Speaker 1: Also media.
Speaker 2: Hello and welcome to Better Offline. I'm your host edzit Charn. Yes,
Speaker 2: and today I'm joined by Jason Kent, the CEO of
Speaker 2: the Trade Association DC. And Jason, thank you for joining me.
Speaker 1: Pleased to be here, Thanks for having me.
Speaker 2: So Jason is joining us today and we'll be joining
Speaker 2: us more regularly to talk through the massive antitrust trial
Speaker 2: going on with Google, the second of them. Jason, why
Speaker 2: don't you set the scene of what's going on?
Speaker 1: Yeah? Sure, thanks Ed. Yeah, we just wrapped up getting
Speaker 1: the opinion on the first trial, which was the search trial,
Speaker 1: where Judge Meta decided an issued an opinion that Google
Speaker 1: has a monopoly in search and a monopoly and search
Speaker 1: text ads. So this is trial number two. It's going
Speaker 1: to be starting on Monday the ninth in the Eastern
Speaker 1: District of Virginia. And this one is focused on the
Speaker 1: ad tech part of Google's business and everything related to it.
Speaker 2: So how does that How is that different because a
Speaker 2: lot of people see them kind of as one homogeneous entity.
Speaker 1: Sure, yeah, I mean the advertising for people to understand,
Speaker 1: the advertising business for digital has now become almost entirely
Speaker 1: a live kind of auction marketplace. Where if you think
Speaker 1: of all these ad units across the web, they are
Speaker 1: being bought and sold in near real time to the
Speaker 1: highest bidder. And Google as a company has both the
Speaker 1: software and a lot of the data that powers the
Speaker 1: decision making. And so if you think about kind of
Speaker 1: on the buy side, a bunch of companies bidding on
Speaker 1: advertising units that they want to own to get in
Speaker 1: front of consumers, and on the other end, you've got
Speaker 1: the owners of those units, whether it be publishers or
Speaker 1: Google itself. Google is the largest player on both sides
Speaker 1: of those transactions, and they also run most of the
Speaker 1: auctions too.
Speaker 2: So what is happening in this trial?
Speaker 1: So the Department of Justice started investing in Google back
Speaker 1: in twenty eighteen, and they spent a few years doing it.
Speaker 1: The state attorneys General, led by Texas filed a lawsuit
Speaker 1: back at the end of twenty twenty saying that Google's
Speaker 1: ad tech business violating I trust laws, and since then,
Speaker 1: the Department of Justice filed its own lawsuit back in
Speaker 1: January of twenty twenty three, so just eighteen months ago.
Speaker 1: And they did it in Virginia, where it's kind of
Speaker 1: known as the nickname is the Rocket docket because it
Speaker 1: moves so fast, and so in less than eighteen months,
Speaker 1: this one's gone. It's gotten to the point where now
Speaker 1: we're about to have a trial starting on Monday, and
Speaker 1: they'll present their arguments to take about four weeks, and
Speaker 1: the look the judge there, the district judge, will determine
Speaker 1: an issue, our opinion on whether or not the various
Speaker 1: charges that are in the complaint she agrees with them,
Speaker 1: and and whether or not they'll be remedies for it.
Speaker 2: And what are the judges roughly speaking.
Speaker 1: The judge judge, what are the charges? Yes, that Google
Speaker 1: has a monopoly and I believe three different areas of
Speaker 1: the advertising supply chain. And so that's the software that
Speaker 1: publishers use, that's the software that runs the auctions, and
Speaker 1: that's the software on the buy side that's being used
Speaker 1: to bid on the on the ads. And in those
Speaker 1: areas that they've also abused that monopoly power.
Speaker 2: How have they been abusing it? Let's get into it,
Speaker 2: get into it. Well, you know, let's let's see how
Speaker 2: they're abusing I.
Speaker 1: Think, I mean, I think one thing that's helpful and
Speaker 1: and you know, fortunately and maybe unfortunately for Google, their
Speaker 1: own employees and some of the discovery for the lawsuits
Speaker 1: did a comparison to the stock market. When you think
Speaker 1: about this kind of live marketplace, anybody that's all flashboys
Speaker 1: and or read the book on high speed trading, this
Speaker 1: is is that plus maybe even more intense.
Speaker 2: And say a little bit about what that means for
Speaker 2: those who might know.
Speaker 1: Of sure, that means that if you think about these
Speaker 1: advertising units that sit there across the web, that there
Speaker 1: is incredibly high speed trading of those units that are
Speaker 1: happening in milliseconds, meaning that you know, in a blink
Speaker 1: of the eye, there are parties that are both bidding
Speaker 1: on and then delivering on ad units based on a
Speaker 1: whole range of targeting requirements and pricing, and then there's
Speaker 1: rules around those auctions. And so if you think about
Speaker 1: kind of the way a stock market works, which is
Speaker 1: also happens and in real time, people are buying and
Speaker 1: selling stock using machine, entirely using machines that have been
Speaker 1: programmed to handle the bidding and the marketplace. Google is
Speaker 1: doing that for the entire supply chain, both the buy
Speaker 1: side and the cell side. And so you know, the
Speaker 1: comparison that the Google employee made and also the Assistant
Speaker 1: Attorney General did when they announced the lawsuit was to
Speaker 1: the stock market as if Google, you know, was both buying,
Speaker 1: was leading and on a majority of the software, both
Speaker 1: for buying and for selling and for running the actual
Speaker 1: auctions themselves.
Speaker 2: And so what's happened so far? You've been so you're
Speaker 2: quite close that you're about twenty minutes in the courthouse Rougher.
Speaker 1: Maybe about twenty minutes. Like what else? There's been a
Speaker 1: number of pre what they call pre trial motions for
Speaker 1: a variety of things to kind of figure out the
Speaker 1: rules of the road for the trial when it starts Monday.
