In Defence Of Google, Mark Israel Tells Virginia Court, Government Misjudging Competition

In Defence Of Google, Mark Israel Tells Virginia Court, Government Misjudging Competition

Judge Leonie Brinkema will rule on the matter by year-end

As Google wrapped up its defense in the antitrust trial that began recently in the US District Court, Eastern District of Virginia, an economist, Mark Israel, has prepared an expert report on behalf of the search engine giant.

He testified that claims of the federal regulators that Google holds a monopoly over advertising technology are improperly focused on a narrow market defined as "open web display advertising.” These are the rectangular ads appearing on the top and the right of a web page when a consumer browses on a desktop computer.

However, the case fails to account for a variety of competition beyond the rectangular boxes. Advertisers have shifted where they spend money to social media companies like Facebook and TikTok, and online retailers like Amazon.

This way, in 2022, Google received just 10 percent of the US market share - down from 15 percent a decade ago, he added.

Israel explained that advertisers had moved away from placing their ads on the screens of desktop and laptop computers where Google, allegedly controls the market, with money migrating to ads placed on apps and mobile device screens. He cited marketing data displaying ad spending on desktop and laptop devices, which decreased from 71 percent in 2013 to 17 percent in 2022.

The government's case "seems to miss where the competition is today," Israel stated.

Meanwhile, District Judge Leonie Brinkema said she expected the government to put on a short rebuttal.

The trial would go on hiatus, with both sides submitting their findings in November and returning to the court to make closing arguments in December. The judge would rule by year-end.

The government had alleged that Google built and maintained an illegal monopoly, restricting choices and inflating costs for online publishers and advertisers. The market control allowed it to keep 36 cents on the dollar for each ad bought and sold through its ad tech stack.

It further claimed that Google controlled advertising, including the predominant technology used by publishers to sell their ad space; advertisers looking to purchase ad space, and the ad exchanges in the middle that conduct auctions in milliseconds to match advertiser to publisher.

The government contended that the search engine illegally tied the markets, forcing publishers to use its technology if they wanted access to a large cache of advertisers. While using narrower market definitions than those used by Israel, the government claimed that Google controlled 91 percent of the market for publisher ad servers and 87 percent for advertising ad networks.

Google stated that the government failed to account for the billions the company invested to ensure its products generate better value for publishers and advertisers by matching the right advertisers to the consumers.

Israel cited the data, displaying that publishers working with Google were generating more revenue for ad space they made available, while advertisers were paying less for each click their ads generated. That occurred because Google's technology continually improved the quality of ads by matching advertisers to consumers. based on their interests and purchase history.

Disputing the government's claims that Google received 36 cents on the dollar for the ad sales, he held that the data showed percentage dropped to 31-32 in recent years. Also, the competitors had higher take rates, with an industry average of 42 cents on the dollar.

Meanwhile, the government had filed another case alleging that Google's ubiquitous search engine constituted an illegal monopoly. The judge in the District of Columbia had ruled in favor of the government and declared the search engine a monopoly, but no decision was made on potential remedies.

The government will soon offer suggestions for proposed remedies. These could include restricting Google from paying tech companies to lock in Google as the default search engine for cell phones or seeking to force Google to sell off parts of its business.