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Welcome to the Architecture Podcast. I'm Ariel Papero. This week, Eric Fronti is on vacation and he chose quite a week to go on vacation. We have a lot of news, but we're going to do a very special episode this week. So, we have two really meaty, exciting conversations. In the first conversation, we have an emergency podcast to react to the ruling from the US District of Virginia that declared Google to be a monopolist in the ad tech market. It's a story that I've been covering extensively since last September when I went down to Virginia and covered the trial in person. So, we have Alan Chappelle who writes the Monopoly Report and Ariel Garcia from Check My Ads. We're going to talk about the ruling, what we saw in it, what's coming next, and our predictions for whether there will be a spin out of the Google assets. Then we have a regular scheduled guest who's also in the news. It's Mark Zagorski, the CEO of DoubleVerify. So, DoubleVerify has been the subject of much writing and speculation. They've been in a bit of a war of words with critics like Adalytics. They're also in a lot of competitive pressure from new AI startups like Scope 3. And lastly, they've been moving. They acquired Rockerbox. They acquired Scibids. So, having Mark on here to talk about all those issues and have a really frank conversation should be really interesting. So, this is a pretty blockbuster episode. Eric will be back next week and we'll do our usual refresh news. But for now, you've got a double episode of really timely, interesting content. So, I hope you enjoy it.
All right, we have the emergency pod. Get the sirens blaring and the emoji warmed up. We're here to talk about the ruling in the Google AdTech trial case that we've all been waiting for. I have Alan Chappelle from the Monopoly Report and Ariel Garcia from Check My Ads. Thank you both for being here on such short notice.
Let's do hot takes first. Like what's your quick reaction? Ariel, first.
All of the times that Google's pro-competitive justification arguments were called pretextual. Like that made my day specifically. All of the, I think back to my bingo cards of like spam, fraud, safety, etc. and having the judge outright say that that was pretext was the highlight.
I would agree with that. For me, the big takeaway here is I don't know there's any huge surprise coming out of this. I don't know, did you feel differently?
Yeah, my take is this is right up the middle. What I predicted, what many people who are observers of the case predicted, that the ad server and ad exchange were clearly monopolistic and the ad network or Google AdWords was kind of a weird extra in the case. It didn't make a lot of sense and that's what the judge found as well.
I'm going to challenge that briefly. I remember we talked about this every couple of days at trial, but I still think that the ad network piece served an important narrative component and the judge did include in this decision the note about the search dominance lending itself to amassing all of that unique advertiser demand. That's to me, it was more of a narrative purpose of including the advertiser ad network. It was obviously very much a sell-side case.
Yeah, I agree with you. It seemed like it was tactical where if they didn't include the ad network, they wouldn't have been able to talk about it. So, they had to include it as a claim even though the claim was weak.
Yeah, I would agree with that. So, why did this take so long? Does anyone know? Because we all expected this back in December or January. And we also thought there would be remedies in the finding, but it took three and a half months past the judge's self-imposed deadline, and there's no talk of remedies. Does anyone know anything?
Yeah, I mean, Ariel, you and I have talked about the conspiracy theory that there was some big settlement taking place or some discussion taking place across multiple entities. I mean, heck, we even have to add Canada now into the mix. But everybody that I've talked to that has a lot of direct knowledge on how the court system works specific to that circuit, even with the rocket docket, said that that's just not possible. So, it just may be that the judge wanted to get things right and had a couple of other things on her plate.
I think it could literally be as simple as Judge Brinkema had other cases. So, I feel like, and then you read through the decision and you're like, 'Wow, the amount of detail that was captured.' So, I think all of us are a little bit impatient unfairly because I can't even imagine what it would have been like to write this decision.
Yeah, it's like 120 pages and they're dense pages. Every sentence has multiple footnotes it seems.
Yeah. The thing about the delay, some people were speculating that Judge Brinkema might be ill. So, we know that like Megan Gray, friend of the podcast, went to her office just to look through the window and she saw that Judge Brinkema is thankfully very hale and healthy. But, enough of the armchair quarterbacking. Let's go through what the actual ruling says. I'll kick it off, which was it said very high level there is a market for ad server, publisher ad server, there is a market for open web exchanges, and by market I mean a legal market in an antitrust sense because there was arguments about what the market was, and that Google acted monopolistic in those two markets. And further, interestingly, and I want to bring this up, neither the AdMeld acquisition nor the DoubleClick acquisition were part of that monopolistic behavior. Ariel, what are the things I missed that are really important and what was your take on those different rulings?
