The U.S. Department of Justice hammered Google over seek advert price manipulation and more in its ultimate statement on seek advertising and marketing.
Google manipulated ad auctions and inflated costs to growth revenue, harming advertisers, the Department of Justice argued ultimate week within the U.S. Vs. Google antitrust trial.
What follows is a precis and some slides from the DOJ’s ultimate deck, precise to search advertising and marketing, that returned up the DOJ’s argument.
Google’s monopoly power
This was defined by means of the DOJ as “the strength to manipulate prices or exclude opposition.” Also, monopolists don’t need to remember opponents’ ad expenses, which testimony and inner documents confirmed Google does no longer.
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To make the case, the DOJ confirmed prices from numerous Googlers discussing elevating advert prices to increase the organisation’s revenue.
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Dr. Adam Juda said Google attempted to give you “higher fees or more truthful charges, wherein those new charges are higher than the previous ones.”
Dr. Hal Varian indicated that Google had many levers it can use to exchange the ad public sale design to attain its favored final results.
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Juda and Jerry Dischler confirmed this. Dischler was quoted discussing the effect of increasing charges from 5% to 15% in two slides:
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Other slides from the deck the DOJ used to make its case:
Google Search ad CPCs more than doubled between 2013 and 2020.
Advertiser damage
Google has the strength to raise expenses whilst it desires to do so, in keeping with the DOJ. Google referred to as this “tuning” in internal files. The DOJ called it “manipulating.”
Format pricing, squashing and RGSP are 3 things harming advertisers, according to the DOJ:
Format pricing
“Advertisers in no way pay extra than their maximum bid,” in keeping with Google.
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Yes, but: What Google failed to mention is “Project Momiji,” which very quietly launched in 2017.
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What is Momiji: It artificially inflated the bid made by means of the runner-up.
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The end result: A 15% growth for the “winning” advertiser. More advert revenue for Google.
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Relevant slides: From the DOJ’s deck:
Squashing
How it labored: Google multiplied an advertiser’s lifetime price based on how a ways their anticipated click-through rate (pCTR) became from the highest pCTR. According to a 2017 record introducing a brand new product known as “Kumamon,” Google were doing this the usage of “a simple set of rules such as bid, three first-rate indicators, and some (primarily) hand tuned parameters.” (A screenshot of this report seemed to suggest Kumamon would upload greater device studying signals within the public sale.)
In other words: Google raised “the price in opposition to the best bidder.”
Google’s goal: To create a “more extensive charge boom.”
The end result: The Google ad auction winner paid extra than it need to have if squashing wasn’t a part of the ad auction.
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And: The DOJ indicated this all caused a “bad consumer revel in” as Google ranked advertisements “sub-optimally in change for greater revenue.”
Relevant slides: From the DOJ’s deck:
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RGSP
What is it: The Randomized Generalized Second-Price was brought in 2019. (Dig deeper. What is RGSP? Google’s Randomized Generalized Second-Price ad auctions explained)
How it labored: Google mentioned it as the ability to “improve fees (shift the curve upwards or make it steeper at the higher quit) in small increments over time (AKA ‘inflation’).” It did no longer result in higher great, in step with 2019 Google emails.
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How Google mentioned it: “A higher pricing knob than layout pricing.”
The result: It incentivized advertisers to bid higher. Google multiplied sales through 10%.
Relevant slides: From the DOJ’s deck:
Search Query Reports
The lack of query visibility also harms advertisers, according to the DOJ. Google makes it nearly not possible for search entrepreneurs to “pick out poor-matching queries” the usage of bad keywords.
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The DOJ’s presentation. You can view all 143 slides from the DOJ: Closing Deck: Search Advertising: U.S. And Plaintiff States v. Google LLC (PDF)