Google manipulated the advertising marketplace before pocketing the money and giving it to publishers who gave the company preferred access, it has been claimed in a bombshell lawsuit.
The damning claims in a Texas lawsuit accuse the search giant of running a digital advertising monopoly that increased the cost to advertisers and harmed ad industry competitors and publishers.
It has been met with fury in the media industry with one publisher calling the system ‘utterly dishonest’ and a ‘betrayal’ of advertisers including untold numbers of small businesses struggling through the pandemic.
The firm began a secret program called Project Bernanke in 2013 which allegedly rigged the market by dropping the second-highest bids from publishers’ advertising auctions.
It used historical data from Google adverts to adjust its clients’ bids for online advertising and boost their chances of winning auctions for impressions.
That allegedly generated generating hundreds of millions of dollars for the company much of it from small business advertisers
Google is then said to have pooled money taken from this system before allocating it to publishers who gave the firm favoured access, including those who only used Google’s ads.
This allegedly gave Google and its bidders an unfair advantage and helped them win auctions they would have lost – something that cost publishers up to 40 per cent of revenue.
The California-based firm is thought to have generated nearly £270million a year from Project Bernanke – named after former Federal Reserve chairman Ben Bernanke for unknown reasons.
One major publisher said: ‘We suspected Google was running a rigged game but we never imagined they could be so utterly dishonest both to their publisher partners and their advertising clients.
‘It’s a staggering breach of trust and business ethics and has cost publishers and advertisers including all the small mom and pop shops who have struggled through the pandemic, hundreds of millions of dollars.
‘You can only wonder how much more is to come out of this can of worms.’
‘How can we possibly trust Google moving forward? They are proposing new solutions for the industry, on topics such as the replacement for cookies, and the want us all – publishers, advertisers, and consumers – to trust them. Clearly we can’t.’
Google began a secret program called Project Bernanke to allegedly rig the advertising market
The claims emerged in documents filed in Texas as part of an anti-trust lawsuit which accuses the company of running a monopoly in the digital advertising market.
And the findings suggest Google is more dominant that previously thought, and it has maintained its dominance by deceiving publishers and manipulating auctions.
Internal Google documents from 2014 reveal that a team known as ‘gTrade’ was founded in New York in late 2012 to devise ‘novel trading strategies’
The aim was to reverse trends of non-Google buyers winning auctions in Google’s advertising exchange at Google’s expense.
Google allegedly wanted to use inside information to reverse these trends and ensure its win rate increased.
To accomplish this the gTrade team developed a number of secret auction manipulation schemes, the most notable of which was codenamed ‘Project Bernanke’.
This graphic explains allegations that the Bernanke program caused AdX to drop the second bid from the auction and lower publisher earnings. Google is said to have retained the difference before adding it to a ‘pool’ to use it to inflate other bids. In this example, the advertiser pays $18, the publisher receives $7.20 ($9 minus Google’s 20% fee), and Google puts the remaining $18 – $9 = $9 into a pool to spend on other auctions
The project is said to have aimed to manipulate auctions to put money into a ‘Bernanke pool’ to be later spent inflating Google’s bids to ensure they won over non-Google buyers.
A Google spokesman told MailOnline: ‘AG Paxton’s latest allegation – that we generated a ”third price auction” or manipulated our ad exchange – is entirely inaccurate.
‘As of September 2019, we have been running a first price auction, but at the time to which AG Paxton is referring, AdX absolutely was a second price auction.
‘Another key area that is wrong: the Bernanke program did not artificially increase prices for buyers in any way.
To reiterate what we’ve said, AG Paxton’s complaint is full of inaccuracies and lacks legal merit.
‘Our advertising technologies operate in a highly competitive environment in which our success depends on delivering strong yields for publishers and effective returns for advertisers large and small.’
Google allegedly developed three different versions of Project Bernanke – one known as ‘Bell’, a second as ‘Global Bernanke’ and a third with an unknown name.
‘Global Bernanke’ is thought to have dropped the second highest bid across publishers’ second-price auctions – which is when the highest bidder wins, but the second-highest bid is paid.
Google told publishers that its ad exchange– now known as AdX, but previously as Double Click Ad Exchange – ran a transparent second-price auction.
But Google was allegedly manipulating these second-price auctions and running secret third-price auctions – where the highest bidder wins but is charged the third highest bid.
This is believed to have artificially lowered the clearing prices for a publisher’s advertising inventory, before Google siphoned the difference into the ‘Bernanke Pool’. This is said to have generated Google $228million a year.
Google’s ad exchange network is known as AdX, but previously as Double Click Ad Exchange
Meanwhile the ‘Bell’ project is thought to have used information about whether a publisher provides AdX with preferential access to determine if Google will spend the money in the Bernanke Pool across a given publisher.
An example could be that there were three publishers – USA Today, New York Times, and the Wall Street Journal – but only USA Today gives preferential access to AdX.
It appears the Bernanke project would then drop the NYT’s and WSJ’s revenues from AdX by up to 40 per cent, then use those siphoned revenues to inflate the bids of advertisers using Google Ads to bid on USA Today’s ad inventory.
The ‘Bell’ version of Bernanke is said to have generated an additional $139million a year for Google.
The court papers also made new revelations about Project Jedi Blue, which exposed allegedly secret collusion between Google and Facebook to rig the advertising market.
