In 2010, one Google product manager Scott Spencer came up with a interview explains Google’s use of a “second price” auction to place ads on the web. In the second bid auction, the highest bidder wins, but no matter what Monday The highest bid is . Economists love this setup — guy who theorized it won a Nobel Prize — because it encouraged participants to bid on any item that was truly valuable to them, without worrying about overpaying. As Spencer explained, “it minimizes the need to ‘game’ the system.”
But what if Google is the system player?
That was the accusation made in a antitrust lawsuit led by a coalition of states led by Texas Attorney General Ken Paxton. On Friday morning, a federal judge released an unresolved version of the most recent complaint in the case, first filed in 2020. The document provides unprecedented details. has about how Google allegedly misled advertisers and publishers for years by manipulating auctions to its own advantage using inside information. When an employee included it in a newly disclosed internal document, Google’s public statement about the second auction was “dishonest.”
The Texas case, one of the Some companies are facing, which is intended for Google’s control of the auction-driven display advertising market. Google absolutely dominates every link in the chain between the advertiser and the audience. It owns the largest buyer platform, largest advertising exchange and largest publisher platform. So when you see an ad on a website, you should bet that the advertiser used Google to place the ad, the Google exchange sent the ad to the website and the website used it. Use Google to provide space. In other words, Google runs the auction while representing both buyers and sellers in that auction.
This presents a obvious conflict of interest. As one employee said, quoted in a previously unsealed version of the lawsuit, “The analogy would be if Goldman or Citibank owned the NYSE.” According to Texas, Google couldn’t resist the temptation to use market control to its own advantage. The lawsuit alleges it implemented at least three programs secretly designed to distort supposed second-price auctions. While the existence of those programs has been made public, the new unresolved complaint provides new details on how they are supposed to function.
The first program, launched in 2013, was the oddly named Project Bernanke, like that of former Federal Reserve Chairman Ben Bernanke. According to Texas’ description of internal Google documents, here’s how it works. Let’s say the highest bid set through AdX, Google’s ad exchange, is $10 and the second highest bid is $8. In that case, the advertiser who bids $10 wins the auction and pays the publisher $8. However, according to Project Bernanke, Google allegedly will pay any publisher the third day-the highest bid is — let’s say $5 — while still charging the full $8 to the advertiser.
What happened to the 3 dollar difference? According to the complaint, Google would suck it into a “Bernanke group” that it used to leverage its own ad-buying tool, Google Ads. The filing cites an internal 2014 document in which a Google employee described the need to reverse the “disturbing trend of 2013”: rival ad-buying platforms won multiple auctions on AdX. According to the complaint, Google used the proceeds to increase bids that would otherwise be lower than bids placed through those other platforms. (This may explain why the show is named after Bernanke, who pushed for “quantitative easing” – pouring money into the economy – to combat the Great Recession. An insider slide of Google uses the phrase quantitative easing.) First, Google tracks how that money was withheld from publishers and eventually returned to them. However, according to the complaint, later versions of the program even stopped doing that.