Speaker 1: Some of that's just logistics. Some of that's really important
Speaker 1: in terms of like what evidence will be allowed and
Speaker 1: not allowed, who will testify and not testify, et cetera.
Speaker 2: So what have you actually witnessed so far, like what
Speaker 2: you've been in a few of these pre trial motions?
Speaker 1: Even yeah, I mean, well that's one thing. I just
Speaker 1: start with the judge because this actually a little bit
Speaker 1: in the weeds here. But this lawsuit originally start out
Speaker 1: it was going to go before a jury of Americans
Speaker 1: to make the decision. So you think about the just
Speaker 1: Department having to explain this topic to the average American
Speaker 1: that that changed a few months ago based on a
Speaker 1: legal maneuver that Google did. And so now the judge
Speaker 1: is going to be actually the one that will issue
Speaker 1: the verdict and make the decision. And you know, my
Speaker 1: observation is she is incredibly experienced. She's been a judge
Speaker 1: for quite some time, and she's had some you know,
Speaker 1: very very significant cases over her career, you know, involving
Speaker 1: from al Qaeda terrorists on down to to you know,
Speaker 1: nine to eleven related cases. So she's not intimidated at
Speaker 1: all by anybody in the room, including Google for sure,
Speaker 1: and so in that regard, you know, I'm very optimimistic.
Speaker 1: She seems to only care about the law and justice,
Speaker 1: which is what you want to see from a judge.
Speaker 1: You know, Google, like with the Search trial, has the
Speaker 1: best and the brightest attorneys that are out there. You know,
Speaker 1: three or four firms working for them, and they've got
Speaker 1: half the room full of their people. This is really
Speaker 1: really important to them. The Just Department wants to break
Speaker 1: up I mean, the outcome they want is they want
Speaker 1: to break up Google, and so that's what this trial
Speaker 1: is all about.
Speaker 2: How do you think how do you see that chances?
Speaker 1: You know, if you asked me, and I'm sure I
Speaker 1: was on the record about this back a year ago,
Speaker 1: I would have said that the chances for this one
Speaker 1: were higher than the search the search lawsuit that they
Speaker 1: just won. And so I also felt pretty optimistic about
Speaker 1: the search lawsuits once they finished closing arguments, because I
Speaker 1: thought they did a really good job explaining their case.
Speaker 1: This one, I think it's even more obvious going in,
Speaker 1: I mean to put in real numbers around. I mean,
Speaker 1: they they the just Department's analysis and their experts analysis
Speaker 1: is that Google has over ninety percent of the software
Speaker 1: that publishers use to serve the ads, and then they've
Speaker 1: got over they've got ninety eight percent of the mobile queries.
Speaker 1: We learned that from the last decision. And so on
Speaker 1: the buy side, they've got you know, almost you know,
Speaker 1: ninety eight percent of the advertising demand that's coming through
Speaker 1: from search ads. So like on both sides of the market,
Speaker 1: they've you know, and then they get to write the rules.
Speaker 1: So it's a problem.
Speaker 2: And as far as the original allegations go, can you
Speaker 2: kind of break those down at all and explain what
Speaker 2: the what the specific things that you would consider the
Speaker 2: most important parts of this trial.
Speaker 1: Yeah, sure, you know that one that they took the
Speaker 1: market power that they had on the advertising demand side,
Speaker 1: and that they used that in order to create market
Speaker 1: power dominance, if you will, in other parts of the
Speaker 1: supply chain. And so one that I think is really
Speaker 1: important is that we now have a decision from the
Speaker 1: other court on that dominance on the demand side. And
Speaker 1: so you know, JUDGMENTA already did the work of saying,
Speaker 1: you know, he believes that Google. You know, they proved
Speaker 1: the case just part of the case that Google has
Speaker 1: a monopoly in search and in search text ads and
Speaker 1: that they abuse that. And so that decision is no
Speaker 1: longer just allegations as it relates to Google, and this
Speaker 1: case claims that they use that market power to to
Speaker 1: create dominance elsewhere. And so they walk in I think
Speaker 1: in a much better place based on the prior opinion
Speaker 1: that came out in August. You know, second thing I'll
Speaker 1: hit on is that they tied you know that to
Speaker 1: other parts of the business. So the exchange in the
Speaker 1: in the ad server business in order to so basically
Speaker 1: to force people to use the other products. So as
Speaker 1: an example, you know, the argument or the allegation is.
Speaker 3: That you weren't able to get access to any of
Speaker 3: that demand unless you use Google's addex product, right, And
Speaker 3: so you know, the evidence looks pretty clear on that,
Speaker 3: but they're gonna have to present that case, you know.
Speaker 1: I think a third area that hit on is that
Speaker 1: that the market itself is properly defined. That's always important
Speaker 1: for NIT trust trials in cases. And so this case
Speaker 1: is all about something called open web display advertising, and
Speaker 1: Google will try to to blur that line, but I
Speaker 1: think that's also what's is.
Speaker 2: Open web display advertizing?
Speaker 1: Well, I guess it's easier to explain the way it's not.
Speaker 1: And that's what that's what bothers Google is. You know,
Speaker 1: it's not closed platforms. So it's not advertising on TikTok
Speaker 1: or not advertising on Facebook. It's advertise that's available over
Speaker 1: the web browser in which companies can participate in auctions
Speaker 1: on the buy side or they can participate auctions on
Speaker 1: the cell side. And you know, and those are auctions
Speaker 1: that are happening for display advertising units on websites.
Speaker 2: So it's a good time to actually take a step
Speaker 2: back and ask how does Google make money from advertising?
Speaker 2: What are their advertising units? Because you've mentioned there's the
Speaker 2: bidding process. But where do we see Google advertising?
