Google’s Censorship, Plans to Restrict Publisher Advertising Raises Antitrust Issues

A connected DC reader sent a copy of Google: Ad Blocking Chrome Extension Raises Antitrust Issues, published by Capitol Forum. The article gives a high level overview a recent Google move to exert even more influence over what appears on the Internet. Recall that recently Google changed its search algorithms to favor “authoritative content” meaning the mainstream media (note that Google already gave lower priority to less popular sites, including academic publications). The most widely publicized result that many left-leaning websites, such as WSWS, Consortium News, TruthDig, Common Dreams, Black Agenda Report, Democracy Now! and even The Intercept saw large drops in the traffic they got from internet searches, which is a significant source of their total pageviews. This result may have been one of the main sought-after outcomes, since not long after that, Google demonetized thousands of YouTube accounts, both left wing ones and those of Trump supporters.

We also reported on an additional move that target major publishers, that Google will launch a new extension to Chrome and e-mailed 700 publishers to tell them their ads would be blocked. This is tantamount to denying them the ability to use their hosted space and connectivity as they see fit. The list of targets includes major sites like the Los Angeles Times, Forbes, the Chicago Tribune and the New York Daily News. Worse, the move is clearly collusive in that Firefox, Safari, and Internet Explorer are expected to be launching similar blocks. As the article notes:

In an attempt to ward off concerns about control over ad blocking with its Chrome extension, Google has followed the approach of Adblock Plus’s Acceptable Ads and created an independent body called the Coalition For Better Ads to create ad blocking standards. Fordham Law Professor Mark Patterson has said the Coalition For Better Ads is a “cartel orchestrated by Google.” Companies like Google and Facebook, as well as publishers, serve on the coalition and aim to create industry standards for permissible ads. Google’s text-based search ads are not likely to violate Coalition standards, which focus on combatting ad types that are particularly annoying to Internet users, such as auto-play videos.

Even if Google has attempted to divest the standard setting role to the Coalition, it is worth questioning whether publishers on the Coalition have the bargaining power to overrule decisions that favor Google’s ad formats or web properties, given their dependence on Google for referral traffic.

This sort of collusion amounts to restraint of trade, but Google commands enough market power all by itself that the Capitol Report focused its analysis on Google alone:

Google’s plan to include an ad blocker extension in Chrome is likely to exacerbate calls for antitrust enforcers to investigate Google’s dominance throughout the vertical stack composed of the Android operating system, Chrome browser, Google search engine and search ads business—each of which occupy the number one market position…

Google’s Chrome extension appears to be a move to take control of ad blocking and sheds light on the high stakes for Google of reducing the threat ad blockers pose to its business model.

In other words, this move has absolutely nothing to do with helping users. It is all about increasing Google’s profits, and it has no concern whatsoever to the damage it will do to major publishers, who are already under considerable financial stress.

As the analysis explains, Google has been paying billions of dollars to get its AdSense ads whitelisted by the two dominant adblocking companies, AdBlock and ABlock Plus, which together control in excess of 90% of the adblocking market for desktops. Virtually all publishers refuse to pay these companies for whitelisting. Not only is the process extortionate, but the pricing is extortionate. The adblockers demand 30% of ad revenues. Mind you, if you are a small publisher, you pay 40-50% of your ad revenues to your ad service already; larger publishers run their own in-house ad operations but they aren’t cheap either. Placing and billing ads, and then getting payment from foot-dragging ad agencies is a big pain. So if you have to pay another 30% to the adblock racketeers, you wind up dead.

As an aside, NC forgoes a considerable amount of ad revenues by not running highly lucrative but obnoxious ads, like autoplay video ads (for some reason all video ads seem to be of the horrible autoplay variety), pop-ups, native ads (ones pretending to be site content) and interstitial ads (ones plunked in the body of articles). So if you run an adblocker and have not whitelisted NC despite the fact that our ads are skimpy compared to most sites, shame on you. You are basically saying you want free media, and that attitude is in the process of killing everything but government propaganda and corporate sponsored content. As Matt Stoller said, “If you are not paying for your media, you are the product.”

