By Jeff Horwitz and Keach Hagey
Google for years operated a secret program that used data from
past bids in the company's digital advertising exchange to
allegedly give its own ad-buying system an advantage over
competitors, according to court documents filed in a Texas
The program, known as "Project Bernanke," wasn't disclosed to
publishers who sold ads through Google's ad-buying systems. It
generated hundreds of millions of dollars in revenue for the
company annually, the documents show. In its lawsuit, Texas alleges
that the project gave Google, a unit of Alphabet Inc., an unfair
competitive advantage over rivals.
The documents filed this week were part of Google's initial
response to the Texas-led antitrust lawsuit, which was filed in
December and accused the search company of running a digital-ad
monopoly that harmed both ad-industry competitors and publishers.
This week's filing, viewed by The Wall Street Journal, wasn't
properly redacted when uploaded to the court's public docket. A
federal judge let Google refile it under seal.
Some of the unredacted contents of the document were earlier
disclosed by MLex, an antitrust-focused news outlet.
The document sheds further light on the state's case against
Google, along with the search company's defense.
Much of the lawsuit involves the interplay of Google's roles as
both the operator of a major ad exchange -- which Google likens to
the New York Stock Exchange in marketing documents -- and a
representative of buyers and sellers on the exchange. Google also
acts as an ad buyer in its own right, selling ads on its own
properties such as search and YouTube through these same
Texas alleges that Google used its access to data from
publishers' ad servers -- where more than 90% of large publishers
use Google to sell their digital ad space -- to guide advertisers
toward the price they would have to bid to secure an ad
Google's use of bidding information, Texas alleges, amounted to
insider trading in digital-ad markets. Because Google had exclusive
information about what other ad buyers were willing to pay, the
state says, it could unfairly compete against rival ad-buying tools
and pay publishers less on its winning bids for ad inventory.
The unredacted documents show that Texas claims Project Bernanke
is a critical part of that effort.
Google acknowledged the existence of Project Bernanke in its
response and said in the filing that "the details of Project
Bernanke's operations are not disclosed to publishers."
Google denied in the documents that there was anything
inappropriate about using the exclusive information it possessed to
inform bids, calling it "comparable to data maintained by other
Peter Schottenfels, a Google spokesman, said the complaint
"misrepresents many aspects of our ad tech business. We look
forward to making our case in court." He referred the Journal to an
analysis conducted by a U.K. regulator that concluded that Google
didn't appear to have had an advantage.
The Texas attorney general's office didn't immediately respond
to requests for comment.
Google's outsize role in the digital-ad market is both
controversial and at times murky.
In some instances, "we're on both the buy side and the sell
side," Google Chief Economist Hal Varian said at a 2019 antitrust
conference held by the University of Chicago Booth School of
Business. Asked how the company managed those roles, Mr. Varian
said the topic was "too detailed for the audience, and me."
In the filing, Google said Project Bernanke used data about
historical bids made through Google Ads to adjust its clients' bids
and increase their chances of winning auctions for ad impressions
that would have otherwise been won by rival ad tools. The company
acknowledged as accurate an internal 2013 presentation showing that
the project was expected to generate $230 million in revenue that
year; Texas has cited that presentation as proof that Google
benefited from its advantage.
The document also sheds more light on a once-secret deal between
Facebook Inc. and Google, known as Jedi Blue, which allegedly
guaranteed Facebook would both bid in -- and win -- a fixed
percentage of ad auctions.
The agreement was signed by, among other individuals, Philipp
Schindler, Google's senior vice president and chief business
officer, and Sheryl Sandberg, Facebook's chief operating officer,
an unredacted section of Google's filing states.
Google acknowledged in its responses that it had agreed to make
"commercially reasonable efforts" to ensure that Facebook was able
to identify 80% of mobile users and 60% of desktop users, excluding
users of Apple's Safari web browser, in ad auctions. The Texas
complaint alleges that this activity appears "to allow Facebook to
bid and win more often in auctions."
Google further acknowledged in the filing that Jedi Blue
required Facebook to spend $500 million or more in Google's Ad
Manager or AdMob auctions in the fourth year of the agreement, and
that Facebook committed to making commercially reasonable efforts
to win 10% of the auctions in which it had bids.
Facebook didn't immediately comment on the new information in
the documents. The company has said it doesn't believe it was given
special treatment compared with other Google partners.
Write to Jeff Horwitz at Jeff.Horwitz@wsj.com and Keach Hagey at
(END) Dow Jones Newswires
April 11, 2021 11:56 ET (15:56 GMT)
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