Speaker 1: Well, they, you know, a majority of the advertising, and
Speaker 1: it's become more and more over each year, is actually
Speaker 1: on Google's own properties, so entertained out that's where they
Speaker 1: make the most money because they don't have to share
Speaker 1: it with anybody else, right, And so so you've got
Speaker 1: the ads on Search, you've got the ads on Gmail,
Speaker 1: you've got the ads on YouTube. So it's on what
Speaker 1: they call their owned and operated properties. And then also
Speaker 1: Google serves ads across the rest of the web, and
Speaker 1: that's where they get a lot of scale and a
Speaker 1: lot of data. And then they take a percentage of
Speaker 1: the action on the byside, percentage of the action cell side,
Speaker 1: percentage of the action and the auctions, and that all
Speaker 1: adds up so that they're taking you know, allegedly thirty
Speaker 1: to thirty two percent of the revenue or just the
Speaker 1: technology that's being used in order to serve those ads.
Speaker 2: Does the suit suggest does it give any idea of
Speaker 2: what the balance so that you said that most of
Speaker 2: their advertising goes through their own properties, does it balance
Speaker 2: that out? It's all? Does it explain?
Speaker 1: Yeah, I think it's it's in there, and it's certainly
Speaker 1: in their sec filings. You know, I think you know,
Speaker 1: this gets to kind of one of the arguments I
Speaker 1: think you'll hear Google make, and that certainly their their
Speaker 1: proxies and kind of their advocates are making, is that
Speaker 1: the part of their revenue that serves on other people's
Speaker 1: properties on publisher sites is only about fifteen you know,
Speaker 1: it's say fifteen percent or so of the revenue, and
Speaker 1: it's declining the last couple of years, so it's not growing,
Speaker 1: it's flat to declining. It's not that material.
Speaker 2: That's the off property revenue.
Speaker 1: That's off property revenue.
Speaker 2: That's very bad for them.
Speaker 1: But the common sense piece, well, yeah, but that's where
Speaker 1: they also have the lower margin because they don't have
Speaker 1: they have to share it with people. The common sense
Speaker 1: piece is that, well, one, if that wasn't that important
Speaker 1: to them, then they'd be offloading it, right because why
Speaker 1: would you want to go get suited by the United
Speaker 1: States j JUSTAHS Department and potentially broken up if it's
Speaker 1: not that important to you. And then two that ignores
Speaker 1: that's just the revenue piece. But I think it's important
Speaker 1: to understand it that like and this will come out.
Speaker 1: I think in a lot of the documents that the
Speaker 1: data that they get from those auctions and from serving
Speaker 1: ads across the web and from tracking users across the web.
Speaker 1: I mean, there's this important moment in time that will
Speaker 1: come up in the trial. I believe we're in twenty sixteen.
Speaker 1: Google merged all of the ad tech data they have,
Speaker 1: with all the search data they have, with all the
Speaker 1: location data they have, with all the Android data, and
Speaker 1: all the Chrome browsing data into one single profile, which
Speaker 1: they promised they wouldn't do, and they went ahead and
Speaker 1: did it. And if you think about the value of
Speaker 1: that data that underpins it, that's really important.
Speaker 2: So when you say unites those profiles, is they have
Speaker 2: a profile on you and me? Is it? Do we
Speaker 2: just not know?
Speaker 1: I mean we expect that they know whether it's a
Speaker 1: synonymous indicator or a placeholder for that user, But they
Speaker 1: know enough that it's this device which is attached to
Speaker 1: a person, and I know all this other information about it.
Speaker 2: Yeah, this person may resemble that because I see in
Speaker 2: twenty sixteen they dumped a ban on PII personally identify
Speaker 2: them information. But is this separate to that? Is it
Speaker 2: the combination of everything else.
Speaker 1: That I mean, that's what the reporting was in twenty sixteen,
Speaker 1: and that's what the evidence that's starting to bubble up was.
Speaker 1: Was this they call it Project Narnia is what we
Speaker 1: just learned it. But that they merged, they dropped their
Speaker 1: ban on PII being merged with search. Juliet Anglin from
Speaker 1: public and I think did the report and and so
Speaker 1: that you know, that was removing the guardrails basically, and
Speaker 1: at least in my mind, and I think that will
Speaker 1: be a part of the evidence.
Speaker 2: So within this, is there anything particularly surprising within the
Speaker 2: first few Well, actually, let me take that back. I'm
Speaker 2: sure there's surprising stuff, But what happens now? So we're
Speaker 2: pushing this episode out on September ninth, the day of
Speaker 2: the first trial. So what happens then and what happens
Speaker 2: after that?
Speaker 1: Yeah, So the first couple of weeks, the just Department
Speaker 1: will present what they call their case in chief. It's there,
Speaker 1: you know, their evidence. So they're going to have a
Speaker 1: slew of witnesses that have already been identified, both Google employees,
Speaker 1: ex Google employees, you know, CEOs and top founders of
Speaker 1: a lot of the competitive at tech companies, experts, et
Speaker 1: cetera that you know probably have already been deposed and
Speaker 1: will will now answer questions on the witness stand, and
Speaker 1: they'll have a ton of exhibits that you know, we've
Speaker 1: probably seen less than five percent of them, i'd say
Speaker 1: at this point to prove their case, and Google have
Speaker 1: a chance to ask questions too throughout, and then they'll
Speaker 1: present their defense. I expect you'll take about four weeks total.
