

Justifying high ad prices

During LaSala’s testimony, Department of Justice lawyers shared old emails LaSala wrote that questioned the 20% take rate of AdX. AdX is Google’s publisher-focused tool that allows publishers to sell their inventory to multiple advertisers.

The email evidence is important because the DOJ has maintained in its case that Google’s take rates are significantly higher than its competitors. The DOJ is also trying to show that Google’s take rates stayed stagnant for many years because they did not have to compete.

“I don’t think there is 20% of value in comparing two bids,” LaSala wrote in a 2018 note to colleagues. “AdX is not providing additional liquidity to the market. It is simply running the auction. The value of our platform is not in AdX. It is in other parts.”

LaSala’s email went on to specify that AdX’s value comes from the Google Ads ad network, formerly known as AdWords—Google’s advertising-product that allows small marketers to buy ads. This plays into a key part of the DOJ’s case that Google runs a monopoly in the adtech business. The DOJ alleges that Google used its market power as a top ad network to try to monopolize another market—the publisher-focused ad exchange.

While Google doesn’t often speak publicly about its take rates, it has sparingly offered discounts, LaSala testified.

The digital ad industry has long been concerned about the amount of ad budgets that get gobbled by adtech fees, instead of going to the publisher. Through LaSala’s emails, the DOJ’s case alleges that LaSala believed Google’s adtech was part of that problem.

“It is questionable that 20% for OA [open auction] is reasonable long term,” LaSala wrote in a 2019 email thread in response to a New York Times article on an ad industry transparency initiative. “[Publishers] accept it because it brings demand (Google Ads). If Google Ads bought everywhere else, I think we’d see pubs move to other SSPs for OA and we’d lose the 20%.”

During cross-examination, LaSala clarified that part of his point of view was not that AdX could not justify its price, but that AdX did not always articulate all of its value. He said this value included services like analytics, fraud protection and running clean and fair auctions.

Brian O’Kelley, who formerly ran AdX competitor AppNexus (which was later acquired by Microsoft), testified later that day in a video deposition that other competing SSPs charged around 10%-15% take rates, compared to Google’s 20%.

Unified Price Rules Spin

LaSala’s testimony and evidence followed the Sept. 12 testimony of Srinivasan, which also undermines Google’s public narrative. Srinivasan was instrumental in implementing Unified Pricing Rules, a controversial 2019 policy that required publishers to set the same price floor for all exchanges within Google’s ad server product.

Previously, publishers would often set the highest floor for Google’s exchange because Google had certain advantages in the auction, so publishers wanted AdX to have to work harder to win their inventory, according to the testimony of former News Corp exec Stephanie Layser and Google executives’ own emails presented during trial.

Executives knew Unified Pricing Rules would be unpopular with publishers, partly because the change would result in even more ad spend flowing through Google’s pipes, according to emails revealed in Srinivisan’s testimony.

“The concern about how we comms even more spend shift into AdX will be tricky,” Sam Temes, a Google executive, wrote to Srinivisan in January 2019, several months before Google publicly announced the change. Comms is a shorthand for communication or public relations strategy.

Google ended up presenting the Unified Pricing Rules policy in a blog post about a different topic: the shift to first-price auctions, where an advertiser with the highest bid wins the auction. The new Unified Pricing Rules policy is buried several paragraphs into that post and described as a way to “maintain a fair and transparent auction.”

This strategy was intentional, according to an email presented by the DOJ during Srinivasan’s testimony. Srinivasan wrote that Unified Pricing Rules and ensuring Google’s products can compete without being disadvantaged by publishers was the “primary internal objective for the entire launch,” while a first-price auction was a “secondary objective.”

“The reason we’re bundling these 2 launches together, is that moving to a first price auction provides us additional justification to remove some [of] these controls,” Srinivasan wrote.

In cross-examination, Srinivisan noted that switching to a first-price auction made it less necessary for publishers to set different floors for different buyers, and Google did not remove all ways for publishers to set different floor controls for different buyers.

Google lawyers cited internal data from several months after Unified Pricing Rules launched that the top 500 publishers actually saw a 2.7% increase in revenue as a result of the change.