Google Sought to Pay Agencies Hundreds of Millions to Sway Media Buys

Google planned to spend hundreds of millions of dollars incentivizing agencies to purchase certain types of its media, according to new documents filed last week in the Department of Justice’s upcoming antitrust trial against Google.

The documents reveal the inner workings of Google’s incentive programs with agencies and advertisers. The program gave agencies discounts, special perks like third-party research, and cash back for agreeing to buy certain media from Google.

Google publicly disclosed the program in a blog post, but the new documents detail the specifics of these programs—including what Google planned to pay out to agencies and how Google internally thinks of the initiative.

Arielle Garcia, director of intelligence at industry watchdog Check My Ads, who formerly worked at ad-buying giant UM, described the program as benefitting Google. Garcia has first-hand knowledge of Google’s program, she said.

“[Google] tends to recommend things that benefit themselves more so than advertisers,” Garcia said.

Incentive programs like those outlined in Google’s filing are common among media companies, said a media auditing source who requested anonymity to discuss sensitive industry relations. But they can be controversial, especially if they are employed by agencies that aren’t transparent with their clients about the deals. The risk comes from agencies recommending media because they were paid to do so, and not because it was in the client’s best interest.

The document is dated May 29, 2018 and is “sponsored” by Google exec Debbie Weinstein with contributions from Google execs Kate Alessi, Brian Gargan, Brett Koons and Rekha Natarajan. These programs have existed since at least 2016, per AdExchanger’s reporting. It is not clear in what capacity these programs exist today.

Wooing advertisers with incentives

The documents detail three types of incentives offered by Google.

The first is DVIP Upfronts, where agencies and advertisers make an upfront commitment to spend on Google display and video ads in exchange for receiving a discount on reservation-based spend, a kind of deal where buyers can buy certain media placements at a fixed rate. Buyers also get access to a pool of money called the discretionary incentive funds, which advertisers can use on creative production, third-party research, and reducing platform fees.

Google executives anticipated it would pay out around $100 million in discretionary incentive funds in 2018 to advertisers, according to the doc.

The second type of incentive is called Agency Capability Fund (ACF), where Google provides agencies cash back at the end of the year in exchange for meeting YouTube growth targets and training requirements year-over-year. Google said it expected to pay over $300 million in these payouts in 2018 to advertisers, which Google executives specifically called rebates. ACF makes up most of the “hard costs” across all three incentive programs, per the document.

The final type of incentive Google detailed in the filing is KPI Deals, where agencies get cash at the end of the year for mutually agreed upon display and video KPIs. Google expected to pay out $45 million for this deal type in 2018.

It is not clear from the document how many agencies and advertisers Google executives planned to pay via the incentive programs.

Google executives conducted an internal audit of both ACF and KPI deal types.

“Despite our initial hypothesis that we needed to accelerate a glide path toward ACF removal, what we’ve actually found is that volume-based rebates and KPI deals can still be effective in satisfying existing market needs,” the documents read. “Furthermore, we can successfully minimize any risk of collusion and competition with the right controls in place.”

One of the changes to the program outlined for 2019 was “ensuring ACF grids are discoverable upon requests from clients” to achieve “the right level of transparency.”

Raising red flags?

The incentive programs raise questions about how agencies manage their relationships with the world’s largest media company.

What makes Google completely different “to another publisher or media vendor that participates in upfront negotiations is that the universe that you can transact through Google’s platform is endless,” the media auditor source said.

For instance, to fulfill a minimum spend commitment under an incentive program with a TV company, there are a finite number of shows in which agencies can buy airtime. But with Google, much more inventory is on the table, making it more likely brands don’t know which exact Google media their agency is buying, the source continued.

A Google spokesperson said that brands can learn exactly which Google media their agencies spent on via impression reporting.

It’s not clear how the U.S. Department of Justice plans to use these documents in the upcoming trial, slated to start Sept. 9. But sources believe this shows how Google can influence how brands spend their media budgets.

“This is a perfect example of how they’re able to pull the strings to direct money wherever they want to,” Garcia said.

The documents show Google planning to use the incentive programs to move money toward Waze, preferred deals, and programmatic deals on AdX, Google’s publisher-centric ad exchange now called Google Ad Manager.

There is also a lengthy discussion of whether incentives should be used to encourage buying from Universal App Campaigns, a campaign type for app advertisers now called App Campaigns that was one of the company’s first forays into AI-driven buying that is now increasingly common across Google.

“At the core, we’d like to determine whether incentives are required for formats with [machine-learning] based, automated buying that optimize toward a specific return on investment, or if the performance of these formats alone should enable them to effectively ‘stand on their own’ and not require additional incentives,” the documents read.

Read the full document here: