If schadenfreude was your hormone of choice, then last month was a good one if you live for the death of Facebook. Never has a corporation grown so powerful, nor has a corporation been so inept that it couldn’t help but cause its own downfall. Hubris, by another Silicon Valley tech-bru name, if you will.
In 2018 Google and Facebook concluded what the Texas attorney-general Ken Paxton called an “illegal price-fixing agreement”. Both CEOs personally signed off on the deal that would see Facebook win a prearranged number of auctions for Google ads. It would also “kill header bidding,” the open transparent system favoured by media houses and publishers.
Facebook COO Sheryl Sandberg wrote an email to her boss Mark Zuckerberg in 2018 that “we’re nearly ready to sign and need your approval to move forward”.
Meanwhile, “Google CEO Sundar Pichai also personally signed off on the terms of the deal,” the 17 States allege.
It’s a smoking gun.
Texas has taken the lead in this multi-State lawsuit originally filed in December 2020 and which was heavily redacted. Last week more of those redactions were removed and these shocking new details emerged.
“Ultimately, Google and Facebook struck a deal executed at the highest levels. Following the agreement, Facebook curtailed its involvement with header bidding in return for Google giving Facebook information, speed, and other advantages,” the States allege.
This refers to how Google tried to see off a new technology – called header bidding – that media houses and publishers were using to open up the digital advertising market. It enables multiple digital advertising networks, or exchanges, to bid at the same time for inventory on publisher’s websites.
Header bidding was an “existential threat” to Google, according to the lawsuit, which one of Google’s most senior executives made this his top priority and said it needed an “all-hands on deck approach” from the search giant’s leadership.
“Google quickly realised that this innovation substantially threatened its exchange’s ability to demand a very large — 19 to 22% — cut on all advertising transactions,” Paxton and 16 other States claim.
Imagine that, one-fifth of the cost of a service, sucked up in transaction fees. No wonder Google seemed so hellbent to keep this fat profit from being eroded by transparency in header bidding.
Instead, it offered its own alternative technology to the publisher’s – Open Bidding – and struck this “illegal price-fixing agreement” with Facebook with the proviso that “no matter how high others might bid, the parties have agreed that the gavel will come down in Facebook’s favour a set number of times”.
To add insult to injury, having stolen the primary source of income from media houses and publishers, “Google pocketed the difference between what it told publishers and advertisers that an ad cost and used the pool of money to manipulate future auctions to expand its digital monopoly”.
This is pretty damning evidence against Google and Facebook – and the US are unlikely to make the claims that they have without the proof they need.
It’s hard to see Facebook – especially Zuckerberg and Sandberg – wriggle out of this. Email evidence is pretty compelling. Just ask recently convicted fraudster and Theranos founder Elizabeth Holmes, who is facing multiple 20-year convictions.