Speaker 1: I think important things for people to know going into
Speaker 1: the trial. You know I already covered that. I think
Speaker 1: the judges is perfect for a case like this, so
Speaker 1: that's very optimistic at this point. Also, I would say
Speaker 1: it's very important to know that there was an important,
Speaker 1: important hearing last week in which it's happened with multiple
Speaker 1: lawsuits against Google, where Google guid in trouble for not
Speaker 1: preserving documents. I was going to say, yeah, yeah, and
Speaker 1: so Google at a point a number of years ago
Speaker 1: issued a memo from their chief league officer and change
Speaker 1: their systems so that any chat messages would by default
Speaker 1: delete after twenty four hours, is the way it's been alleged,
Speaker 1: and unless the employee actually proactively turned on their history
Speaker 1: and turned off that purging because they run her a
Speaker 1: litigation hole. Then the evidence was lost, and so the judge,
Speaker 1: the judge very much expressed her concern about this had
Speaker 1: happened and that probably a lot of evidence had been
Speaker 1: deleted and that throughout the trials she's going to have
Speaker 1: to take that into account whenever Google sends somebody up
Speaker 1: to this with a stand that she's going to have
Speaker 1: to have her own informtays and whether or not this
Speaker 1: is a reliable testimony and whether or not there's you know,
Speaker 1: information and exhibits that were not available to her because
Speaker 1: of this policy. That's like really bad for Google going
Speaker 1: into a trial, you know, like there already well, I
Speaker 1: think that you know, ultimately she could decide to infer
Speaker 1: that what they call a verse inferences, She could basically
Speaker 1: decide that that there has been evidence that's been purged
Speaker 1: in her mind, and therefore therefore Google was trying to
Speaker 1: hide stuff that would have been incriminating to them or
Speaker 1: prove the case of this department.
Speaker 2: So doesn't that weaken the case potentially on like appeal
Speaker 2: if she does that a lot, or would it be
Speaker 2: very carefully used?
Speaker 1: It would probably be carefully used. I think, you know,
Speaker 1: anderstanding off. Judge Meta had the same concern and decision
Speaker 1: you know, coming out of the search opinion, but he
Speaker 1: said that he didn't need it, you know, he didn't
Speaker 1: actually need to rely on it, that he was going
Speaker 1: to find against Google, that it would monopoly and abused
Speaker 1: its power without it, So he didn't need to have
Speaker 1: that intent. She says, the intent is really important a
Speaker 1: case like this, So we'll see how she how heavily
Speaker 1: she weighs on it.
Speaker 2: At the end of the day. So on the ninth,
Speaker 2: they are going the Homement of Justice will make their
Speaker 2: first will begin making that case.
Speaker 1: They will, they will. Yep.
Speaker 2: So has anything interesting come out yet as far as
Speaker 2: the initial motion and have we seen any e any
Speaker 2: of the exhibits provided in ad once.
Speaker 1: Sure, Yeah, we've seen, I mean even their initial the
Speaker 1: original complaint. We've seen and through reporting we've seen some
Speaker 1: of the the evidence in details on a lot of
Speaker 1: projects that Google had. This one's a lot of there's
Speaker 1: a lot of code name projects which will make it
Speaker 1: hard to keep up to, but keep up with. But
Speaker 1: there's things like you know, Perot and Bernanki and all
Speaker 1: these like fancy names Belle and they each have a
Speaker 1: little clever story behind them. Jedi Jedi Blue.
Speaker 4: And behind those fancy names are typically experiments, they would
Speaker 4: call it. Where Google is testing making changes to its
Speaker 4: auctions in order to drive some sort of outcome, whether
Speaker 4: it be more revenue for Google, whether it be more
Speaker 4: market power or more business for Google, you know, driving
Speaker 4: more revenue to the publishers or the advertisers. Like it's
Speaker 4: them playing with the auctions.
Speaker 1: And so we've seen some of the details of those.
Speaker 1: I think what we're going to see now is some
Speaker 1: of the intent behind them and some of the communications
Speaker 1: internally about them.
Speaker 2: I'd be interested. So Jedi Blue, that was the collusion
Speaker 2: with Facebook.
Speaker 1: Right, that was the alleged collusion with Facebook. It's very
Speaker 1: much still around.
Speaker 2: Well I thought that that got kind of dismissed in Europe.
Speaker 1: Yeah, so Google has made that communication argument through some
Speaker 1: of their proxies. It actually was dismissed in the the state.
Speaker 1: AGS had their own case I mentioned was filed at
Speaker 1: the end of twenty twenty in the Eastern District, Texas,
Speaker 1: which was then moved to New York Southern just New York,
Speaker 1: and while it was there that was dismissed from the case.
Speaker 1: I won't go into why or when that was accurate,
Speaker 1: but it was that specific charge which had potential criminal
Speaker 1: criminal implications for them was dismissed. That the complaint then
Speaker 1: and the lawsuit then moved back to Texas for a
Speaker 1: different reason, and that discovery was reopened up about four
Speaker 1: months ago, i'd say, on Facebook. And it also led
Speaker 1: to a deposition of Sudar Pakai, the CEO of Google,
Speaker 1: because he has unique knowledge about that deal.
Speaker 2: It also led and what was the deal.
Speaker 1: The deal as alleged was that Google Jedi. Project Jedi was,
Speaker 1: as we understand, it was Google's attempt to match or
Speaker 1: have their version of what's called header bitting, which was
Speaker 1: this coding layer at the top of a web page
Speaker 1: that opened up auctions so that other parties could compete
Speaker 1: and participate in auctions, live auctions. And it was a
Speaker 1: threat to Google's business because it meant that a publisher
Speaker 1: could could participate put on their header of their web
Speaker 1: page this code which would allow them to open up
Speaker 1: their auctions to outside parties, so it didn't have to
Speaker 1: go through Google Jedi Blue. So if you think about
Speaker 1: that as a threat to Google, Jedi Blue was a
Speaker 1: way to keep to do a deal with Facebook, as alleged,
Speaker 1: so that Facebook would not support header bitting, that Facebook
Speaker 1: would instead not participate in header evading, which would be
Speaker 1: bad for header bitting, and would instead, you know, exchange
Speaker 1: value with Google. And that value, as I understood it
Speaker 1: from the complaints was and the reporting was that Facebook
Speaker 1: would get additional matching of users and the auctions that
Speaker 1: Google ran, and they would get speed preferences in the auction.
