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I was head of sales for independent adtech company MediaMath until 2019, during which time the company was considered a top player in the space.
Our tech was licensed by big brands and premier agency holding companies in major media markets globally. Though I remain proud of MediaMath’s growth, I believed it was always bounded by Google.
But I did not believe this was due to being fairly outsold. Instead, I saw how Google’s heavy-handed strategy of paying lavish rebates for the largest chunks of ad dollars won it outsized advertiser budgets, which compounded over the years. The scraps left over were for independent adtech to fight over. Many of these strategies were described by expert witnesses and in court documents during the recently wrapped antitrust trial.
Today, of course, we marvel at Google’s glistening ad and tech product marketing, mammoth user scale, enormous sales and service teams, exclusive ad inventory, and instantly recognizable brand image. But from my tenure leading teams who sold against Google, I remember well how it built that edifice: It would buy off ad buyers in exchange for ad budgets.
Google would reward the right organizations, at the right times, in the right places, with the right packaging, and in the right amounts for first dibs on ad budgets. According to an internal memo, $445 million in rebates were paid out in 2018, securing more than $15 billion in spend commitments. The memo stated: “For 2019 we intend to deliver ~$20B in deals with $550M in incentive value,” for a cost of “~2% of total qualifying spend.”
Google’s search business was the mother of all leverage, and over the years, Google was able to expand this leverage to include its ad server and YouTube.
Indeed, to attract bigger display and video budgets, Google used those products in order to, per a document it filed in court, “drive non-search growth with a focus on YT and [Google’s ad] Network.” Agencies would then spend those display and video budgets disproportionately on Google’s own properties or networks, regardless of campaign performance, which represented far richer margins for the company than spending on third-party publishers.
While the effects of these rebate schemes continue to reverberate across the industry, in my opinion it’s advertisers who remain most negatively impacted by these schemes for two interrelated reasons.
First, media agencies became dependent on rebate revenue, especially as clients insisted on lower and lower media management fees. The growing dependency served to distort media buying incentives and recommendations.
Second, critically, campaign ad performance and ROI for advertisers became secondary to rebate economics. At MediaMath, we regularly ran “head-to-head” competitions versus DBM (Google’s DoubleClick Bid Manager, now Display & Video 360) that showed demonstrably, consistently superior ROI. But these results didn’t matter relative to the offline economics at play. Budget allocations would remain.
Advertiser ROI, we might appreciate, is a cornerstone of adtech’s promise. What better way to stifle innovation and destroy competition than to render advertiser outcomes irrelevant to winning media budgets?
How rebates were actually delivered was dark comedy, as I learned from countless conversations with procurement directors at big brands and agencies around the world.
Cash worked where it was legal to receive and where CFOs could figure out how to report the income. Alternatively, agency leadership told me that gifting free media was the preferred method—it enabled the agency to sell the media to their clients at a cost higher than zero and pocket the difference.
But my personal favorite was shown to me on a tour of a New York media agency buying floor, whose office and cubicle walls were adorned with promotional posters for Google products. Google paid the agency for the “ad space.”
In all cases, the art was to distance these paybacks from client ad procurement processes, per internal guidance from a 2018 memo that recommended strengthening the rebate schemes. A section called “Evolve Agency Partnerships” makes clear that Google “can sufficiently minimize any risk of collusion and competition with the right controls in place.”
And in 2019, internal memos revealed through discovery showed that Google sought to include its Ad Exchange (ADX) Programmatic Guaranteed and Preferred Deals as part of the rebates for ad buyers, which hoovered up a major growth driver for my business by making that spend eligible for rebates under Google’s Display and Video Incentives Program.
At MediaMath, we tried to innovate around these realities, partnering with agencies to create combined products in which our platform was engineered to package and deliver an agency’s unique media and data assets, which were then sold to the agency’s advertisers. This created (gasp) real value for advertisers while enabling a richer share of ad dollars for the business partners.
But the bottom-line impact versus rebates just wasn’t big enough to take share from Google, and our top line was unaffected.
In one case, I even witnessed how leverage was exerted by Google from parts of its business entirely outside adtech and media buying to influence its share of ad budgets. My client, a brilliant head of procurement in France, saw Google’s strategy for what it was: a naked play to commoditize his agency through technology, where, in his estimation, the technology development was being financed by his own clients.
“First they eat your thumb, then they eat your hand, and soon you don’t exist,” he told me. He refused to let Google into his programmatic practice, where MediaMath commanded nearly 100% share.
Until he couldn’t refuse any longer.
A subsidiary of his parent company sought to ink a deal with Google to power its autonomous electric car business but, I was told, would not sign unless substantial share of his agency’s ad dollars were moved to Google’s ad and tech businesses. The next year, our revenues from this client plummeted by more than 50%.
I’m heartened to see a possibility that Google may get its comeuppance in courts, though I do fear this litigation is roughly 20 years too late.
But the stakes remain big. Advertising is 1% of GDP and principally responsible for the sales growth of the rest of the 99%. Of all advertising, digital is 60%, and that share is growing fast. Soon all advertising will be digital advertising. Getting the incentives right and putting a stop to Google’s rapacious practices is existential.
