Monday, October 9, 2023

Dischler Testimony on AdWords Fraud

Adi Robertson:

As the second week of the US v. Google antitrust trial gets underway, the Department of Justice is focusing on the real moneymaker behind Google Search: ads. It alleges that Google’s dominance lets it raise prices for advertisers with few repercussions — a claim backed up by Google ads executive Jerry Dischler on the stand.

Bloomberg’s Leah Nylen has the details of Dischler’s testimony, where he describes statements he made under oath in 2020. Dischler says Google tweaks its auction process in ways that may have raised prices in the past by 5 percent for the typical advertiser and could potentially have raised them by 10 percent for some queries. The parties buying the ads would have been unaware of these “tunings” of prices; “we tend not to tell advertisers about pricing changes,” Dischler said.

Matt G. Southern:

One specific change that boosted Google’s revenue, RGSP, altered the ad auction process so that the second-highest bidder would win the top advertising slot, with the actual winner taking the second spot.

Dischler revealed that while he didn’t know if this change led advertisers to place higher bids, it did increase Google’s revenue.

Leah Nylen (via Hacker News):

Michael Whinston, a professor of economics at the Massachusetts Institute of Technology, said Friday that Google modified the way it sold text ads via “Project Momiji” – named for the wooden Japanese dolls that have a hidden space for friends to exchange secret messages. The shift sought “to raise the prices against the highest bidder,” Whinston told Judge Amit Mehta in federal court in Washington.

Google’s advertising auctions require the winner to pay only a penny more than the runner-up. In 2016, the company discovered that the runner-up had often bid only 80% of the winner’s offer. To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said, citing internal emails and sealed testimony by Google finance executive Jerry Dischler earlier in the case.


Dischler testified on Sept. 19 that Google sometimes tweaked its advertising auctions to ensure it met revenue targets, but most of his testimony occurred in a sealed session. Whinston’s comments Friday described Google’s technique, called “squashing,” that seeks to make the runner-up’s bid more competitive.

It sounds like they are saying that instead of paying 1 cent more than the runner-up you would have to pay 15% more. This is actually less egregious than what I saw when using AdWords myself, which suggested that the auction was totally fake.


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