Google keeps up to 36 percent of every ad sale it brokers, the government says in the antitrust lawsuit

The Justice Department and a coalition of states allege that Google has built and maintains a monopoly on technology that matches online publishers with advertisers. Dominance over the software on both the buy and sell sides of the deal allows Google to keep up to 36 cents on the dollar when it brokers sales between publishers and advertisers, the government claims in court papers.

Google says the government’s case is based on the Internet of yesteryear, when desktop computers dominated and Internet users carefully typed precise World Wide Web addresses into URL fields. Advertisers are now more likely to turn to social media companies like TikTok or TV streaming services like Peacock to reach audiences.

In recent years, Google Networks, the division of the Mountain View, Calif.-based tech giant that includes services like AdSense and Google Ad Manager that are at the center of the case, has actually seen revenue decline, from $31.7 billion in 2021 to $31.3 billion in 2023, according to the company’s annual reports.

The trial for the alleged ad tech monopoly begins Monday in Alexandria, Virginia. It was originally going to be a jury trial, but Google maneuvered to force a bench trial by sending a check to the federal government for more than $2 million to discuss the only claim brought by the government that required a jury.

The case will now be decided by US District Judge Leonie Brinkema, who was appointed to the bench by former President Bill Clinton and is best known for prosecuting high-profile terrorism cases, including 9/11 defendant Zacarias Moussaoui. Brinkema, however, also has experience in highly technical civil litigation, working in a court that sees a huge number of patent infringement cases.

The Virginia case comes on the heels of a major defeat for Google over its search engine. which generates most of the company’s $307 billion in annual revenue. A judge in the District of Columbia has declared the search engine a monopoly, maintained in part by the tens of billions of dollars Google pays each year to companies like Apple to block Google as the default search engine shown to consumers when they buy iPhones and other gadgets. .

In this case, the judge has not yet imposed any remedy. The government has not offered its proposed sanctions, though it could be a close watch on whether Google should be allowed to continue making exclusivity deals that ensure its search engine is the default choice for consumers.

Peter Cohan, a professor of management practice at Babson College, said the Virginia case could be more damaging to Google because the obvious remedy would be to force it to sell parts of its ad technology business that generates billions of dollars in annual revenue.

“Divestiture is certainly a possible remedy for this second case,” Cohan said, “It could be more significant than initially seen.”

In the Virginia trial, government witnesses are expected to include executives from newspaper publishers, including The New York Times Co. and Gannett, and online news sites that the government alleges have faced particular harm from Google’s practices.

“Google has extracted windfall fees at the expense of the website publishers who make the open Internet vibrant and valuable,” government lawyers wrote in court documents. “As publishers generate less money from selling their ad inventory, publishers are forced to put more ads on their websites, put more content behind expensive paywalls, or go out of business altogether.”

Google disputes that it charges excessive fees compared to its competitors. The company also says the integration of its buy-side, sell-side and middle-of-the-road technology ensures ads and web pages load quickly and enhances security. And he says customers have options to work with external ad exchanges.

Google says the government’s case is improperly focused on display ads and banner ads that load on web pages accessed via a desktop computer and doesn’t take into account the migration of consumers to mobile apps and the boom in in-site ads of socialization in the last 15 years.

The government’s case “focuses on a limited type of advertising viewed on a narrow subset of websites when users’ attention migrated elsewhere years ago,” Google lawyers wrote in a pretrial filing. “The last year users spent more time accessing websites on the ‘open web’ than social media, video or apps was 2012.”

The trial, which is expected to last several weeks, is taking place in a court that rigidly adheres to traditional practices, including resistance to technology in the courtroom. Cell phones are banned in court, much to the chagrin of a tech news outlet used to District of Columbia trials tweeting live updates as they happen.

Even lawyers, and there are many on both sides, are limited in their technology. At a court hearing Wednesday, Google’s lawyers pleaded to be allowed more than the two computers each side is allowed to have in the courtroom during the trial. Brinkema rejected it.

“This is an old-fashioned courtroom,” she said.

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