Yosef Weitzman does a GREAT JOB covering The DOJ Google anti trust trial. We have copied his current post here from today Monday Sept 18th

Written by Michael E Dehn

Founder and CEO of Metro Pulse a continually running enterprise since May 1980.

September 19, 2023

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DOJ takes a “deep dive” into Google’s $100-billion advertising bu

Yosef Weitzman from Big Tech on Trial 
 BIG.DOJ takes a “deep dive” into Google’s $100-billion advertising business

Google advertising executive Jerry Dischler was called to testify about Google’s ability to raise prices in its advertising auctions.YOSEF WEITZMANSEP 19 READ IN APP
 Google’s advertisement business took center-stage as Week 2 of its antitrust trial got underway. (Photo by Stephen Chernin/Getty Images)The DOJ’s antitrust case against Google is broadly about Google’s dominant search engine — but the DOJ is actually accusing Google of illegally maintaining monopolies in multiple markets related to that search engine. One of those alleged monopolies is in general search services and another alleged monopoly is in search advertising.¹The markets for general search services and search advertising are obviously related, so a lot of the evidence in this case will bear on the DOJ’s claims about each distinct monopoly.

But through the first week of the case, we’d heard very little testimony that was focused specifically on Google’s alleged monopoly in search advertising.That changed today as the DOJ called to the stand Jerry Dischler, who has worked at Google since 2005 and is currently the company’s Vice President and General Manager of Ads. Indeed, the DOJ’s lawyer said during the start of his direct examination that he and Dischler would be doing a “deep dive into the advertising side of the business.”That “deep dive” highlighted just how big Google’s advertising business is. According to one exhibit that was displayed during the direct examination, Google earned over $98 billion in advertising revenue from its owned and operated properties in 2019 — excluding its revenue from YouTube. That same revenue number was redacted for 2020, but in response to the DOJ’s questioning, Dischler testified it was above $100 billion.

After putting up that exhibit, the DOJ lawyer asked Dischler if it was correct that two-thirds of Google’s total revenue comes from search ads. Dischler said it was incorrect. The DOJ lawyer then tried to impeach that testimony with a prior inconsistent statement from one of Dischler’s depositions — but the deposition statement the DOJ attorney cited didn’t actually seem to say that two-thirds of Google’s total revenue came from search ads. (I’ll confirm this once I’m able to read a transcript, but I think Dischler’s testimony in response to the question was fully consistent with what he had previously said in his deposition).So we still don’t know the exact percentage of Google’s revenue that search advertising makes up, or just how big the revenue has been since 2019. But that probably wasn’t the most important testimony the DOJ elicited from Dischler anyway.That would be the DOJ’s apparent attempt to show that Google has the ability to profitably raise the prices on its advertising auctions without losing significant market share to its rivals.

This is important because it maps on closely to the test that is used to determine whether a company has monopoly power over a specific market. In theory, if a firm does not have monopoly power, then it should not be able to profitably raise its prices because raising the prices will cause it to lose sales to its competitors.It was a bit hard to follow this part of the direct examination because the DOJ was frequently also referring to Dischler’s prior deposition statements, but here’s what I believe that the DOJ was able to establish through Dischler’s testimony:Google has increased its revenue in the past by raising its advertising auction prices by 5%.It is possible that Google could increase its revenue by raising its advertising auction prices by 10%.Dischler said he believed Google’s revenue would not go up if it raised advertising auction prices by 15% as too many advertisers would move their budgets to other advertising platforms instead.Testimony about Google’s ability to raise advertising prices may be especially significant in this case given that Google search is offered to users for free.

As I mentioned in a previous post, that means the government can’t use the traditional test to prove that Google has monopoly power over the market for general search — but that test does still work for the search advertising market. Of course, there are still other ways that the government can try to establish Google’s monopoly power over general search such as by relying on industry-accepted market definitions (and we’ve already gotten to see some of this in the past week).Open vs. ClosedWe saw something else for the first time today since the trial started: the DOJ and Google argued about what DOJ should be allowed to ask Dischler about in open court.Confidentiality and redactions had been the source of some pre-trial disagreements between the parties and Judge Mehta had largely left it to the parties to try to work out between themselves. Since the trial started, we’ve had some closed sessions of testimony, but before today, the DOJ and Google hadn’t raised many disagreements about what should proceed in open court vs. closed session.I summarized some of the details of today’s argument on X/Twitter, but I thought there was one particularly noteworthy exchange. When the DOJ asked Dischler if it was correct that two-thirds of Google’s total revenue comes from search ads, one of Google’s lawyers objected on the grounds that it was getting close to the line of what was confidential. DOJ’s lawyer seemed willing to back off from the question until the closed session, but Judge Mehta said something to the effect of “it might be close to the line, but that doesn’t mean it’s at the line.” (Note: that’s not a verbatim quote, but it was something like that).During the initial argument, DOJ’s lawyer said that two-thirds of his examination would have to be in closed-session if Judge Mehta ruled against the DOJ on its argument with Google.

But since Judge Mehta sided with the DOJ on this dispute, the majority of Dischler’s testimony was in open court.Google’s agreements with VerizonThis morning, we also heard testimony from longtime Verizon employee Brian Higgins who currently serves as the company’s Chief Customer Experience Officer. Much of Higgin’s testimony occurred in a closed session.During Higgin’s open-court testimony, he testified that he “wouldn’t see the value” in providing a specialized vertical search platform (like Yelp) as a default on an Android phone. This testimony likely supports the government’s argument that general search is its own relevant market in which Google competes only against other general search services like Bing and DuckDuckGo. Google has challenged this market definition, arguing that it also competes with specialized search verticals like Yelp, Expedia, and Amazon on a query-by-query basis.Higgins also testified that he wasn’t aware of Verizon soliciting bids from other general search providers when the company recently renegotiated Google’s deal to be its default search engine.

Here’s part of what Bloomberg reported on this testimony:”[S]tatements by Higgins appeared to undermine a key Google defense — that it won exclusive contracts to offer its search engine fairly. Verizon’s decision not to bid its most recent contract stands in sharp contrast to previous years, when Microsoft and Google competed to provide the search engine default.”During cross-examination, Google’s lead-litigator John Schmidtlein asked Higgins about negative product reviews written when Bing was pre-loaded as the default on Verizon Android devices in 2010. Higgins testified that he had never seen any negative reviews like that about Google being pre-loaded on Verizon Android phones. This cross-examination testimony seems to support Google’s defense that Google default placements provide the best user experience for consumers.

That’s all I have for today. I’ll be back in court again tomorrow to keep following the action.

1In fact, the DOJ and State Attorney Generals actually alleged multiple relevant markets relating to search advertising including general search text advertising and general search advertising. Big Tech on Trial is a free newsletter reported by Yosef Weitzman and brought to you by BIG providing daily coverage of the Google antitrust trial.

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