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- [00:01]
Ari Papero
This podcast is brought to you by audiohook, the leading independent audio dsp. Audiohook has direct publisher integrations into all major podcast and streaming radio platforms, providing 40% more inventory than what could be accessed in omnichannel DSPs. What's more, audiobook has full transcripts on more than 90% of all podcast inventory, enabling advanced contextual targeting and brand suitability. Audio Hook is so confident that in addition to CPM buys, they offer the industry's only pay for performance option, where brands can scale audio and podcasting with peace of mind. Mind knowing they are only paying for outcomes. Visit audiohook.com to learn more. That's audiohook.com.
- [00:52]
Alan Chappelle
Welcome to the Monopoly Report. The Monopoly Report is dedicated to chronicling and analyzing the impact of antitrust and other regulations on the global advertising economy. If you are new to the Monopoly Report, you can subscribe to our weekly newsletter@monopoly-report.com and you can check out all of the Monopoly report podcasts@monopolyreportpod.com I'm Alan Chappelle. This week my guest is Ari Papera. I think most of my listeners know Ari from his day as a doubleclick app, Nexus Beeswax, and now as CEO of marketecture, the company that owns the Monopoly Report podcast and newsletter. Arie is here to talk about his book, How Google Bought, Built and Bullied Its Way to Advertising Dominance. I'm coming at this discussion for what I think is a different perspective than some of the other interviews I've seen Ari do recently. I want to ask some tough questions about Google's various competition cases and see if we can break some new ground. And I'm hoping to ask a question that every privacy and regulatory professional will want to know, namely, how can we get senior business leaders to pay more attention to regulatory issues? So let's get to it. Hey, Ari, thanks for coming on the pod. How are you, man?
- [02:03]
Ari Papero
I'm great. It's a little weird to be on this pod as a guest.
- [02:06]
Alan Chappelle
Yeah, it feels like the roles are really reversed. It was just literally a year ago today where I think I was on the market pod. And so, you know, everything has come around full circle, I guess.
- [02:16]
Ari Papero
I know. And now you're a major podcaster with your own listenership. I'm an author and it's very complicated, this whole new media environment.
- [02:24]
Alan Chappelle
It is. But you seem to be thriving. You seem to be everywhere. That's. That's the comment that I'm hearing from literally everybody. It's like, I'm going To interview Arian, it's like, oh, well, he's everywhere.
- [02:32]
Ari Papero
Well, I got to sell some books, man. Like, you know, the. All. All modesty goes out the window when you have to sell some books. Like, you want me on Oprah, you want me on, like, your local bookstore, you want me on your kids programming, whatever. I'm selling some books, dude.
- [02:46]
Alan Chappelle
I'm a former touring musician. Like, if there's ever a thing where you just kind of whore yourself out to any. Anything that can get you a little bit of publicity, you're going to do it.
- [02:55]
Ari Papero
Yep. I'm going to do the drive by spot on the morning radio.
- [02:58]
Alan Chappelle
Fantastic. So what made you decide to write a book?
- [03:02]
Ari Papero
I thought it was a good story. That's really the short, very short answer, which is that the story of sort of the history of ad tech is maybe interesting to, you know, 500 people. And there are some pretty interesting twists and turns. But when you frame it, when I framed it as, how did Google, which is probably the most important company of my lifetime, you know, and it's the standard oil of the second half of the 20th century or something like that, or the first half of the 21st. And how did this company that's so important go from literally nothing, they had no advertising business outside of search, to such dominance that they're being broken up by the federal government, they're being sued by state governments, they're being broken up by Europe, they're being sued by Canada, and their private suits left and right, effectively becoming like big tobacco for advertising. That's an interesting story. And there are people involved. It wasn't just a anonymous march to dominance. There were customers, people at publishers and agencies and advertisers and competitors, all of whom were, to some extent, collateral damage in that story and have interesting perspectives and stories to tell.
- [04:10]
Alan Chappelle
Yeah, I mean, on some level, you're taking a page from Hunter S. Like, it's almost like a gonzo journalism thing where you're a part of the story here, right?