No, I mean I think you captured most of it. We already spoke to the fact that they didn't succeed on the ad network side. I'll speak super briefly to why. There were a couple of things that jumped out at me that the advertiser ad network wasn't in the judge's view a commonly understood term. Unfortunately, the idea of cross-channel buying, the PAX argument, seems to have landed. That's probably my least favorite part of this decision. But no, I think you captured everything well. I mean, one thing that I found interesting was that the AMX, like one big two-sided market argument, did not succeed. Happy to see that. It was nice to see the realization that a DSP doesn't allow publishers to monetize their inventory. Like those silly reasonable substitute arguments failed. And then I guess the last thing that I think is worth touching on which is more of an antitrust nerd thing is Trinko. We got a sneak peek at this during closing arguments where the judge said, you know, at first this is like super attractive but then as I thought about it more it wasn't, and basically she reiterated that sentiment here saying that this is really about its customers not its competitors. So that was an important distinction that the judge drew.
Yeah. For those of you who are not following at home, what effectively happened was that every single one of Google's arguments was thrown out. Even though they didn't lose on all points of the case, the points they lost on were just factually disputed. Like that AdMeld was a monopolistic activity, but Google's arguments in the case that the market was defined in a way that was too narrow was totally rejected by the judge. The argument that the transactions had to be evaluated both buy and sell side, that's the AMX case, and that you couldn't just look at the publisher ad server as one piece, totally rejected that argument. And the Trinko decision was about the so-called duty to deal, which is the idea that Google shouldn't be compelled to work with competitors, and there's a case called Trinko in the telecom world where that was ruled, and she threw that out also. So it was as if the Google Defense just didn't exist and the DOJ's case was evaluated just on its own. Alan, do you have any thoughts on the legal side of this before we go into like what the practical aspects are?
I agree with what you're saying, but there's still a lot in there for an appeal. I mean, even within Trinko, they distinguish it because ad tech is unregulated. The Trinko decision involved telecom, which is highly regulated. So, that's going to be, I think that's surface area right there for them to lodge an appeal. I was also sort of struck that AdMeld and DoubleClick weren't on their face viewed as anti-competitive just by virtue of acquiring them. And I'm not sure if the judge was trying to draw a distinction as between like anti-competitive on day one versus anti-competitive on day 60 or day 300. The reason I think that's going to be important is that that may have an impact on possible remedies, right? If the goal here for the DOJ is divestment, does that impact their ability to get there?
Yeah, that was my thought as well is if the proposed remedy is spinning out DoubleClick, but the acquisition of DoubleClick wasn't considered monopolistic behavior then it kind of raises a question. All right, let's talk about remedies. So there's nothing in the document on remedies. Like it's the last paragraph of the 120 pages is, 'Oh, by the way, I expect the parties to tell me what they want to do about remedies.' So, are we in for another trial? Is this a two-parter? Because I thought this was not a two-parter.
It's a distinction really without a huge difference. So, in the search case, there was very clearly a phase one trial and then a remedies trial. Here the judge has set it up as all as one trial but it's a separate set of hearings, a separate set of motions, so maybe it'll be a little quicker than if there was a completely separate trial, but to me it's still, you know, there's still a separate event that needs to take place for them to determine what the remedies are.
My understanding is that there is, to your point, yes, there are hearings anticipated. I know I saw some speculation about whether there would be witnesses there. I think because the language around hearings was used, I do believe that there would be witnesses there.
You think they'll be able to call new witnesses and put new evidence into evidence?
I would expect that they would be able to call new witnesses.
Does this mean you and I are going to have to hang out in the pews again for like a couple weeks?
I mean, I really hope so to be honest with you.
To be fair, like this week was supposed to be my vacation. That's going great for me. And the search decision dropped on my birthday. So, I think that this is just the way things go. Well, Alan is actually on vacation right now calling in and he's quoting the paperwork, so he's had a busy day away from his family. Alan, what do you think? How do you think the remedies are going to play out? I mean, hasn't Google already put a good chunk of the sell-side part of their ad tech stack on the table as part of a settlement?
So, I think that those are gone. It's just a question of when, but really it's ultimately a question of are they willing to divest? I know that's a separate trial, but all of this stuff is interrelated. And I mean, heck, there was even a couple of references to the search trial within this decision. I mean, they're very aware of how intertwined all this is, and that's really what it comes down to.
Didn't like the head of the DOJ just say this week that they were going to be kept separate, or is that just public negotiation?
I think that's public negotiation.
Some background for those of you who don't follow this as well, which is in the fall, like in September of last year, Reuters reported that Google had offered to spin out the ad exchange, not including the ad server, and Europe rejected that request. And previously, the previous summer, they proposed putting the ad exchange and the ad server into a separate division of Alphabet and that was rejected. And we also, I think there were some rumors that they had offered something similar to the DOJ recently. So there's that. This also brings up kind of the next question. So, there was this one interesting little bit of the finding where it was declared that the behavior and the effect was global, not US. And I had someone in my DMs telling me that was the thing that their lawyers were the most excited about because it expanded the potential fine. I'm kind of confused about this because shouldn't it just be US? It's a US court. Ariel, do you have any thoughts on that?
