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How Google Edged Out Rivals and Built the World’s Dominant Ad Machine: A Visual Guide


How Google Edged Out Rivals and Built the World’s Dominant Ad Machine: A Visual Guide

Nexstar Media Group Inc., the largest local news company in the U.S., recently tested what would happen if it stopped using Google’s technology to place ads on its websites.

Over several days, the company’s video ad sales plummeted. “That’s a huge revenue hit,” said Tony Katsur, senior vice president at Nexstar. After its brief test, Nexstar switched back to Google.

Alphabet Inc.

GOOG 2.39%

’s Google is under fire for its dominance in digital advertising, in part because of issues like this. The U.S. Justice Department and state attorneys general are investigating whether Google is abusing its power, including as the dominant broker of digital ad sales across the web. Most of the nearly 130 questions the states asked in a September subpoena were about the inner workings of Google’s ad products and how they interact.

We dug into Google’s vast, opaque ad machine, and in a series of graphics below, show you how it all works—and why publishers and rivals have had so many complaints about it.

Much of Google’s power as an ad broker stems from acquisitions of ad-technology companies, especially its 2008 purchase of DoubleClick. Regulators who approved that $3.1 billion deal warned they would step in if the company tied together its offerings in anticompetitive ways.

In interviews, dozens of publishing and advertising executives said Google is doing just that with an array of interwoven products. Google operates the leading selling and buying tools, and the biggest marketplace where online ad deals happen.

When Nexstar didn’t use Google’s selling tool, it missed out on a huge amount of demand that comes through its buying tools, Mr. Katsur said: “They want you locked in.”

The first step is to understand how online ads are typically bought and sold, and where Google fits in. Here’s how it works—and it all happens in an instant:

Google’s role as both the primary auction house for selling digital ads and an auction participant has led to calls for regulatory action. Presidential contender Elizabeth Warren has proposed unwinding the Google-DoubleClick merger.

Google says that the way its ad products work together is one of the primary attractions for publishers, advertisers and other tech companies. “Publishers use our technology to access demand from over 700 partners, of which Google is just one source,” a Google spokesman said in a written statement. “Advertisers use our technology to buy inventory on over 80 exchanges. Interoperability across the ad tech landscape allows publishers and advertisers to mix and match technology partners to meet their different needs.”

Locked to Google

More than 90% of large publishers use the Google ad server, DoubleClick for Publishers, according to interviews with dozens of publishing and ad executives.

Using Google’s DoubleClick for Publishers is the only way to get full access to Google’s AdX exchange, publishers say. Why is AdX special among major exchanges? One reason is that it connects to yet another powerful Google product, AdWords, which draws on the company’s dominance in search. Sounds complicated, but here is a simple view of how the various components lock together:

For many years, Google’s AdX was the only ad exchange that had access to this fire hose of ad dollars. Google now opens up some AdWords demand to rival exchanges, but AdX continues to receive the majority of demand, according to people familiar with Google’s ad products.

Media companies are so reliant on the proprietary advertising demand flowing through Google’s AdWords that one executive at a major publisher referred to it as “crack.”

Wall Street Journal parent News Corp, a longtime Google critic and active complainant against the company with Australia’s antitrust authority, considered switching its ad-serving business over from Google to rival AppNexus, in which it had invested, but ultimately felt it would endanger the 40% to 60% of advertising demand its gets from Google’s ad marketplaces, according to people familiar with the matter. News Corp has invested in several advertising-technology rivals to Google.

In Australia, Fairfax Media Limited, the publisher of The Sydney Morning Herald, left Google’s ad server for AppNexus in 2016 but returned the following year. The most prominent publisher to have moved off Google’s ad server to AppNexus is German publisher Axel Springer SE—but its biggest American subsidiary, Business Insider, stayed on Google.

One point of tension for publishers: Google’s own properties, along with those of

Facebook Inc.

and Inc.,

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are competing with them for digital ad spending—and winning. Collectively, the tech giants will take in 68% of the roughly $130 billion in U.S. digital ad spending this year, according to eMarketer.

Overall, Google made $116 billion in advertising revenue last year, a 22% rise from the previous year and 85% of the company’s total revenue. Most of that ad revenue came from Google’s own properties, but the company’s vast role in brokering online ad sales off its own platforms gives it an added level of dominance.

Google has, at times, provided incentives to use its products in tandem. A few years ago, Google waived certain fees for DoubleClick for Publishers if an ad sale was made through its AdX exchange, according to a contract reviewed by The Wall Street Journal.

Last year, Google merged those two products—DoubleClick for Publishers and AdX—into a single product called Google Ad Manager, making it plain to the industry that they are indeed linked, ad and publishing executives say.

Auction battles

Websites put their ad space up for sale in exchanges, where auctions happen. But there are several major exchanges—how do publishers decide which one should sell their ad space? Google’s rivals and critics have accused the company over the years of tilting the process in ways that hurt publishers and help its AdX exchange. Here’s a look at how that fight has played out:

Google is now rolling out additional changes that it says will eliminate any advantage it ever had. But it will come with other changes that publishers fear will reduce control over how they sell advertising.

Ad-Tech ‘Cemetery’

Google’s tightening of the screws over the years hasn’t just hurt publishers, but also competing ad tech companies.

Several rivals to DoubleClick for Publishers have left the ad-serving business in recent years, including OpenX, Facebook and

Verizon Communications Inc.

“The ad-tech industry is like a cemetery,” said Damien Geradin, an antitrust lawyer and professor of competition law and economics at Tilberg University in the Netherlands.

At the start of 2016, Google began requiring ad buyers to use Google’s tools for purchasing video ads on YouTube, by far the most trafficked video site on the web. Previously, advertisers could use various third-party buying tools to purchase ads on YouTube.

“That was in many ways the beginning of the end,” said

Brian O’Kelley,

the co-founder of AppNexus, which sold to AT&T Inc. last year for around $1.6 billion after its revenue growth stalled. Mr. Kelley had previously acknowledged that AppNexus, like others in the industry, was also battling to root out fraud in its system.

“Google used its monopoly on YouTube to put its hand on the scale,” said Ari Paparo, who today runs Corp., an ad-buying specialist that competes with Google.

Also in 2016, Google began allowing data it gathered from services like Gmail and Google maps, such as users’ locations and email addresses, to be used in DoubleClick’s ad-targeting system—but only for customers of its ad-buying tool DV360. Google said it anonymizes and aggregates this data into audience segments.

Rival ad-buying companies say when they asked to access the data, Google refused, citing privacy concerns. “We offered to sign a privacy assurance, and they said no,”

Rajeev Goel,

chief executive of rival ad-tech firm PubMatic Inc., said.

One former senior Federal Trade Commission official who supported the DoubleClick deal in 2008 now regrets it. “At the time, it seemed like the right decision, but things changed a lot in the last dozen years,” the official said.

Write to Keach Hagey at

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