- [04:18]
Ari Papero
I'm not really. Yeah, I mean, I'm like. It's more like Zelig. I'm like, in every scene, but I don't have any lines. Especially the first half of the book, which talks about the invention of the ad Exchange and DoubleClick's acquisition by Google. I was there. I mean, I was a VP at DoubleClick and later Director at Google, but I wasn't on the sell side. I was on the buy side, meaning the product that used to be called dfa, that's now called gcm and that was not that involved in these shenanigans. Like basically the thrust of the story is sell side. It's about taking the monopoly of DFP later gam and manipulating that monopoly to the benefit of Google. So even though I was there, I didn't have that much to do with it.
- [05:02]
Alan Chappelle
So how deep did you go into the history in your book and where did it start? Like, I mean was it just the DoubleClick acquisition or did it go prior?
- [05:10]
Ari Papero
Yeah, I did something like 65, 70 in depth interviews with people in our industry. I also read has to be a thousand documents from the court cases and put together a pretty compelling narrative as well as taking contemporaneous reporting from adex, Digiday and the rest of the great journalists in our space. So I didn't leave any stone unturned. What I did when I wrote the book is I didn't want it to be History of Ad Tech. This happened then, this happened then there was this guy that's boring. I wanted to tell stories. And that's where maybe a little bit of the Hunter S. Thompson thing comes in, in that I use the interviews I did with people to paint the picture about their motivations and what they were doing at the time. That moves the story along. And so we're starting with Brian o' Kelly and David Rosenblatt. So everyone knows Brian, maybe some folks don't know Rosenblatt. He was the CEO of DoubleClick through the acquisition and this feeling like the invention of the ad exchange was changing everything. And what did that mean? Like what did it mean to be changing everything? And Rosenblatt at the time says he was running DoubleClick, he was very successful. And he said I felt like I was on the bridge of the Titanic clinking my champagne glasses because he knew that this Pandora's box had been opened and Google was coming after them. And so the acquisition in a sense was defensive. Even though it was quite an eye popping, 3.1 billion. The reality was that the financialization of advertising was going to lead inevitably to the dominance of tech in that space.
- [06:44]
Alan Chappelle
And that's really my next line of questions, like because, all right, so there's people in our industry today who have been around a while, a decade or more, who have never known a day when Google wasn't the biggest and baddest cat on the block. And so I'm curious, in your opinion, when did the trajectory here become truly inevitable?
- [07:04]
Ari Papero
So they acquired DoubleClick and Neil Mohan is put in charge of the strategy And I talk about this a lot in the book he identifies there's a three pillar strategy. You have the platform dfp, you have the ad exchange that makes the DFP inventory available for sale. And then you have the ad network which used to be called the Google Display Network or gdn. And they got rid of that name at some point. And so in his view, the demand comes from gdn, it gets transaction to adx and it ends up in dfp. And, and if you do those three things, you're going to, you know, build a really big business. I'm not sure dominance is the right word, although some people certainly use that word. You're going to build a really big business. Let's just put it that way. You know, in the transaction, the estimate that Neil and David gave to the potential buyers was that There was approximately $3 billion in synergy per year from acquiring DoubleClick, which is a big number. So when did they become dominant? Well, it wasn't right away because it's a little hard to remember. But in 2009, 10, right after the deal closed, ADX was tiny, absolutely tiny. There was much more innovation happening from competitors like Admeld, PubMatic, Rubicon Project were much more advanced than ADX. And really importantly, the Google Display network was a piece of crap. It didn't have any measurement, it didn't have frequency capping. Can you imagine buying on an ad network that had no frequency capping? So it was a cookie less display ad network. AdSense, the text side was doing pretty well, but the images were doing terrible. So it was only a couple of years later and I don't think there was one announcement you can point at, but sometime in like 2013 ish, 12 or 13 ish, when Google got its shit together and the display network was at parity, it was a buyable network, the Salesforce was selling it. ADX was plugged in and was starting to become an obvious leader. They had acquired admld, so they had people on board like Brian Adams, who's, who's currently I think the CTO of Spotify. But at the time he was the co founder of admld and he was basically telling the Google team what to do, how to build a real exchange that worked with things like private exchanges. That was a big innovation at the time. And lastly, the acquisition of Invite Media which took place I guess in 2010 had been rebuilt as the initial, it was called something else. But what's currently DV360 which gave them a complete package buy Side middleman, sell side network liquidity. So that all kind of gelled in that early part of that decade and after that it was game over.
