Behind a Secret Deal Between Google and Facebook

The Wall Street Journal had reported on aspects of the draft complaint earlier.

The swell of recent antitrust cases filed against Google and Facebook has cast a spotlight on lucrative deals among Big Tech. In October, the Justice Department sued Google and homed in on an agreement with Apple to feature Google as the preselected search engine on iPhones and other devices.

“This idea that the major tech platforms are robustly competing against each other is very much overstated,” said Sally Hubbard, a former assistant attorney general in New York’s antitrust bureau who now works at Open Markets Institute, a think tank. “In many ways, they reinforce each other’s monopoly power.”

Google and Facebook accounted for more than half of all digital advertising spending in 2019. In addition to displaying advertising on their own platforms, such as Google’s search engine and Facebook’s home page, websites, app developers and publishers rely on the companies to secure advertising for their pages.

The agreement between Facebook and Google, code-named “Jedi Blue” inside Google, pertains to a growing segment of the online advertising market called programmatic advertising. Online advertising pulls in hundreds of billions of dollars in global revenue each year, and the automated buying and selling of ad space accounts for more than 60 percent of the total, according to researchers.

In the milliseconds between a user clicking on a link to a web page and the page’s ads loading, bids for available ad space are placed behind the scenes in marketplaces known as exchanges, with the winning bid passed to an ad server. Because Google’s ad exchange and ad server were both dominant, it often directed the business to its own exchange.

A method called header bidding emerged, in part as a workaround to reduce reliance on Google’s ad platforms. News outlets and other sites could solicit bids from multiple exchanges at once, helping to increase competition and leading to better prices for publishers. By 2016, more than 70 percent of publishers had adopted the technology, according to one estimate.

Seeing a potentially significant loss of business to header bidding, Google developed an alternative called Open Bidding, which supported an alliance of exchanges. While Open Bidding allows other exchanges to simultaneously compete alongside Google, the search company extracts a fee for every winning bid, and competitors say there is less transparency for publishers.