Speaker 1: So if you think about the timing of bids.
Speaker 2: But auctions within Google's ad.
Speaker 1: Product, within Google system. Yeah, so that is.
Speaker 2: An obvious that's an obvious use of monopoly power that
Speaker 2: one feels. How has that being I'm shocked that that
Speaker 2: hasn't caused more problems for them.
Speaker 1: Well, and where it got the Smiths it was it
Speaker 1: was narrowly read by the judge as normal. You know,
Speaker 1: these are two companies that are competing with each other
Speaker 1: still at the end of the day, and and they
Speaker 1: were both getting a value exchange that that made sense
Speaker 1: for them, and Facebook was acting the best interest of
Speaker 1: its business. You know, it was a questionable ruling, but
Speaker 1: what's important to understand is that still it is part
Speaker 1: of the conduct for the just Department case starting next week.
Speaker 1: It's a part of the conduct for the State a
Speaker 1: g case and Sinndarbakai has now been deposed about it
Speaker 1: in the last two months, and the attorneys all flew
Speaker 1: over the night Kingdom to depose Facebook's project manager on it,
Speaker 1: who also believed Mark Zuckerberg ahead of his met with Sundarbakai.
Speaker 1: And so you know, it's very much in the in
Speaker 1: the documents. When you dig in, there's stuff moving very
Speaker 1: quickly that Facebook was trying to fight and we was
Speaker 1: trying to fight, and that project manager from Facebook is
Speaker 1: is on the witness list for the Justice Department in the.
Speaker 2: Next few baby. I could not wait for that. As
Speaker 2: discussed listeners, Jyson is going to be back quite a
Speaker 2: few times in the next few weeks to discuss the stuff.
Speaker 2: I'm quite excited by this. So, what are some other
Speaker 2: any other like notable projects on there, notable like Perroh
Speaker 2: and such that you mentioned.
Speaker 1: Yeah, you know, there's there's there's a project in which
Speaker 1: the you know, I don't know how much you went
Speaker 1: get into like the way auctions work, but typically okay,
Speaker 1: so a lot of these auctions and and certainly Google's
Speaker 1: auctions for their search ads from the very beginning, I've
Speaker 1: always been second price auctions. So so the company that
Speaker 1: the bidder that bids the highest doesn't actually pay their bid.
Speaker 1: They pay the second highest bid plus a penny. Chymically
Speaker 1: how it happens, right, And so there's all sorts of
Speaker 1: rationale behind that. And so there's a project in which
Speaker 1: the actual price that was paid was basically the third
Speaker 1: the third highest, and then the dollar amounts. So they
Speaker 1: paid the second highest, I'm sorry, and then they delivered
Speaker 1: the third highest, and so they kept the margin in
Speaker 1: between and then reinvested it back into boosting other auctions
Speaker 1: basically bids. It was called Bernanke I think that was
Speaker 1: the plane Bernanky, and then there was another flavor of that,
Speaker 1: but it basically was like, you know, re routing some
Speaker 1: of the margin between the second and third highest back
Speaker 1: into the system to increase other bids.
Speaker 2: That makes sense, so but sorry if I misunderstand. How
Speaker 2: did that benefit Google upon Mike.
Speaker 1: Well, it it allowed them. The allegations are that by
Speaker 1: then rerouting that money back in and boosting other bids,
Speaker 1: it allowed Google's system to win more auctions. So it
Speaker 1: was the same money flowing, but it allowed them to
Speaker 1: win more auctions which help them take market share.
Speaker 2: That's it's crazy. It's crazy that it seems not just
Speaker 2: it seems like an outright cone in so many places.
Speaker 1: I mean, you know, Google will try to argue for
Speaker 1: each of these some sort of benefit to the advertisers
Speaker 1: or to the publishers on one side or the other.
Speaker 1: But I think ultimately what we'll see and I think
Speaker 1: will be most damage into Google will there's there's likely
Speaker 1: to be evidence that will show both of those considerations,
Speaker 1: going into some math to say how does this help Google?
Speaker 1: You know, And so you know, if you're if you're
Speaker 1: able to see both sides of the transaction, you have
Speaker 1: a clear conflict of interest and you're able to to
Speaker 1: you know, manipulate the both sides of the business rather
Speaker 1: than acting the best interests of both sides of the
Speaker 1: business individually in a way to benefit yourself.
Speaker 2: So do we know yet who's going to get the
Speaker 2: post or a cross examined.
Speaker 1: Yeah, we have, we have a witness list for sure.
Speaker 2: Yeah, who you're looking forward to.
Speaker 1: You know, there's a couple ex Googlers that actually tried
Speaker 1: to get their testimonies uh quashed. But that didn't happen today,
Speaker 1: I mean so last week, I guess now so. But
Speaker 1: there's a few ex employees.
Speaker 5: That know a lot about the advents that have been
Speaker 5: around a long time. I think it's like Lesala, There's
Speaker 5: a guy named Chris Scott Spencer. They just know a lot.
Speaker 5: And uh, you know Neil Mohan who ran the double
Speaker 5: click business that was then bought by Google and ran
Speaker 5: the ad business for a long time. I think will
Speaker 5: be super interesting.
Speaker 1: I think the Facebook witness that I mentioned just to
Speaker 1: get an answer whether or not Jedi Blue was a
Speaker 1: problem or not once in for all, I think will
Speaker 1: be interesting. So there's a long list. There's you know,
Speaker 1: there's key players from the ad tech business that have
Speaker 1: competed against Google over the years or tried to the
Speaker 1: guy that ran app Nexus, the guy that runs index Exchange.
Speaker 1: These are like, you know, people that are very, very
Speaker 1: knowledgeable in the entire history of the att tech business
Speaker 1: that will be on the standard.