- [09:44]
Alan Chappelle
Yeah. And then was it just a matter of just, you know, they continually. Them kind of just increasing a stranglehold over the rest of the ecosystem and over time.
- [09:53]
Ari Papero
Yeah. And you know the subtitle of my book, which we didn't say the name of the book. Come on, man. It's called Yield How Google Bought, Built and Bullied Its Way to Advertising Dominance. And I want to, I want to explain why I called it that. So bought, built and bullied. I want to give them credit. They bought, they bought Admel, they bought invite, they bought DoubleClick. They built like hundreds of engineering years, went into fixing a lot of these old crappy DoubleClick products, the ones that I built, you know, that were just not up to speed for that era. So the investment was heavy and they deserve credit for that. But then the bullying starts and you have incremental decisions being made by various people at Google that just hurt competition at every stage. So you have DV360 exclusivity onto YouTube that hits around 2014. That's a death blow for independent DSPs. It's a miracle that DSPs were able to survive, survive that, given how important it was. You have the what's called dynamic Rev Share, which is where Google would manipulate the fees it's charged between buy and sell side to win more. So their auction volume started increasing at the expense of competitors. You had Project Bernanke and Project Bell, which were other auction manipulations to enshrine Google's power. And then ultimately, like around after header bidding comes out, there's all this dirty business around trying to kill header bidding ends up in exchange bidding and then ends up in the ultimate straw that breaks the camel's back of unified pricing rules, or upr, where it was so blatantly obvious they were working against the interests of their customers that it shocked people.
- [11:34]
Alan Chappelle
Okay, so that really leads me because the bullying part is what the next thing I want to talk about here. So the trial surfaced a bunch of stories documenting, we'll just say, questionable acts and some of which were conducted by friends of yours.
- [11:48]
Ari Papero
But hopefully, hopefully no. I sent an email, just, I'm going to drop here for one second. I sent a little text message to my group chat and I was like, hey, guys, you all know I wrote a book. You all know what it's about, you're in it, and we have to still be friends with after it comes out. Well, good.
- [12:07]
Alan Chappelle
And I think that that kind of perspective is certainly helpful. It's, I think, better to be better, more objective than not. But one of the things that I caught from one of the interviews, the thousands of interviews you've done for the book so far, you know, you've gone out of your way to say that, you know, Google isn't a bad company and so help me reconcile, you know, what seem like bad acts and you've got stories of, you know, people being gaslit and you know, companies being strangled. And how do you reconcile those two statements?
- [12:37]
Ari Papero
I think there are bad behaviors, right. And I think I came away with was that there was pretty widespread arrogance. I think they're certainly guilty of arrogance. Undisputedly unanimous verdict of arrogance throughout the company in that the way they treated their customers was paternalistic, like publishers don't know what they're doing. There's a lot of that sentiment in the emails. We'll change the auction because publishers are going to try to get more yield out of it in bad ways that they don't understand Their long term interest though that sentiment was, was widespread inside the company and is really not a good look when those are your customers. There is arrogance in the way the accounts team treated their customers. They treated them like they were lucky to be using this ad server when in fact they desperately wanted to get off of it and were unable to because it's a monopoly. And then in terms of evil, right, don't be evil, the famous and very unfortunate motto of the company, they did some things that if there was a clear sight at a leadership position in the company, they may have chosen not to do. And I think what happened was that a lot of the original double clickers who were much more empathetic to the media business and understanding of the customers started to peel off and go to other jobs inside the company or leave. And the folks who took over were much more search types from the west coast and who were just about making the numbers go up and to the right to get promoted. And you kind of lost track of whether what you were doing was actually a good idea or not. The worst things they did were manipulative. They didn't drive anyone out of business on purpose. They didn't do any things that I would consider like really evil corporate behavior. They did a lot of things that were not to the benefit of their customers in their own benefit, gaslighting people telling half truths and things like that. So that's where I end up is kind of a Moral mixed bag and.
- [14:36]
Alan Chappelle
Fair enough. And just an observation for me. I was at DoubleClick back in 2001, and my two observations about my time there, by the way, I was a salesperson who could not sell a thing. So take this as the. Were you on the next employee?
- [14:50]
Ari Papero
Wait, hold on, hold on. Who did you report to and what did you sell?
