Alphabet Inc.’s Google is facing a federal antitrust trial and charged with illegally holding a monopoly over online search by paying off web browsers and smartphone manufacturers with billions of dollars to guarantee it’s preselected for web users all to ensure the digital advertising leader holds their market share.
During the case, Apple Inc., Samsung Electronics Co., and others have been named as being paid revenue, according to Bloomberg.
Vice president for Google’s advertising products Jerry Dischler said during the federal antitrust trial that he does not believe Google search ads are a “must-have for any advertiser,” but he did say, “We are losing share to other new entrants” including TikTok and Amazon.com Inc.
Dischler said roughly two-thirds of Google’s total revenue stems from search ads, which in 2020 equalled $100 billion, but the current environment has shifted, which has opened opportunities for competitors like Amazon.
According to Dischler, Amazon is more prominent than Google in retail advertising and is expanding at two times the rate.
Additionally, Amazon is “able to get better data than we are on the effectiveness of their advertising,” which has “caused budgets to shift,” he said.
Google updated changes to auctions, frequently increasing ad prices by as much as 5%, and when “tunings” affect ad prices, Google in general does not let advertisers know, Dischler testified.
“We tend not to tell advertisers about pricing changes,” he said.
Back in a May 2019 email, Dischler and his team conversed over “shaking the cushions” to discover potential changes to the ad auctions to meet Google revenue targets and “to get creative” to meet quotas.
If targets weren’t met “for the second quarter in a row and we miss the street’s expectations again, which is not what Ruth signaled to the street, so we will get punished pretty bad in the market,” Dischler wrote.
“I care more about revenue than the average person, but I think we can all agree that for our teams trying to live in high-cost areas, another $100,000 in stock price loss will not be great for morale, not to mention the huge impact on our sales team,” he said.
On cross-examination Tuesday by Google’s lawyers, Dischler said “financial compensation shouldn’t impact the quality of the search results,” he said and that it is a “church and state” type of situation between the two teams. “Revenue is a motivator, not a decider.”
Despite the changes Google has already made, Dischler admitted he cannot prove beyond a doubt that the 15% increase is enough for Google to ensure still revenue for the digital advertising giant still rises.
Google’s RGSP was said to increase revenue when it swapped the auction for the runner-up to give the top advertiser position and the winner the second position, according to Dischler.
RGSP allows Google to flip positions, Dischler said.
“Otherwise, Amazon always shows up on top.”
According to Dischler, he was unsure if the update led advertisers to put in higher bids, but it did, however, grow Google’s revenue.
