ALEXANDRIA, Va. — Federal regulators who say Google holds an illegal monopoly over the technology that matches online advertisers to publishers are vastly underestimating the competition the tech giant faces, an expert hired by Google testified on Thursday.
Mark Israel, an economist who prepared an expert report on Google’s behalf, said the government’s claims that Google holds a monopoly over advertising technology are improperly focused on a narrow market the government defines as “open web display advertising,” essentially the rectangular ads that appear on the top and along the right hand side of a web page when a consumer browses the web on a desktop computer.
But the government’s case fails to account for a variety of competition that occurs beyond those rectangular boxes, Israel said. In the real world, advertisers have dramatically shifted where they spend money to social media companies like Facebook and TikTok, and online retailers like Amazon.
When accounting for all online display advertising, not just the narrow segment defined by the government’s case, Google gets just 10 percent of the US market share as of 2022, he said.
In addition, advertisers have moved away from placing their ads on the screens of desktop and laptop computers where Google is alleged to control the market, with money migrating to ads placed on apps and mobile device screens. Israel cited marketing data showing display ad spending on desktop and laptop devices has decreased from 71 percent in 2013 to 17 percent in 2022.
The government’s case “seems to miss where the competition is today,” Israel said.
His testimony comes as Google wraps up its defense in the third week of an antitrust trial that began earlier this month in Alexandria, Virginia. US District Judge Leonie Brinkema has said she expects the government will put on a short rebuttal case on Friday.
The government’s case alleges Google has built and maintained an illegal monopoly that restricts choices and inflates costs for online publishers and advertisers. Its control of the market has allowed Google to keep 36 cents on the dollar for every ad bought and sold through its ad tech stack, the government claims.
The government says Google controls advertising tech at every step of the process, including the predominant technology used by publishers to sell their ad space, the predominant technology used by advertisers looking to purchase ad space, and the ad exchanges in the middle that conduct auctions in a matter of milliseconds to match advertiser to publisher.
The government’s case contends that Google illegally ties those markets together, forcing publishers to use Google’s technology if they want access to Google’s large cache of advertisers.
The government, using more narrow market definitions than those used by Israel, has claimed that Google controls 91 percent of the market for publisher ad servers and 87 percent of the market for advertising ad networks.
Google says the government’s case also fails to account for the billions the company has invested to ensure its products, working together, generate better value for publishers and advertisers by matching the right advertisers to the right consumers.
Israel cited data showing publishers working with Google are generating more revenue for each bit of ad space they make available, while advertisers are paying less for each click their ads generate.
That only occurs, Israel said, because Google’s technology is continually improving the quality of the ads by matching advertisers to consumers based on their interests and purchase history.
Israel also disputed the government’s claims that Google gets 36 cents on the dollar for the ad sales it facilitates. He said data shows that percentage has dropped to 31 percent or 32 percent in recent years. More importantly, he said, competitors have even higher take rates, with an industry average of 42 cents on the dollar.
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