- [14:54]
Alan Chappelle
I reported to everybody because they kept changing the company every three months, but it was Doug Knopper and Tom Faschetta and Gian. So I was in the. The diameter research business. And the diameter research business was this redheaded stepchild that they did everything they could to make sure we couldn't talk to Dart for advertisers where at which completely handcuffed our ability to, like, sell the darn thing. All right, but that wasn't my point. And my point was that first, the media side, even back in 2001, really was kept in a different place than the tech side. Culturally. It just felt like there were some people like, oh, yeah, I remember that guy over there. We used to work together. But like, it was felt like they were separate companies. And then the arrogance thing, at least on the tech side, I think was not entirely an invention of Google. I think some of the DoubleClick folks kind of came in with that, you know.
- [15:45]
Ari Papero
Yeah, DoubleClick definitely was an arrogant company in the era that you're talking about. I think a lot of it got kind of stamped out because the company had such a bad run in the mid 2000s. Like when I started, the company was publicly traded and was at like, you know, $5 a share or something. And so. So some of that got stamped out. But, you know, the company always had swagger, and it was just a kind of a different vibe once it had been fully absorbed into Google.
- [16:12]
Alan Chappelle
So you went into the ad tech trial as pretty much an expert in ad tech and Google, both from the perspective of understanding how the plumbing really works, but also understanding some of the key business drivers. And so was there anything that came out that really blew your mind, you know, either about, you know, how the space really worked or about how the cultural mindset of the industry or something else?
- [16:33]
Ari Papero
Yeah, a couple of things I thought were pretty interesting when we're talking about metrics and economics. The first thing, and I kind of knew this, but it was a little bit shocking. I still think this is underreported story is the extent to which adx is subsidized by the rest of Google. So we think of ADX as more than 50% market share still, it used to be more like 70% before header bidding. And we think of it as this monster business, et cetera, et cetera. But the reality is that more than 60% of the demand on ADX is from Google Ads, meaning AdWords. Right. And Google Ads has no choice about where else to buy. So it's a captive customer. And Google Ads made many intentional decisions to overpay adx to win more on adex. So if adx was a standalone and only had one advantage, which would be the DFP integration and didn't have the other advantage, the buy side, it'd be a tiny business, it wouldn't be dominant at all. And the extent to which it was subsidized is just dramatic. So that was kind of the first interesting point and that really is relevant when we start talking about remedies, because if adx gets spun out on its own without the other things, I'm not sure if it's worth anything. The second thing, and this is also kind of the same topic in a different sense, is that there was testimony at the trial from the woman who, I forget her name, but the woman who's in charge of finance for the Display group. And so Display at Google is not a real division. The real division is called Network, which is on the financial statements. But they cobbled together sort of a P and L for Display, which was like parts of network and parts of non network and they subtract YouTube, you know, some complicated internal thing. And she testified pretty clearly that Display was not profitable at Google. So we have a monopoly dominant position over 90% share on the AD server, 50% share on, on ADX, probably 30 or 40 on DV360. And it loses money, which is just astounding. And she testified more specifically that the only thing that got it close to profitability was the giant upsurge in AdMob, the mobile business during COVID And so if you fast forward, because the latest data we had from the trial is 2020, the network business has been flat to down since then. Mobile keeps growing. It probably implies that the display business is still quite unprofitable and maybe even declining in size.
- [18:56]
Alan Chappelle
Yeah, and that begs the question of why are they holding onto it?
- [18:59]
Ari Papero
Why are they holding it?
- [19:00]
Alan Chappelle
Is it entirely a day to play? Is it just that they need that chip because they are negotiating with regulators all around the world around divestment options and if you get rid of that, they're just going to be. The next question is great, what else?
- [19:13]
Ari Papero
I think there's three Things. One is what you just said, which is the poker chip. The longer they push this, the network business, the ad tech business, the more value they keep to ultimately settle other things. The second thing is the data. So having tag on the page with effectively every publisher on the Internet is very valuable for search, for analytics, for data, DV 360 for AdWords, for all those other things. And we know that's true because when Google tried to get its AdWords bidder to bid on other exchanges, which is a program called AW Bid or awbid, they really struggled to get it to work with other exchanges because they didn't have nearly as good telemetry on fraud and identity and stuff like that. So the tag on the page really matters to a lot of the business. And the third thing is pmax. You know, pmax is the growth engine for the, for maybe all of Google. It's taking advertiser dollars and sending it to YouTube pretty aggressively. And I've got to imagine that that business benefits in a lot of ways from having that tag on the page and having the demand in GAM and other things like that.
