For years, Google implemented a 20 percent commission fee for ad transactions conducted through its platform, a rate significantly higher than those charged by other industry players. This fee, which executives privately regarded as difficult to defend, is now being used by the Justice Department (DOJ) as evidence of Google’s monopoly over online advertisements.
During the DOJ’s antitrust trial against Google, significant attention was placed on this take rate. Utilizing internal Google documents and testimony from former Google sell-side ads executive Chris LaSala, the DOJ aimed to show that Google experienced little to no pricing pressure due to its dominant market presence. Despite being aware that its fees were higher than those of competitors and receiving customer complaints about its tools, Google maintained its rates.
Emails presented as evidence in court revealed that Google executives questioned the sustainability of the 20 percent fee charged by AdX, the company’s ad exchange. In a 2018 email, ad executive Jonathan Bellack expressed that the fee was “not long term defensible” and suggested that it should align with market value, indicating it should not be double the price.
The continuation of this pricing was largely attributed to Google’s control over accessing a vast advertiser base via the Google Ads Network, only allowing publishers full market access through AdX. In a 2018 email, LaSala responded to a colleague’s inquiry about disclosing Google’s buy-side fee, justifying the 20 percent rate by referencing the unique demand generated through AdWords, which was not available through other means. He mentioned that a sell-side revenue share should ideally be no more than 10 percent for open auction transactions.
Furthermore, in a 2019 email exchange, LaSala acknowledged ongoing calls from buyers and publishers for greater transparency, deeming it reasonable and not to be dismissed. He also cast doubt on the long-term reasonableness of the 20 percent fee, noting that market rates for open auction ad transactions were closer to 10 percent.
Brian O’Kelley, founder of AppNexus, which unsuccessfully attempted to build a publisher ad server to compete with Google’s, characterized AdX’s 20 percent take rate as significantly higher than that of competitors.
The internal communications amongst Google executives underscored their awareness of AdX’s powerful ability to link Google’s publisher-side tool with its extensive advertiser base, allowing for an unusually high commission rate. While Google has argued that its systems benefit all parties involved, the government is attempting to demonstrate that Google illegally tied its publisher ad server and ad exchange to maintain its monopoly, rather than to provide better service.
Google spokesperson Jackie Berté countered these allegations, stating, “Publishers keep the vast majority of the revenue when they use Google’s advertising technology, and our fees are transparent and in line with industry rates.” According to Berté, when Google’s tools are exclusively used for ad transactions, publishers retain approximately 70 percent of the revenue. Google is anticipated to present its defense after the conclusion of the government’s case.
Google employees and executives have acknowledged the significant challenge for publishers to switch ad servers if dissatisfied. LaSala testified about the substantial effort required to change ad servers, citing Disney as the only publisher he knew of during his tenure who successfully made a switch, opting to build its own system instead.
Tom Kershaw, former chief technology officer at rival ad exchange Rubicon, also testified, highlighting the dire consequences of bypassing AdX and thus relinquishing access to Google’s advertiser network, an act he equated to existentially risky for competing entities.
