'Hurt All Constituents': Fresh Concern Over Google's Alleged Ad Auction Rigging

Google allegedly used its control over the ad-tech stack to mislead advertisers and publishers about the prices in digital ad auctions, according to newly un-redacted allegations in an antitrust suit brought by a group of attorneys general against Google in the southern district of New York. The case claims Google used its advantage to win auctions against third-party ad-tech firms and reward publishers who used the tech giant’s features.

While the suit, led by Texas Attorney General Ken Paxton, was originally filed in December 2020, the new un-redacted allegations were released last Friday (Jan. 14).

Three industry sources interviewed by Adweek said new details about Project Bernanke are among the most concerning of the new allegations. Under the program, Google sometimes claimed it was running a second-price auction—where the winning bidder in a digital-ad auction pays the second-highest bid. In reality, the case alleges it was charging advertisers the price of the second-highest bid while giving publishers the third-highest bid and pocketing the difference.

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“Google has set up a system in which essentially advertisers are overpaying and publishers are under receiving,” said David Chavern, president and CEO of news media trade organization the News Media Alliance. “You have no idea what the real clearing price of the ad inventory is because Google is asserting so much of their own value.”

Google found that its Bernanke program reduced publishers’ revenue by upwards of 40%, according to the complaint.

On Friday, Google filed a motion to dismiss the attorneys’ general lawsuit today, a spokesperson said.

In an emailed statement, the Google spokesperson said that Project Bernanke did not artificially increase prices for buyers in any way, and was instead one of many improvements Google Ads made to optimize advertiser bids.

“We’ll continue to fight this meritless lawsuit in court,” the spokesperson wrote.

Google wins

Project Bernanke was revealed in filings earlier this year, reported by the Wall Street Journal in April, but the mechanics of how the project worked weren’t public until last week. A source familiar with the ad-tech industry, who requested anonymity to preserve business relations, said the revelations are much worse than they thought.

“People assumed Google was manipulating auctions to help publishers make more money,” the source said of Project Bernanke, which was originally described as a program that gave Google’s ad-buying tech an advantage over competitors. “Now we actually know what it did. It hurt all constituents. It cheated advertisers, publishers and other ad exchanges. It’s quite clear that Project Bernanke just benefitted Google.”

The case claims Google used the difference it pocketed to inflate the bids of advertisers using Google Ads to help these advertisers win impressions that would have otherwise gone to advertisers using other demand-side platforms. Google internal documents reveal the company devised Bernanke after observing advertisers using Google Ads were losing too often, compared to those using other ad-tech providers, according to the complaint.

Penalizing publishers who don’t give preferential access

The program eventually evolved not only to disadvantage other ad-tech vendors but also to penalize publishers who did not grant Google’s exchange AdX preferential access to their inventory, according to the complaint. Only publishers that allowed AdX the opportunity to bid before any other exchange received the bids inflated with the pool of Bernanke money.

Publishers have long withstood Google’s terms in order to plug into its unrivaled demand. But the ad-tech source compared the practice to a situation where Tesla gave consumers who owned their cars a better deal on its stock.

Google switched to using first-price auctions in 2019, meaning Project Bernanke, which relied on second-price auctions, became obsolete, the ad-tech source said.

Relationships with Facebook

The increased use of header bidding—the programmatic technique where publishers offer inventory simultaneously to multiple exchanges in real-time—posed a threat to Google as it could allow advertisers to bypass Google’s services, especially when Facebook’s ad network announced it was entering the business.

The April 2021 filings alleged that Google struck a deal with Facebook to reduce the social giant’s presence in header bidding if Google allowed Facebook more guaranteed ad auction wins. New information from the un-redacted complaint last Friday includes new details on the deal, including the fact that Google CEO Sundar Pichai signed off on it, a point Google denies. The search giant denies it manipulates the Open Bidding auction in Facebook Audience Network’s favor, and said the agreement was well-publicized.

A call for marketers to show some muscle

Jason Kint, CEO of digital content trade association Digital Content Next, argued that despite Google’s denial of wrongdoing, if Bernanke wasn’t causing harm, the mechanics of the project should have been public.

“Why is that a secret? Why was that ever redacted in the first place? If you’re going to be the dominant player on the buy side and sell side, why doesn’t everyone know?” Kint said.

Advertisers aren’t necessarily up in arms over Google’s dominance in ad auctions, said a source who surveys marketers, who requested anonymity to avoid commenting on regulatory issues.

“Five years ago when you were talking to a CMO about [Google’s dominance], they wouldn’t accept this was a major problem,” the source said.

But the ad-tech source argued that this complaint should lead to a more vociferous condemnation of Google.

“If this happened for any other business, customers would leave in droves,” the source said. “I have yet to see any industry outcry because Google is too powerful.”