- [20:26]
Alan Chappelle
Okay, let's talk remedies. So I'm going to give you two scenarios and I would love your thoughts on how the marketplace works out. So first scenario is, in both the search and the ad tech case, the DOJ gets everything that they're asking for currently. What does the marketplace look like in three to five years?
- [20:43]
Ari Papero
Yeah, so certainly Google's going to appeal. I don't want to go into too much depth on that, but. So the DOJ would ask for a Chrome spin out that Google's restricted in some way on AI data collection and that in the ad tech case, that DFP and ADX are spun out separately over time. What does it look like for Google? Well, they're going to lose a big chunk of revenue. Now. A lot of that revenue maybe is lower margin, so it won't necessarily affect the stock that much. I'm pretty confident Google can manage through it. They might put more and more, they would put more and more of their efforts into YouTube. They'd look a little bit more like Meta does, where Meta spends, you know, 99% of its time on its own app and 1% of its time on Fan. You could be in a similar situation. I think there's an open, interesting question about whether and how Google thinks about DV360. DV360 is also not profitable and is not subject to the DOJ's remedies. No one's asking them to spin out DV360 but they might choose to or they might choose to de emphasize it or a lot of other things because it does feel like the odd man out in the Google side of things. How does the world look outside of Google? Well I think it looks increasingly diverse. I think that you might see in the ad tech side multiple ad servers or ad server like technologies from companies like Magnite, Pubmatic, maybe Microsoft App, Nexus or whatever it's called. It starts revitalizing and publishers have a lot of choices about how they want to manage their businesses. I'd love to see some innovation, not just the same old same old but you know, you could have much more aggressive integration of things like native ads which have always been sort of stymied by the complexity of implementation. So I think that you'd have more variety on the publisher side. The billion dollar question though is do publishers make more money or not? Because publishers are struggling. A lot of the benefit of the monopoly Google monopoly is that ultimately dollars end up on publishers income statements and interrupting that flow might not be great, might involve more friction, less yield and publishers have enough problems already so we'll have to wait and see on that one.
- [23:02]
Alan Chappelle
Do you think that if the DOJ gets everything they want, does that hasten Meta's re entry into the open Internet?
- [23:11]
Ari Papero
Yeah, I've speculated about this before mainly based on the evidence that in the trial Meta documents were presented that specifically said they did not want to be in the open Internet because Google was intermediate mediating them. And they said there was a Google, there was a slide from Meta that says no matter what we do we have to go through Google. And then just about six months or a year after that slide they turned off fan on open web and so could they re enter? Yeah, maybe. I don't think it's a top priority given that there's a secular decline in web based media. But certainly having Google stop intermediating could be a green light for interested parties be they TikTok, Microsoft, Meta or others to move some of their dollars back to the open web.
- [23:59]
Alan Chappelle
Okay, so what does the world look like if Google gets everything that they ask for currently or they're currently proposing?
- [24:05]
Ari Papero
Yeah, so Google's remedies are basically forget that we're a monopoly and go back to business. Their counter proposal is like a joke.
- [24:13]
Alan Chappelle
I think they're also asking for an apology.
- [24:15]
Ari Papero
Yeah, an apology, pay their legal fees. I think the world looks pretty bad if Google wins. And the reason is because I fundamentally don't think they really care about this business very much. I think that they're operating the network business as a siphon for dollars to move to YouTube. That's their top priority and that would continue. And so if you're a publisher who's stuck on their stack, it's a monopoly. They probably are not putting their best people on it. If you were a Google engineer, would you really want to work on the product that already has 90% market share and angry customers doesn't sound that appealing. So I think that you would see a slow decline in the quality of the offering and the dollars that were flowing to those publishers. And it still would probably be more of a fair market because I think they would be under so much scrutiny that they wouldn't bother manipulating the market anymore. But effectively I just don't think they care very much.