Speaker 2: So there's a dumb question, how big a deal is this?
Speaker 2: How as far as his history of the tech industry goes,
Speaker 2: how big is this?
Speaker 1: Well, I mean the Google antitrust suits themselves actually use
Speaker 1: the description of the Assistant Attorney General cant Or. He
Speaker 1: He described it as on the mount rushmore of anti
Speaker 1: trust cases. You know, I think with Standard Oil, AT
Speaker 1: and T and Microsoft was was Google. You know, this
Speaker 1: is their advertising business, and you know, the actual advertising
Speaker 1: revenue business is two hundred and fifty billion dollars quarter
Speaker 1: of a trillion dollars. They'll argue this is just their
Speaker 1: ad tech part of the business, so they'll say it's
Speaker 1: thirty or forty billion. You know, as I mentioned, I
Speaker 1: think the data fuels and I think this enables the
Speaker 1: rest of their business in any way. So this is
Speaker 1: a really big deal. And this is you know, this
Speaker 1: is what funds journalism, entertainment across the internet.
Speaker 2: Good that not in turn, I'm not I'm not I
Speaker 2: think Google should get broken up. But is there a
Speaker 2: world where this is better for journalism if.
Speaker 1: They get broken up? I think absolutely. Yeah. I think
Speaker 1: there's short term concerns in any breakup outcome, because it's
Speaker 1: going to be a headache and you know, the benefits
Speaker 1: are going to take some time to start to play out.
Speaker 1: But if you just if you just use the man sense,
Speaker 1: do you think about the stock market or any sort
Speaker 1: of marketplace having a company that's on the buy side
Speaker 1: and the cell side and developing the rules. Ultimately, they're
Speaker 1: going to take more and more money out of the
Speaker 1: supply chain, right and so so. A world in which
Speaker 1: the company on the buy side or the company on
Speaker 1: the sell side have to act in the best interest
Speaker 1: of the advertiser, whether it be the small, small mom
Speaker 1: and pop store buying advertising, or the publisher on the
Speaker 1: other end, being the local newspaper or national player or whatever,
Speaker 1: you know, having to act in their best interests is
Speaker 1: a really really important, you know, and common sense sort
Speaker 1: of marketplace rule where you actually have competition that are
Speaker 1: serving the best interests of the parties.
Speaker 2: Do you think that this could kill Google? Because I
Speaker 2: have this ongoing theory about this company that they can't
Speaker 2: survive without their monopolies. I just don't. I don't know anything. Yeah,
Speaker 2: in the sense that they make more than half of
Speaker 2: their revenue from a from search, which they have a
Speaker 2: monopoly on, connect to ads, which they have a monopoly
Speaker 2: on where they hold all the data and completely rig
Speaker 2: the dice for themselves. I don't see how Google survives
Speaker 2: this in its current form. I don't even mean just
Speaker 2: breaking them up. I just mean, if they are no
Speaker 2: longer allowed to rig dice quite how they've been rigging them?
Speaker 1: Yeah to a quite. I mean, you know, in a
Speaker 1: breakup scenario, then I think your answer is right that
Speaker 1: they don't survive it. And you know, and maybe it's
Speaker 1: best for shareholders anyway, if you if you study you know,
Speaker 1: AT and T and other standard oil et cetera, you
Speaker 1: know it could release more value anyway, if there's if
Speaker 1: YouTube separated or any of the ad tech businesses separated,
Speaker 1: how reliant are they? I mean that takes me back
Speaker 1: a little bit aded to the search trial. I mean,
Speaker 1: my my biggest obs arevation out of the search trial,
Speaker 1: and I spent a lot of time studying it and
Speaker 1: being in the courtroom that I think hasn't been totally
Speaker 1: appreciated yet. Is that how important Google's scale in terms
Speaker 1: of search queries is. And so they have ninety eight
Speaker 1: percent of the mobile search queries eight percent, and.
Speaker 2: That ability search market the.
Speaker 1: Queries themselves being asked into search prompts on mobile.
Speaker 2: And so just to be clear, you mean across every
Speaker 2: single search engine?
Speaker 1: Oh yeah, sorry, yes, across general search engines.
Speaker 2: Is the way it was defined that is completely insane
Speaker 2: and so I and.
Speaker 1: You think about the scale of that, and importantly for
Speaker 1: what they call tail queries. So a tail query for
Speaker 1: the listeners, if they're not aware, is a query that's
Speaker 1: never been asked before, right.
Speaker 2: And that makes up like what certain amount, like this
Speaker 2: surprisingly large amount of.
Speaker 1: Fifteen percent is what you know, what we learn in
Speaker 1: a the UK's investigation of Google was that fifteen percent
Speaker 1: of the queries any given day are tail queries. And
Speaker 1: you know, those are the things I've never been asked
Speaker 1: before in a search prompt. And so Judge Meta used
Speaker 1: several times during the trial and the fall, used the
Speaker 1: example of Taylor Swift and Travis Kelsey like that there
Speaker 1: was a moment in time where nobody had ever put
Speaker 1: those two names together in a prompt before, right, And
Speaker 1: I don't know how quick it was after they started dating,
Speaker 1: but it was a new query and unless you actually
Speaker 1: had some context for it, you didn't know what it meant.
Speaker 1: And so if you take that to the fifteen percent
Speaker 1: of the billions of queries they're happying, you know, maybe
Speaker 1: given a week on Google, their ability to understand those
Speaker 1: queries and because of their scale and to decide what
Speaker 1: to do with them in terms of driving clicks where
Speaker 1: they go to satisfy the users and to target advertising
Speaker 1: is extraordinary, very relative to anyone else, including nineteen times
Speaker 1: on mobile, nineteen times more than the rest of the
Speaker 1: market combined. And the rest of the market includes Microsoft right,
Speaker 1: a three trillion dollar company.
