“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Jason Bier, chief privacy officer at Adstra Data.
The DOJ’s antitrust suit, together with 11 state’s attorneys general, contains surprising revelations about the extent of Google’s alleged illegal search Monopoly.
In less than a page of writing, page 49, paragraphs 154-159 detail allegations that Google, Apple and Mozilla conspired to drive traffic to Google’s search business, with Apple and Mozilla receiving a 40% cut of browser-based search revenues through the agreement. These allegations, if proven true, outline a brazen scheme to control the advertising industry. One must go back to the railway barons of the (last) Gilded Age to find an adequate comparison to a monopoly of such scope and severity.
The outcome of the DOJ’s suit is uncertain, and Google’s future also depends on lots of factors, including anticipated actions from other states and from countries around the world, such as Australia, Italy, China and the United Kingdom – all preparing antitrust actions against Google.
But the damage to Google is more significant than it may appear.
Antitrust litigation, under the Clayton and Sherman Acts, triggers a process that can damage a defendant very soon after a case is filed by the government. Once a company is sued for antitrust violations, any “person” damaged (i.e., corporation or individual) can leverage testimony and judgments in that government case as prima facie evidence of wrongdoing in a separate action.
This process also results in statutory treble (i.e., 3X) damages, and provides for a tolling and extension to the statute of limitations in which a person can bring an action after the case concludes. Every publisher and privately held website in the world can go to a US court armed with the government’s obtained testimony or judgment, and without having to do any discovery, seek to “prove up” treble damages and obtain a judgment against Google.
Given the broad damages that Google’s actions have allegedly caused independent publishers through the 40% kickback, and the case’s simplicity, this likely opens the door to one of the biggest litigation events in global history. Based on the allegations presented in the DOJ’s suit, litigation is very likely going to cascade against Google and result in billions in eventual losses. Even Google’s massive war chest may not be enough to pay it off.
The cookie un-crumbles
While it doesn’t state it outright, in my opinion, the anticompetitive behavior detailed in the complaint implicates Google’s display advertising business, including its recent move to block third-party cookies in Chrome by default. This is because the exclusivity payments to browser owners from Google will be higher for browsers that block third-party cookies. Those higher payments are because Google’s first-party cookie dominance on publisher sites permits first-party ad calls and analytics to feed its display engine as users engage beyond Google’s search monopoly.
Using privacy as a pretense, Apple’s cookie policies have consistently provided a siloed opportunity to Google as a result of the exclusivity agreements cited in the Complaint.
Consider for example a purchase on Safari through Google search, which ultimately takes place on a retail website. Based on Apple’s Intelligent Tracking Protection (ITP) the first-party cookie data made after purchase will only be available to Google at scale because these cookies survive for only 24 hours. Due to the search exclusivity agreements, Google can refresh these cookies regularly because it is the default search engine, essentially leaving its competitors in the dust as their cookies expire. Such conduct results in the siphoning of ads from these browsers to Google’s ad exchange via first-party advertising and analytics, removing price competition.
This behavior is just one example of how browsers benefiting from exclusivity agreements with Google develop rules for display advertising that favor huge scale from default search positioning, which increases the 40% revenue share to the browsers, benefiting Google.
As Google faces this reality, we should not be surprised if we see it reverse course on the removal of third-party cookies, or adopt an acceptable industry alternative, due to the likely anticompetitive and illegal nature of such conduct.
Furthermore, as targets of the DOJ probe, Apple and Mozilla may have to reverse their own actions against the cookie and move to reinstate it as a default feature of their browsers. After all, the allegations in the Complaint tie Apple and Mozilla directly to the alleged unlawful conduct, potentially also liable for treble damages to publishers that have resulted from such behavior.
The most important event for the internet since its invention
As massive a reversal as that is, the potential impact of this suit extends much further than cookies. If these allegations are proven, the outcome will represent nothing less than the biggest change to the internet since its inception.
It will likely be a positive change too.
If these legal actions against the browser monopoly end the lockdown of persistent IDs by the internet giants, it will lead to a more neutral and democratized internet that benefits all stakeholders. With Google’s stranglehold loosened, it will open the internet back up for more innovation and more competition. Publishers will be able to more effectively leverage advertising to fund their content. Third-party ad tech will once again attract levels of investment and interest akin to its early days. Data will flow more freely, consumers will have more control over where their data goes and the topic of privacy will be discussed in a more constructive manner in the best interest of society.
The revenues that have gone to Apple and Mozilla account for all the oxygen that has slowly been lost from the independent ecosystem. Its return to circulation will lead to a renaissance.
It’s all but inevitable that forthcoming litigation will more explicitly challenge Google’s display advertising monopoly. But with the DOJ’s complaint, and the likely prima facie evidence that will result from it, the damage is already being dealt.
One does not necessarily need to wait for the other shoe to drop. The foundation of a revitalized internet is now in place as a result of the filing of the DOJ’s Complaint.