- [25:16]
Alan Chappelle
Okay, I've got a bit of a therapy question here for you. So I don't know for me or you, are you on the couch or.
- [25:21]
Ari Papero
Am I on the couch?
- [25:22]
Alan Chappelle
No, I'm on the couch here. So you know Dr. Paparo, so why is it so difficult to get business people in the ad space to focus on regulatory issues?
- [25:32]
Ari Papero
Well, okay, that's a hard question. The first of all, I think there's learned helplessness because I've now I'm coming on 20 years and there's been no legislation, there's been nothing. The government hasn't done a single thing that's helpful to me in the industry. The only thing that's happened in those 20 years is GDPR got adopted, which was an example of bad over overwrought regulation. I'd say good, good idea, bad implementation. So why should I spend effort or time hoping and wishing that someone in Washington will do something obvious and pass a law? You know, I think people basically gave up.
- [26:12]
Alan Chappelle
Okay, but this is separate from the rant around like why doesn't DC get its act together and put together a national privacy law? Because even in the absence of that and even we don't even have to talk about the state laws. But like there's Apple, att, there's all of the shenanigans that Google has instituted in the name of self regulation over the last 10 to 15 years. There's the DAA and the NAI. So like there's not a lack of things to be talking about and opining on. Nonetheless, I would say that, that you know that the business community pays at best lip service to this kinds of stuff.
- [26:47]
Ari Papero
Yeah, maybe we could be more the business community If I'm speaking for them, could be more aggressive, I'm not sure. Besides, I mean we have, we have how many trials going on right now in New York there's a multi party trial against Google on the same grounds being led by Daily Mail and Gannett and others, you know, rumble tried to sue Google for these same charges and it just got dismissed for other reasons. The state and federal trials against Google were largely instigated by publishers who were tired of what they felt was abusive activities. So the courts have been a pretty active area for all of this. In the non ad tech world you have Epic, which effectively broke Apple's monopoly on the App Store, which is a pretty impressive accomplishment.
- [27:34]
Alan Chappelle
So.
- [27:35]
Ari Papero
Yeah. So what's missing? Well, no one went after Apple for att. It's a tough case. Like it's a very tough case. You know, Apple's not a monopoly. They obviously can claim the privacy benefits of that. The sandbox. Geez. I mean you've written about this. It was litigated, it was put into the cma, it was a fight. It just turned out to be a waste of time for everyone involved. So what would you suggest they do?
- [27:57]
Alan Chappelle
And that's my question is the prevailing sense that a lot of this stuff is ultimately a base of time and that we just need to get down to business or closing the next quarter's round of business.
- [28:08]
Ari Papero
I think the ultimate problem that the digital advertising world has is that there are large tech firms with much, much larger balance sheets. Like not just much larger, like a hundred times larger balance. She who largely control the destiny of digital advertising and have either negative or neutral opinions about advertising. And it's pretty difficult to fight against that. In the cases where it's obvious, like in this Google case where they obviously had a monopoly and they're obviously manipulating it, there was a straightforward thing to do. But like imagine if the IAB or Jason Kent and his group, because they're more of an advocacy group, they went to Congress and said, you know, you should regulate the browsers. Do you really think that's going to result in anything? I mean on the other side you have Google and Apple with sort of unlimited lobbying funds saying like, oh no, we're innovative. It just seems kind of like a dead end.
- [29:10]
Alan Chappelle
Yeah, I think that's a fair point and I might position it a little bit differently. You do have these large tech companies who are able to control the narrative in most of the rooms that they're in. And so diving beneath that is work. And you've already got a Job.
- [29:25]
Ari Papero
Yeah, yeah. And these companies, ad tech companies, independent ad tech companies are just not that big. Like think about a big one. Like, I mean like Magnite. I haven't checked recently, but single digit billion market cap, less than a thousand employees. I think just, again, just off the top of my head, it's not a very big company to start spending, I don't know, $25 million a year on lobbying. That would be a big expense that would change its earnings if it did that.
- [29:52]
Alan Chappelle
Oh, absolutely. And also just 25 million is a drop in the bucket. So let's say you put $25 million in there. I don't know what you're getting for that.
