$Alphabet-A (GOOGL.US)$In a testimony during a trial by the US Department of Justice on antitrust, a former executive stated that eight years ago, after developing a method on the website to bypass Google's tools and increase online advertising revenue, Google considered reducing its advertising trading fees. Google charges a fee of 20%, the highest in the industry.

Websites that sell advertising space have developed a new technology called Header Bidding in an attempt to challenge Google's high fee structure and generate more revenue from transactions. Google never reduced its fees but developed a modified version of the technology in 2019.

In a trial that began this week at the federal court in Alexandria, Virginia, antitrust enforcers accused Google of illegally monopolizing the technology used to buy and sell online advertising space.

Google controls a range of complex technological products that websites use to sell advertising space, and the company also controls tools provided to advertisers and a trading platform that connects the buying and selling of ads.

Dominance of Google

Julia Tarver Wood, an attorney representing the US Department of Justice, said that Google's publisher advertising server business, Google Ad Manager, advertising exchange platform, Google AdX, and advertising network, Google Ads, constitute a "triple monopoly," with Google holding at least half of the market share in each business line. "By certain measures, its market share even reaches 91%."

The US Department of Justice and state attorneys general have stated that Google's dominant position in the industry allows it to charge customers excessive fees. It is estimated that Google can extract $36 to $37 from the $100 that marketers spend on ad space.

Government witness and CEO of marketing company Goodway Group, Jay Friedman, stated that he was able to negotiate lower rates with several other advertising platforms, but "Google says it's not possible" to lower rates. Goodway Group works with advertisers and advertising agencies to carry out campaigns. Due to the high fees, his company considered not using Google's ad exchange platform but found that other platforms could not provide enough ad supply.

Former Google executives testified on Tuesday and Wednesday about how the company handles pricing and competitive technology.

Eisar Lipkovitz, who served as Vice President of Display and Video Advertising Engineering at Google from 2014 to 2019, recalled internal Google discussions about whether to reduce fees for the Ad Exchange (AdX) platform. He ultimately suggested a 10-15% reduction in fees. However, lawyers from the US Department of Justice stated that the 20% rate was never lowered, indicating that Google has the ability to maintain high prices without harming its business.

Lipkovitz acknowledged that the high cost of AdX led websites to adopt header bidding, a method where websites conduct ad auctions within browsers, allowing multiple ad exchanges to compete for ad placements.

Stephanie Layser, former executive at News Corp, testified on Tuesday that header bidding helped publishers increase their revenue by 50%.

Lipkovitz left Google and joined Lyft in 2019. He stated that Google believed that ads sold through header bidding had lower quality and were susceptible to spam and fraud. However, Layser argued that ads sold through Google could also have spam or fraud issues.

"Long-term threat."

In internal documents, Google referred to header bidding as a "serious long-term threat" because it could divert business away from its advertising trading platform.

"The problem is the existence of header bidding," another Google employee said. "Publishers feel shackled by Google's tools, which only gives Adx the ability to compete, and hence, header bidding was born."

Brad Bender, former vice president of display and video advertising products at Google, testified on Wednesday. He joined Google after its acquisition of DoubleClick in 2008. Bender once sent an email to the entire display advertising team at Google, which contained speech notes from former DoubleClick CEO David Rosenblatt, outlining the company's strategy of locking in customers using advertising server products.

In the notes, Rosenblatt stated that due to the "enormous cost of conversion," websites are unlikely to abandon their advertising servers. He said, "Platform switching is a nightmare."

Rosenblatt stated that by having access to publishers' ad servers, Google can also "see first" the ad space for sale, giving it an advantage over other trading platforms. "We will be able to beat other networks, which is our goal."

According to Wedbush's research, Google's advertising technology tools contributed $20 billion in 2020, accounting for 11% of the company's total revenue.

It is understood that large U.S. technology companies are facing increasing antitrust pressure.

Last month, the US Department of Justice won a ruling against Google in another case involving Google's dominant position in the online search field and is separately prosecuting them.$Apple (AAPL.US)$The U.S. Federal Trade Commission is investigating.$Meta Platforms (META.US)$And.$Amazon (AMZN.US)$Filing a lawsuit.

Editor/ping