Google and Facebook are already dominant forces in the online advertising market. While organizations that have the two tech giants as members come up with lower estimates, independent analyst Brian Weiser found that the two companies controlled 72% of online ads globally and captured 99% of the growth in the US in 2016.

Here is the nut of the pernicious relationship between Google and the adblockers:

Google’s payments fuel ad blockers’ business, which from publishers’ perspective destroys ad revenue necessary to fund journalism. A report by Juniper Research published last year predicts that ad blocking will cost publishers $27 billion in lost revenue by 2020.

In addition to Google, Microsoft and Amazon reportedly also pay for whitelisting. Facebook has engineered around ad blockers and has millions of dollars of ad revenue to show for it, as discussed below.

The business risk of ad blockers is obscured by lack of public information about Google’s whitelisting agreements. There is a surprising lack of public information on the terms of Google’s deals with ad blockers, upon which billions of dollars of Google ad revenue depends.

Sridhar Ramaswamy, Google senior VP of advertising and commerce, confirmed in February 2016 that Google pays Eyeo, the parent company of Adblock Plus, to unblock its ads. Google has not disclosed how much it pays for whitelisting.

However, a 2013 article in Germany disclosed how much Google had paid to the parent of Adblock Plus that year, based on government filings. The total payment was 2.8% of Google’s ad revenues. The German authors confirmed in 2013 adn the Guardian reconfirmed in 2016 that the standard charge is 30%.

And here is a more recent estimate of Google’s interest in the matter:

In June 2015, PageFair calculated that Google’s payments to Adblock Plus were saving it $3.5 billion, but Google was still losing $6.6 billion due to ad blocking. PageFair attributed that loss to Google ad formats that Adblock Plus will not whitelist and to other ad blockers that do not allow whitelisting, including Adblock Plus’s closest competitor Adblock.

That equation changed in 2015 when Adblock was acquired by a mystery buyer and moved to allow Google to make ransom, um, whitelisting payments and earn more on a net basis: “The change in ownership thus immediately increased Google’s ad revenue by nearly $3 billion, working off of PageFair’s calculations above and Adblock’s 40% market share. ”

Now get a load of this:

 In a recent Intercept article, David Dayen writes that Google “has hit upon a neat idea to consolidate its already-dominant business: block competitors from appearing on its platforms.”

Google Chrome has approximately a 54% worldwide market share and a 47.5% share in the US; Google search has an estimated 85% worldwide market share, a 63% US market share on desktop, and 93% on mobile; Google Android has an estimated 70% worldwide market share; and Google has a 40.7% market share of digital advertising in the US and 78% share of search ad revenue.  Google’s DoubleClick controls 80 to 90% of the ad serving market. Adding control over which ads get through the Google-controlled stack raises monopolization and monopoly maintenance concerns.

As matters stand now, about two-thirds of the installations of ad blockers are on the Chrome browser, and most users find their Adblocker through Google’s search engine. Google’s text ads bypass the top two ad blockers, while Google’s competitors’ ads are blocked.  This allows Google to command a greater share of the overall digital ad market. And Google may pay a rate that is a small fraction of the rate publishers would have to pay if they wanted to unblock their ads….

Furthermore, the reported Funding Choices program, which is separate from the ad blocker extension, gives Google a gatekeeping function.  Under Funding Choices, publishers set a price for consumers using competing (non-Google) ad blockers to pay in order to see a publisher’s page, or else abandon their ad blockers.  Not only is Google creating a mechanism to charge users of competing ad blockers, but also it reportedly plans to take a cut of that charge.  If ad blockers are extortionist in the view of publishers and the IAB, then Google taking a cut of circumventing the extortionists amounts to profiting from the purported extortion.

Read the last paragraph again. In other words, Google’s business model is best described as “All your base are belong to us.” And the next lines in the video that created that meme are apt:

You are on the way to destruction.

You have no chance to survive make your time

Ha ha ha ha

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