- [30:01]
Ari Papero
Right. So who has the ability to wage these theoretical fights that you're yearning for? It's Google. So Google could have sued Apple on antitrust grounds when ATT came out or maybe or Facebook more likely would have, but they obviously decided not to. I mean, it's not a good look in the public either to be like, no, we want to track users more. You know, that would have been a pretty negative PR cycle for them.
- [30:30]
Alan Chappelle
Fair enough. What's working against Apple now? And again, this is just Europe and so it's just France and Germany, but their competition regulators pretty much ruled that ATT was an anti competitive canard.
- [30:42]
Ari Papero
Good.
- [30:43]
Alan Chappelle
And so we'll see where that ultimately goes. But even that, you know, it's sort of like, okay, then what, you know, do I think that there's a chance that, that something may happen to Apple where they at least feel less emboldened to, you know, do what they do and stick their middle finger out at everybody? Maybe, but that's one of the challenges.
- [31:02]
Ari Papero
Yeah, I mean, do you want to, do you want to go back and start litigating, do not track again, like this is.
- [31:08]
Alan Chappelle
Well, that was fun.
- [31:09]
Ari Papero
It's the exact same argument. The exact same argument, like, oh, industry groups should do something about privacy. Let's do it. Oh wait, no. Big tech giants don't agree with our point of view. Everything goes to shit.
- [31:19]
Alan Chappelle
Okay, but now we're off at a side argument. We may end up just editing this out. I would just say the W3C is not an industry group. The W3C is a handful of browsers and privacy advocates who decided in the name of privacy to do everything they could to stop the ad tech industry from doing almost anything, but nonetheless would not restrict browsers ability to send Google search data.
- [31:43]
Ari Papero
Right, right. So this is so to the extent that there is some theoretical regulatory framework that makes that balances advertising with consumer privacy and with fair dealing in commerce. I think it's pretty far away and would never get to any consensus.
- [32:04]
Alan Chappelle
Fair enough. I want to shift gears a little bit, and I'm looking forward to the separate state ag case trial later this summer. So. I think you just told me you were attending.
- [32:15]
Ari Papero
I'm tentatively. Like, the idea of going to Texas on August 11th for a week is really unattractive, but I think I'm going to do it. And there's some funny emails going around where the various reporters in our space are all emailing each other, like, are you going? Like, where are you staying? Where is Plano? You know, it's. It's very under the radar.
- [32:35]
Alan Chappelle
Yeah, I don't have the attention span to go. I mean, honestly, you and Arielle and Megan Gray, mad props to all three of you, because to be able to sit in a room like that and come out with anything coherent, I'd be songwriting or, like, setting notes to my wife or something. Like, I don't know how. There's just a lot going on there that you're paying attention to.
- [32:54]
Ari Papero
So, no, I like. I like that sort of thing. I think I'm really interested in this case because I think it's going to be a lot more red meat than the federal case. By all indications, the attorneys general, especially Texas, they just want blood. And there's absolutely a political angle to this story. Like, there is not a coincidence is happening in a red state, and they're going for blood. So I want to. I want to get some of that red meat. It's like a UFC for ad tech.
- [33:20]
Alan Chappelle
Well, yeah, UFC is a really good analogy because so if. If. If you have any experience watching how things work in Washington, in D.C. that is a gentle person's forum. You go into some of those states and they're going to start throwing elbows.
- [33:36]
Ari Papero
And, yeah, it's a jury trial, too, so they're going to try to make it as dramatic as possible to influence the jury. Also, it's very important to note that, like, the DOJ left out the auction manipulation parts of the trial. They. They intentionally did not include any auction manipulation in the trial, whereas Texas is very focused on that.
- [33:57]
Alan Chappelle
In addition to manipulation, do you see any other potential bombshells?
- [34:01]
Ari Papero
Well, there's some debate about whether Jedi Blue is in or out of this Texas trial, and it's really complicated. And everyone seems to have an opinion about whether Jedi Blue, meaning the pact between Google and Facebook, will be adjudicated and what sort of details and Whether we'll hear from people like, you know, Zuckerberg and Sandberg and stuff like that. So that's an interesting angle. I personally, now I'm editorializing, but I personally think Jedi Blue is not a big deal at all. I think it's just a total canard and not important, but it would make good trial drama.
- [34:35]
Alan Chappelle
Well, why not walk me through that?
