This past Friday a New York judge unsealed previously redacted documents in the lawsuit against Google led by the State of Texas. One of the main allegations of the antitrust lawsuit is that Google and Facebook colluded to rig ad prices and “kill header bidding” (the attempt by competitors to make the ad market less Google-centric).
“The lawsuit claims that when Facebook began to gain traction as a rival advertiser, Google made an agreement with Facebook to reduce competition in exchange for giving the social media company an advantage in Google-run ad auctions. The project was called ‘Jedi Blue,’” we wrote in April of this year.
The newly unredacted information shows just how deep the alleged agreement went between Facebook and the search engine giant.
Jedi Blue and Facebook/Google ad exchanges. Code-named “Jedi Blue,” the arrangement between Facebook and Google meant that Google would “charge Facebook lower fees and give Facebook information, speed and other advantages in header bidding auctions in exchange for Facebook’s support of Open Bidding, Google’s header bidding alternative,” wrote Allison Schiff for AdExchanger.
Some suspect that Facebook initially backed header bidding in order to force Google’s hand in the arrangement and force a mutually beneficial deal. “Partnerships like this are common in the industry, and we have similar agreements with several other companies. Facebook continues to invest in these partnerships, and create new ones, which help increase competition in ad auctions to create the best outcomes for advertisers and publishers. Any suggestion that these types of agreements harm competition is baseless,” Facebook said in a statement.
The internal documents at Facebook reveal that the company had “four options: to ‘invest hundreds more engineers’ and spend billions of dollars to lock up inventory to compete, exit the business, or do the deal with Google.”
Meanwhile, Google’s main goal was to figure out any way to stop header bidding from gaining steam in the industry.
What is header bidding? “Header bidding helped website publishers circumvent Google’s exchange for buying and selling ads across the web. The exchange auctions ad space to the highest bidder during the split second it takes a webpage to load. Header bidding allowed the publishers to directly solicit bids from multiple ad exchanges at once, leading to more favorable prices for publishers,” explained Ryan Tracy and Jeff Horwitz for the Wall Street Journal.
Google worried, according to court documents, that having a large ad rival (like Facebook) embracing header bidding would disrupt what was essentially their monopoly on the ad market. “Header bidding was bad because it allowed publishers to bypass fees which we now learn ranged between 19-22% of revenues,” said Jason Kint in a tweet thread analysis of the court docs.
How Project Jedi worked. In order to win in the exchange, Google created the Open Bidding program. This program, in theory, let publishers display their inventory to multiple ad exchanges at once. This was presented as a competitor to header bidding. However, the lawsuit alleges that Google manipulated Open Bidding to give Facebook’s Ad Network (FAN) an unfair advantage. “Jedi’s success was measured not by financial targets or output increases, but by how much it stopped publishers from using header bidding,” said Janice Tan with Marketing Interactive after an assessment of the documents.
From there, the partnership with Facebook meant the social media giant also threw its weight behind Open Bidding over header bidding. In exchange for backing Google’s open bidding over header bidding, Facebook received “information, speed and other advantages in the auction it runs in the US,” added Tan.
“Both companies also had an illegal advertising deal that allowed the social media company to appear more in Google Ads. Google did this by fixing bids in ad auctions to Facebook’s favor,” alleges Nalin Rawat for FossBytes.
Why we care. Well, firstly, it’s a lot to digest. There is potential that publishers and advertisers have been overpaying and missing out on placements due to Google’s alleged collusion with Facebook to essentially rig the ad market. According to the unredacted documents, Jedi “generates suboptimal yields for publishers and serious risks of negative media coverage if exposed externally.” Also with Google promoting FLoC, FLEDGE, and the rest of their sandbox as a privacy solution for the open web, these revelations call into question their motives (especially if the company is sharing sensitive data with other firms that have agreed to terms with them for ads). Many advertisers complain about the lack of reach with other competitive ad networks and the revelations in the unredacted Google lawsuit show that the tech giant’s leadership worked diligently to ensure that competition was squashed.