Former advertising executive at Facebook reveals insider secrets of Alphabet Inc. Class C (GOOGL.US) advertising market, adding another witness to the anti-monopoly investigation!

In the antitrust lawsuit filed by the Department of Justice against Alphabet Inc. Class C (GOOGL.US) in the United States, testimony from a former Facebook advertising executive revealed a secret agreement between Meta Platforms Inc. (Facebook's parent company) and Alphabet Inc. Class C. The executive, Brian Boland, who served as Facebook's ad tech chief from 2009 to 2019, disclosed to a federal court in Virginia that Facebook initially tried to challenge Alphabet Inc. Class C's dominant position in the display advertising market but ultimately found it difficult to compete due to Alphabet Inc. Class C's market monopoly. Facebook's Audience Network project aimed to allow advertisers to not only place ads on Facebook and Instagram but also to buy ad space on other websites and apps. However, by 2017, Facebook realized that due to the advantage Alphabet Inc. Class C gave itself in its ad tools, Facebook had difficulty effectively competing with Alphabet Inc. Class C. A 2017 strategic memo stated that Alphabet Inc. Class C's strategy was like putting up a barrier between advertisers and Facebook, allowing Alphabet Inc. Class C to prioritize the best ad resources. Boland explained to Judge Leonie Brinkema that Facebook was concerned that this barrier would affect its ad business. Judge Brinkema will rule on the Department of Justice's charges of Alphabet Inc. Class C illegally monopolizing the advertising technology market. Alphabet Inc. Class C's ad exchange platform allows it to conduct a "last look" after ad auctions to decide whether to purchase ad space. Boland likened Alphabet Inc. Class C's technological advantage to being able to pick the best 30 Apples Inc. from a box of Apple Inc. before anyone else can buy, leaving other participants to choose from the remaining Apples Inc. Under Boland's supervision, Facebook conducted six months of negotiations with Alphabet Inc. Class C, ultimately reaching an agreement in 2018 internally referred to as the "Blue of Jedi" agreement. This agreement provided favorable terms for Facebook when bidding on ads in its Audience Network through Alphabet Inc. Class C's ad exchange platform. The agreement was approved by the top leadership of both companies, including Facebook CEO Mark Zuckerberg and Alphabet Inc. Class C CEO Sundar Pichai. Although Alphabet Inc. Class C and Facebook are respectively the first and second largest participants in the online advertising market, the details of this transaction known as the "Ad Auction Agreement" were not disclosed in court testimony. However, court documents indicate that Alphabet Inc. Class C wanted Facebook to pay 15% of media costs in exchange for giving up the advantage of the "last look". In 2020, a group of state attorneys general sued Alphabet Inc. Class C, accusing it of monopolizing the advertising technology market and alleging that the agreement between the two companies violated antitrust laws. They claimed that Alphabet Inc. Class C proposed this deal in exchange for Facebook abandoning a new technology called "header bidding" that could weaken Alphabet Inc. Class C's market position. However, a judge in New York dismissed these charges, finding no impropriety in the agreement reached by the two companies. Antitrust enforcement authorities in Europe also investigated this deal and concluded the investigation in March 2022 without taking any action. Last year, the Department of Justice in the United States filed a lawsuit against Alphabet Inc. Class C for monopolizing the advertising technology market, but did not allege that the agreement was anti-competitive, instead emphasizing that even tech giants like Meta could not compete against it. Boland left Facebook in 2020, expressing internal concerns about Facebook's lack of growth in the display advertising sector. Eventually, the project stopped buying display ads online and instead focused entirely on mobile ads. In addition to Boland, several other executives testified in the antitrust investigation against Alphabet Inc. Class C. Among them, former News Corporation executive Stephanie Layser pointed out that in 2017, News Corporation estimated that if it stopped working with Alphabet Inc. Class C's ad agency and no longer followed Alphabet Inc. Class C's guidelines, News Corporation would lose at least $9 million in ad revenue that year. She believed that Alphabet Inc. Class C's ad business benefited them more but harmed the interests of publishers. Almost no one in the industry uses other products because Alphabet Inc. Class C's publisher ad server is tied to its ad exchange platform. Layser emphasized that by the time she left her job, efforts to change this setup were still ongoing, with publishers seeking more autonomy and control over their ad revenues.About 70-80% of advertising transactions for News Corporation are conducted through the advertising platform of Alphabet Inc. Class C. However, Alphabet Inc. Class C argues that this data is outdated, as large publishers now typically have six different platforms for selling advertisements, with over 80 related services available.The advertising executive of Gannett, the largest newspaper group in the United States, Tim Wolfe, also testified that Gannett has been using Alphabet Inc. Class C advertising servers for about 13 years and has not been able to find any other viable alternative. In addition to executives from Gannett and News Corp, employees from companies such as Trade Desk, Comcast Corporation Class A, and PubMatic are also on the list of potential witnesses, along with over twenty current or former employees of Alphabet Inc. Class C waiting to be "summoned". The U.S. Department of Justice is proving that Alphabet Inc. Class C is using its dominant position in the advertising technology field to illegally monopolize, preventing publishers and advertisers from using other tools and unfairly harming their competitors' bids.