Speaker 2: So so they just have this massive dates or advantage
Speaker 2: that no one else could possibly have.
Speaker 1: Right, And it's in particularly valuable in terms of recency
Speaker 1: of data and queries like the new stuff.
Speaker 2: That being a yeah, so you can anticipate what adds
Speaker 2: people might be.
Speaker 1: Right or just where they want to go on the
Speaker 1: internet when that search happens.
Speaker 2: But how can they use that dates to help themselves?
Speaker 1: Well, one, it locks them in because there's nothing more
Speaker 1: frustrating than searching for something that's a new, fresh search.
Speaker 1: You know, it's typically really interesting, it's typically related to news, right,
Speaker 1: it's things that are happening in society in a given
Speaker 1: day that probably journalists are actually the ones doing all
Speaker 1: the work and carrying the cost and burden of And
Speaker 1: then you know, if the search engine know the answer,
Speaker 1: or if it gives you back results that aren't very good,
Speaker 1: you get frustrated, right, So you end up back on
Speaker 1: Google because they're better at it and they just lock
Speaker 1: that in. And so you know that ninety eight percent
Speaker 1: if you take that and apply it to the future,
Speaker 1: and it's particularly AI world where everybody talks about in
Speaker 1: the AI world how valuable capital is, right, so, and
Speaker 1: how valuable compute is Amazon Meta. You know, these companies
Speaker 1: have enormous compute, Microsoft, Google and enormous capital. But what
Speaker 1: they don't have is what Google has, which is that
Speaker 1: that query scale. And so Google's ability, when it wants
Speaker 1: to to entrench itself even further is pretty significant in
Speaker 1: terms of training large language models and and you know,
Speaker 1: being able to respond appropriately to a prompt in the
Speaker 1: AI world. And so they could ultimately and I think,
Speaker 1: you know, based on what I was seeing, they could
Speaker 1: squash even Microsoft and open AI when they want to, right,
Speaker 1: and so.
Speaker 2: So do you think that they'll do? Do you think
Speaker 2: that this could have wider ramifications than just Google.
Speaker 1: I think it could.
Speaker 4: Yeah.
Speaker 1: I mean I think if you're watching this in your
Speaker 1: Microsoft or your Apple, for sure you're thinking really hard
Speaker 1: about how this could unlock opportunity for you. So I
Speaker 1: think this is a big one.
Speaker 2: So what are you excited about What is the part
Speaker 2: of the trial as we go into this, what are
Speaker 2: you really looking forward to as a sports fan.
Speaker 1: As a sports fan, you know, I think the great
Speaker 1: challenge and I think the just Department did a phenomenal
Speaker 1: job of this and the Search trial is being able
Speaker 1: to tell the story and explain it to the judge
Speaker 1: in the room right into the public, explain their case.
Speaker 1: And I think, you know, they did that in the
Speaker 1: complaint very very well. I think people should know as
Speaker 1: much as as much as there's this reputation that goes
Speaker 1: back a long time that people in DC, whether it
Speaker 1: be lawmakers or regulators, don't really understand technology. I would
Speaker 1: just really strongly suggests that they're wrong on this one.
Speaker 1: And the attorneys that are involved, and they were involved
Speaker 1: in the Search trial and now involved in this ad
Speaker 1: tech trial, they really have done their homework. These are
Speaker 1: you know, these are really really strong, you know, strong
Speaker 1: and competently tech, you know, technical folks that can dive
Speaker 1: in and understand how things work. And they've they've done
Speaker 1: their homework over the years. The questions that they were
Speaker 1: asking back in twenty eighteen were already pretty impressive. I mean,
Speaker 1: they are the questions that that the top ad tech
Speaker 1: company people wouldn't be asking, you know, the people into
Speaker 1: the industry would be asking. And then they've been you know,
Speaker 1: studying that for now almost five you know, five years
Speaker 1: before they filed their lawsuit, and so I'm really interested
Speaker 1: in how they present their case and tell the story
Speaker 1: for sure. You know, one thing that also will be
Speaker 1: interesting is the chill I guess I described as the
Speaker 1: chill over the room.
Speaker 4: You know.
Speaker 1: I I don't think it's a secret that I was
Speaker 1: involved or or you had means with the just Department
Speaker 1: over the years on this on this case. And one
Speaker 1: of the things I told them very early on was
Speaker 1: that probably the greatest symptom would just be the lack
Speaker 1: of people willing to talk to them. Right that everybody
Speaker 1: does business with Google, and Google is probably the most
Speaker 1: important business partner for most companies in terms of their
Speaker 1: news and information being found, in terms of their advertising
Speaker 1: being delivered, et cetera, et cetera. So you're gonna have
Speaker 1: a lot of witnesses that are under subpoenas and and
Speaker 1: are there because they were ordered by the court to
Speaker 1: be there, and they're gonna have to testify to the facts,
Speaker 1: and that will be interesting to see. I don't think
Speaker 1: they'll be talking much in the press about about these issues.
Speaker 2: And do you think you've kind of hinted the press
Speaker 2: hasn't been covering like they've been covering it, Just to
Speaker 2: be clear, But why do you think that this is
Speaker 2: This feels like it should be the only story everywhere,
Speaker 2: But it's quite quiet out there. Again, people are still
Speaker 2: covering it.
Speaker 1: I mean, I think that the chill piece plays into
Speaker 1: that too, and and so you know both. I don't
Speaker 1: want to say they're fearful of covering it, but at
Speaker 1: least some of the trade press. Google is an important
Speaker 1: advertiser for their events and for their for their publications
Speaker 1: the d C Press. Google is probably one of the
Speaker 1: biggest sponsors of of their their sites and their newsletters,
Speaker 1: and so that doesn't motivate them probably to be there.