I'm going to kick this one to Alan. I feel like Alan probably has more thoughts on this one.
I really don't. Again, all this stuff is so intertwined and we even now have Canada saying, you know, a week ago that as far as they were concerned, they were going to enforce divestment regardless of what the US does. And so, you know, whether that means that this is just going to be a big free-for-all or there's going to be, I don't know.
Well, there's also reporting I think like recently, very recently, like last month, that the EU had already found against Google on the exact same basis, but was waiting for this report to drop their report. So if that's true, within the next probably week, we'll see the EU come out with the exact same report or finding against Google, which all brings up like kind of my theory that I've had for a long time, which is that Google wants to get rid of these businesses, but they don't want to play their card too early because they'll lose all their negotiating leverage. They want to tie everything up in one bow and just be done with it. This ruling being what they expected is just, you know, kind of like to use the poker analogy just like a random three being turned over and now it's time to get to the end pot and figure out how to deal with this. The way I'm looking at it is you can compare this to like the EU search case, I'm sorry, the Google Shopping case, because there it dragged on for seven years and the reason it dragged on for seven years is because it was in Google's interest. They kept making more and more money every year and they were able to very easily outrun whatever the fine structure is. I think we're in a little bit of a different game here where if they could have just divested their ad tech stack they would have done that already. So the question now is are they going to agree to a divestment of Chrome or is that going to get ripped out of their cold dead hand? And then maybe are they going to agree to some flavor of divestment of some of their owned and operated, specifically YouTube. That's I think where the negotiation is and like, and that's where the, you know, does the government go for broke thus delaying things or is there a deal that can be had in the next, you know, six months to 18 months? I'm sort of hoping for the latter but boy.
Yeah, I mean Google is better off seeing more cards turn over. Like they're better off even if they don't want to divest this thing, they're better off appealing and delaying and delaying and then seeing what happens in the search case because that will give them more information. And if they do appeal, then we're talking once again years before this ever gets resolved, which is sort of a pain in the ass.
I think a decision in both the search case and the ad tech case remedies phases probably by the end of this summer just as the state AG case. To me, that's a really interesting point where maybe there needs to be a settlement.
Yeah, it would certainly put a relief on a lot of people's minds to just get this over with. No one's enjoying this except for maybe the three of us.
I mean, I just don't see how they can realistically be treated separately. Like if they don't have to divest Chrome at the end of the day, I don't know what the ad tech trial ultimately ends up accomplishing. So I don't know. I just, you'd have to figure that there has to be coordination there in reality.
Well, if they win on Chrome and they don't need to divest it. That's what they care about the most. So they win on Chrome, then I think they actually become more likely to settle this thing because then they jettison ad tech and they have a nice healthy business. If they lose on Chrome, then they go to war and they appeal everything. And don't settle on anything.
Yeah, agreed. I think so. But somewhere in the poker game, there's a percentage of market share that they're losing in the new AI search game, that, you know, their hands are being tied and like, you know, and so at what point do they say, you know what, let's cut our losses and make it the best deal we can.
Yeah. Yeah, the thing that really decides these cases is having a new CEO. And until they have a new CEO or they pay off a billion dollars to Donald Trump and his family, this doesn't get resolved. That's just my very very cynical point of view.
I agree with you. And look, we can never say never with the current administration, but it really is starting to look like Google and Meta are the proverbial odd men out here. In terms of just support politically outside of the specific administration, the support that both those companies have is not what their CEOs want. You know, maybe they can buy their way out of it, but it's starting to look like that's going to become really hard.
Any final predictions? Will anything meaningful happen on this in the, well let's go with final predictions on what the remedies side will be in this trial? Ariel, what do you think the remedies are going to be decided?
I think it is going to be divestiture of both the ad exchange and the ad server. There's obviously going to be behavioral remedies too, but I think what I'm most interested in is the divestiture piece. And I do think it'll be both.
Alan agree in the divestiture that there's going to be behavioral remedies. Google will figure out how to make that into a bit of a circus to the point where they're entirely meaningless. You may have a little more optimism on that than I do, Eric, because you know maybe there's a way that they can open up some of their pipes on the demand side and that could be sort of forced without it being a complete farce. But I think spinout, when we say behavioral the most likely behavioral would be something that said that Google Ads needs to spread its demand across a lot of different places. But Google will always want a loophole that they have the option to not put their demand anywhere. And I think that one of the booby traps here is that they may just stop bidding on open web entirely which would screw everybody and would make the divested ad exchange worth nothing. So those are some booby traps there.