Project Jedi Blue was a secret deal between Facebook and Google that allegedly ensured Facebook would have a leg up in Google’s ad auctions, with fixed win rates, informational advantages and discounted exchange fees.
Project Bernanke was named after former Federal Reserve chairman Ben Bernanke (pictured in Washington in 2013) for unknown reasons
Facebook was planning to enter the so-called ‘header bidding market’ but was convinced not to do so in exchange for a preferred deal with Google.
Header bidding sees publishers sell advertising space simultaneously to different adexchanges and therefore increase the value of every advertising impression.
Header bidding posed a significant threat to Google’s digital ad market monopoly, as these header bidding systems run outside of Google’s purview.
It is claimed that a Google analysis found the prices paid in header bidding were ’80 per cent higher than the average price publishers received for impressions sold through AdX’.
It is also alleged that some publisher revenues jumped by as much as 70 per cent when they switched to header bidding.
Facebook could be forced to pay £50 to 44 MILLION users in UK if landmark legal action succeeds: £2.3bn lawsuit claims US tech giant made billions by only granting access to site in exchange for ‘highly valuable’ personal data
Most British Facebook users could receive a £50 payout if a landmark legal claim launched against the social network over ‘unfair’ terms and conditions is successful.
Competition law expert Dr Liza Lovdahl Gormsen has brought the class-action lawsuit against Facebook’s parent firm Meta at the UK’s Competition Appeal Tribunal.
The director of the Competition Law Forum has accused the technology giant of abusing its market dominance, and is seeking a minimum of £2.3billion in damages.
Dr Liza Lovdahl Gormsen has launched a class-action lawsuit against Facebook
The action could see more than 44million people compensated over claims that Facebook used its dominant position to force them to agree to terms and conditions.
It is claimed this allowed the firm to generate billions in revenues from their data, while users received no monetary returns, which the claim labels an ‘unfair deal’.
The claim – the first of its kind against Meta in the UK – will seek financial redress for Facebook users in the UK between October 1, 2015 and December 31, 2019.
The payout would apply to people who used co-founder Mark Zuckerberg’s site at least once during this period – which is thought to be more than 44million people.
It argues that, between 2015 and 2019, Facebook collected data both within its own platform and outside using mechanisms such as Facebook Pixel.
Pixel is an advertising tool that can be used by third-party websites to monitor how users act on their site.
The action claims that Facebook was able to impose terms and conditions on UK users which enabled this data gathering because of its market dominance.
The agreement is thought to have been signed off by Facebook’s chief operating officer Sheryl Sandberg and Google’s senior vice president and chief business officer Philipp Schindler.
The benefit to Google was to both keep Facebook out as a competitor but in as a participant which was extremely lucrative for Google.
For Facebook, the deal made them money but also saved them potentially billions of pounds in costs to build competing systems.
The financial impact on publishers of Jedi Blue has not yet been estimated.
Google issued a blog post in response to the claims by Texas Attorney General Ken Paxton in January last year, which addressed claims that Google ‘forecloses competition by using exclusive access to historic bid information to win auctions’.
The company said: ‘Google Ads bidding technology does not have exclusive access to historic bid information from the Google Ad Exchange.
‘AG Paxton mischaracterizes one of many improvements Google Ads has made to optimize advertiser bids.
‘Like many other businesses, we constantly work to improve our products and compete more effectively. That’s the kind of behaviour that increases competition and makes ads more effective for businesses large and small.’
The company also addressed claims that its ‘open bidding agreement with Facebook harms publishers’.
Google responded by saying: ‘Facebook is one of over 25 partners in Open Bidding, and their participation actually helps publishers.’
It continued: ‘AG Paxton also makes misleading claims about Facebook’s participation in our Open Bidding program. Facebook Audience Network (FAN)’s involvement isn’t a secret.
‘In fact, it was well-publicised and FAN is one of over 25 partners participating in Open Bidding. Our agreement with FAN simply enables them (and the advertisers they represent) to participate in Open Bidding.
‘Of course we want FAN to participate because the whole goal of Open Bidding is to work with a range of ad networks and exchanges to increase demand for publishers’ ad space, which helps those publishers earn more revenue. FAN’s participation helps that.
‘But to be clear, Open Bidding is still an extremely small part of our ad tech business, accounting for less than 4 per cent of the display ads we place.’
The company added: ‘AG Paxton inaccurately claims that we manipulate the Open Bidding auction in FAN’s favour. We absolutely don’t. FAN must make the highest bid to win a given impression.
‘If another eligible network or exchange bids higher, they win the auction. FAN’s participation in Open Bidding doesn’t prevent Facebook from participating in header bidding or any other similar system. In fact, FAN participates in several similar auctions on rival platforms.
‘And AG Paxton’s claims about how much we charge other Open Bidding partners are mistaken – our standard revenue share for Open Bidding is 5 to 10 per cent.’
A company spokesman for Facebook’s owners Meta told MailOnline: ‘Meta’s non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms, have helped to increase competition for ad placements.
‘These business relationships enable Meta to deliver more value to advertisers while fairly compensating publishers, resulting in better outcomes for all.’
Facebook is not a defendant in the lawsuit.
How Google ‘RIGGED’ the online advertising market