Speaker 1: And then on top of that, the resources are constrained
Speaker 1: because Google sucked up a lot of the revenue, so
Speaker 1: most newsrooms don't have enough back. We're now in the
Speaker 1: day where all the local you know, Chicago, La, New York,
Speaker 1: all these different publishers could all send their reporters, so
Speaker 1: they instead rely on like the Associated Press or some
Speaker 1: sort of wire reporter. Right, Yeah, so that's difficult.
Speaker 2: It's a difficult. I find it's quite difficult to analyze
Speaker 2: because even like asking you how is Google will use
Speaker 2: this monopoly, it's a multifaceted answer, and it almost feels
Speaker 2: like people don't really realize how big Google is despite
Speaker 2: knowing it ninety eight you just so I'm clear to
Speaker 2: repeat this, it's ninety eight percent of all searches on mobile.
Speaker 1: That's right.
Speaker 2: That is insane. Yeah, yeah, that is like Ford, every
Speaker 2: every single truck being made by Ford other than like
Speaker 2: a tiny amount, but also every road also being made.
Speaker 2: It boggles the mind.
Speaker 1: Yeah. Yeah. And then the data that comes with it.
Speaker 1: They'll talk about the revenue from that, but then the
Speaker 1: data is what underpins all of this, and it's in
Speaker 1: the case throughout an end, and the importance of that
Speaker 1: data and the.
Speaker 2: Scale almost feels as if the money isn't quite as important,
Speaker 2: or it is, but just the money is not enough
Speaker 2: to analyze it.
Speaker 1: I agree, I agree, I mean I think the data
Speaker 1: pieces as every as important and and it informs and
Speaker 1: gives unique advantages that no one else has. If you
Speaker 1: think about being able to merge that mobile query data
Speaker 1: with the att tech data, with the browsing data, you know,
Speaker 1: with the Android data. So yeah, so the press, I
Speaker 1: think I'm optimistic that there will be more trade press
Speaker 1: because this is advertising specific that will show up at
Speaker 1: least for the first week, and that will be good.
Speaker 1: On the flip side, I think also it's important to
Speaker 1: know that this courthouse is fairly unique in that it
Speaker 1: doesn't allow any devices in the building.
Speaker 2: Any any but you put them, you just don't bring them.
Speaker 1: You don't you're not allowed to bring in the building.
Speaker 2: And so jesus.
Speaker 1: So there's no streaming, there's no recording, there's nothing.
Speaker 2: Is there a live broadcast or anything.
Speaker 1: There is an overflow room where they will have a
Speaker 1: broadcast into the other room for people that are in
Speaker 1: the overflow room.
Speaker 2: But you can't a device to recall that.
Speaker 1: You're not all the right device into the building.
Speaker 2: What's the Russian now with that?
Speaker 1: I think it's old school court rules and uh, you
Speaker 1: know it does it limits the ability for the public
Speaker 1: to watch the witnesses and get visions. And so I
Speaker 1: think that way this this courthouse is you know, this
Speaker 1: may be interesting from a Google perspective. I mean, it's
Speaker 1: it sees a lot of very sensitive cases. It's in
Speaker 1: northern Virginia. So I think the CIA, the Pentagon, like
Speaker 1: this judge, you know, as I mentioned, dealt with some
Speaker 1: pretty sensitive matters, criminal matters over the years, and so
Speaker 1: so I think that's the way they're they're used to operating.
Speaker 1: It was it was kind of an amusing moment this
Speaker 1: morning when Google tried to put in the last minute
Speaker 1: request to have an extra laptop or two in the
Speaker 1: room for the lawyers to be able to look up
Speaker 1: stuff really quickly exhibits, and she denied it, and oh, so.
Speaker 2: It's gonna be it's gonna be like, just to be clear,
Speaker 2: regular lawyers also print out stuff anyway, but it's going
Speaker 2: to be just completely analog the whole way down.
Speaker 1: Google will be allowed and the problem will be allowed
Speaker 1: to have a device and a backup device to put
Speaker 1: exhibits up on the screen so that people in the
Speaker 1: courtroom will be able to see the visual exhibits on
Speaker 1: the screens.
Speaker 2: So you have to write down a lot, you have
Speaker 2: to write down a line.
Speaker 1: And she said that Google wasn't allowed to have any
Speaker 1: other devices beyond those because that's not the way we
Speaker 1: do things here.
Speaker 2: So so just a clear for our listeners. Jason will
Speaker 2: be joining me every week to go through the happenings
Speaker 2: of this case because I feel like it's the most
Speaker 2: important thing happening in tech while also being one of
Speaker 2: the more difficult things to pull apart.
Speaker 1: I agree, I agree. Well, thank you for the interest.
Speaker 2: Yeah, of course. So Jason, where can people find you?
Speaker 2: Because you're going to be following along and dropping stuff
Speaker 2: on Twitter as well.
Speaker 1: Yeah, it will be I'm mad, Jason underscore kin't knt.
Speaker 1: I also would do a plug if you don't mind for.
Speaker 2: Please, that's one we're asking US v Google ads dot com.
Speaker 1: Us v Google ads dot Com. There's a coalition of
Speaker 1: organizations that are trying to make sure that the public
Speaker 1: interest is met to and so there's those exhibits are
Speaker 1: being posted there, and witness lists and and all sorts
Speaker 1: of documents that as they come out. So I think
Speaker 1: the goal that of that website is to make sure
Speaker 1: that you know some of the challenges in the search
Speaker 1: trial are are overcome for this one.
Speaker 2: Well, Jason, good luck in there, bring your pen and
Speaker 2: paper and we'll speak next week and get an update.
Speaker 1: Excellent.
Speaker 2: Thanks for having me in, Thanks so much. Thank you
Speaker 2: for listening to Better Offline. The editor and composer of
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