- [34:38]
Ari Papero
So Jedi Blue was an agreement where Facebook would agree to start bidding into Google's open exchange system and paying them a fee, so 5% fee. And in exchange they got certain guarantees from Google really about the quality of the auctions, like how often the user ID would be present in the auction, that sort of thing. And the interpretation that's very negative is that this was a collusion between two giant companies to corner the market and that there was a quid pro quo where Facebook agreed not to build its own header bidding solution. That's like the most negative thing you could say about Jedi Blue, in my opinion. First of all, the agreement has no evidence that there was a quid pro quo. There's an email from a Meta executive that says something like, well, it's obvious what they want. They want us to stop building header bidding. Okay, great. That's an email, internal, between Meta people chatting about Google's motivations. It's not a smoking gun. So that's the first thing. No smoking gun. Secondly, the various provisions in this agreement that get people worked up, like the minimum percentage of auctions that have IDs and the minimum payments from Facebook, they just strike me as ordinary course of business, SLA type things. Why would Facebook agree to pay them a minimum amount of money unless they knew there was going to be a minimum number of IDs? It's pretty straightforward. And the fact is it was just bigger than any other deal either company had ever done. Meant that there was more and more protections in it. So I think this is a nothing burger, basically.
- [36:16]
Alan Chappelle
Well, since we're talking about Meta, have you been following the FTC antitrust trial against Meta?
- [36:22]
Ari Papero
Yeah, indirectly. I haven't been there, but I've been following it.
- [36:24]
Alan Chappelle
It feels like Google's trial has probably taken up, at least in the ad space, it's taken up a bunch of the oxygen in the room.
- [36:31]
Ari Papero
Well, it's a. I think it's a much more damning set of facts than the Meta case. The meta case is what, 15 year old behaviors and seems just, in my opinion, again, seems just like really out of touch.
- [36:44]
Alan Chappelle
Well, yeah, that's going to be the struggle, I think for the ftc. On the other hand, when you have emails from the CEO saying oh my God, we're getting killed by these guys, we better buy them so as we don't have to compete with them anymore.
- [37:00]
Ari Papero
Yeah, those aren't the best.
- [37:04]
Alan Chappelle
So normally on let's Pod, I ask one final question about what your super secret hobby or passion is, but I already know it for you because you're writing books.
- [37:13]
Ari Papero
All right, so it's called Yield and it is available on, on Amazon, Barnes and Noble, anywhere else. You want to buy a book audiobook as well. It's not up yet. It comes out August 5th. So anytime between now and August 5th, you can pre order the book, audiobook, et cetera. People keep asking me if I'm going to sign it. The answer is absolutely, you buy it, I'll sign it. But no free books.
- [37:37]
Alan Chappelle
Fair enough. Well, I'll just say I have a pretty strong regulatory audience, most of whom struggle to figure out how ad tech works. So folks, if you're looking for a book to help you understand how the ad tech space works, pick up Yield.
- [37:51]
Ari Papero
Yep, and it's a good read. It's like entertaining. It's not entirely technical by any means. I think it's a great book to if someone is in the advertising business but not an expert, this is a great book for them.
- [38:02]
Alan Chappelle
All right, Ari Papero and Yield. Thanks for coming on.
- [38:05]
Ari Papero
Thanks for having me.
- [38:08]
Alan Chappelle
That was a great conversation. It was helpful to hear Ari's thoughts about how the Google trials will impact the ad space and why Google hasn't already exited from its network business, which continues to be a low profitability but high risk endeavor. One thing that I can say about the ad space from a regulatory perspective, the rules that govern our space make absolutely no logical sense at times. And the only way to get your head around some of the arcane rules around here is to understand the history. Aries book. Yield provides what I believe is a compelling narrative of the space and helps understand how we got here and why. I recommend buying a copy and adding it to summer reading list. We have a bunch of other fantastic guests coming up on the Monopoly Report podcast over the next few weeks. Please subscribe to the show@monopolyreportpod.com or on Spotify, Apple, YouTube, or wherever you listen to your podcasts. And thanks for listening.
- [39:06]
Ari Papero
Thank you for listening to the marketecture podcast. New episodes come out every Friday and an insightful vendor interview is published each Monday. You can subscribe to our library of hundreds of executive interviews at marketecture tv. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv. And if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtechgod.com.