How Big Tech Is Losing Their Antitrust Trials feat. Jason Kint

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This is Better Offline.

I'm Ed Zitron.

Today I'm joined by the wonderful Jason Kint who has been at the Google Ads trial and multiple other FTC and DOJ-related trials as well.

Now, last week we had wonderful news.

The Department of Justice won their antitrust trial against Google, saying they have a monopoly over ad tech.

This is a wonderful time.

And Jason, of course, last year was here for multiple episodes with us to walk us through the trial.

He was there in person.

Jason, how are you doing?

I'm good, Ed.

Thank you.

It's good to see decisions starting to come in from the courts on what we've been talking about.

And just to be clear, Jason is the CEO of Digital Content next i did not say that at the top it's the professional podcast run by a professional but so walk us through what the verdict was

uh this is the ad tech case against google that was in virginia to remind the listeners and it was around google having market power and monopoly power on the buy side the sell side and in the exchange and then illegally using that monopoly power.

The decision from the judge was that mostly in agreement with the the plaintiffs, and it was a big win to the Justice Department who worked really hard on this case, that they have monopoly power in the exchange, so where the auctions actually happen, and then on the publisher side with the ad server marketplace that determines what ads land on the page, and that they illegally tied those two products together.

So, the only part of the decision, which I think Google's trying to make to be a bigger deal than it probably is, is that the judge did not agree that there was this market on the buy side the way it was defined.

Um, and so what does that mean in simpler terms?

In simpler terms, it it could affect where remedies go because there is not a finding that they illegally use monopoly power on the buy side with advertisers buying ads.

And so just they owned the technology to sell the ads and the ways in which it was selling.

Like, I guess

yeah, they they they still it's true that they have significant influence because they have the largest player on the buy side of ads, so where advertisers are actually buying the ads, but not that they she didn't find that they had that there was a foreign legal market there that they abused.

And so, as we go through remedies discussions, I think it's probably it might be less likely that there's some sort of structural separation where they need to divest the buy side too.

Although all this stuff's frankly going to get tangled together and it will be a whole new ballgame with remedies,

especially with search remedies going on this week, too.

So go ahead.

I was going to say, like, so what are the remedies that the Department of Justice is actually seeking here?

On the ad tech case, on this case, it's a structural separation

of their roles in the ad tech marketplace.

And so that was very clear coming into the trial.

So just break it down for me, though.

How would they break up Google in its current form?

Is that even possible?

I mean,

yes, yes, absolutely.

In the simplest way would be forcing Google to divest, which probably would mean spinning off to its shareholders rather than selling because it's going to be such a valuable asset.

But actually,

a separate company.

A separate company that is the ad server marketplace.

Yeah.

And

the exchange itself, too.

So dumb guy question for you.

What is an ad server in this case?

Like, how does this actually break down?

it's that you know it's the technology that sits on the web pages or on the publisher side that actually makes the decision on what ad to serve on the page so when you're browsing a web page or on an app uh it's what's deciding to serve the ad

and so google ran that themselves they like they ran that themselves so they ended up prioritizing their own ads i'm guessing yes that's that's the case and so and you know in the findings what's really interesting is that the judge very much agreed with and understood that Google's illegal conduct in terms of how they were able to manipulate auctions in ways that probably favored them and certainly harmed the publishers was a part of the findings.

So, yeah.

And when you say they harmed the publishers, is it just the it wasn't possible to compete with Google on ads?

Because Google both made ads and then had the platform that showed the ads to people.

You know, she hit on a number of things that I think are going to be super interesting in the remedies.

She hit on that Google was able to keep charging 20%

of the exchange market.

So they could take 20% of every single transaction and that that price never moved from 20% for the most part because of their monopoly power.

But she also hit on all the ways that they could manipulate the auctions, which could end up being, that's a bigger issue.

When you start thinking about the private lawsuits that are out there, too, you get into literally tens tens of tens of billions of dollars of potential harm to publishers from auction manipulations.

And how were they manipulating auctions, just so we understand?

Well, the allegations

were that, you know, and the

this and what she addressed in the opinion were things like first look and last look, where they actually were able to

see the prices ahead of time or at the end of the auction and make decisions based on the bids that they uniquely were able to do.

Which is so insane that they were able to basically set prices, like get everyone to bid, and then just immediately beat them.

Like, it's shocking.

That's the thing.

It's kind of flagrant.

So, with last look, I think, you know, I think I've hit on two things here.

One, last look, which I think the judge very much understood because I can remember her,

you know, who was completely new to this marketplace.

She totally got why that was an issue.

When she, you know, last look, if you take to like a silent auction where you put your little bids down in an envelope and everybody has kind of their secret bid, this would be like Google then at the end was able to look at everybody's bid, see what the highest bid was, and then bid higher if they wanted.

That was last look.

And there were a bunch of other things that stemmed from that.

And she really seemed to understand it, which is,

it's, you know, it's nice to see.

So, kind of impressive to see a judge just pick up an entire subject matter like that.

I totally agree.

You know what, I, who I be, should be most scared, frankly, by this opinion is if I'm Facebook or Meta who is like counting on this idea that the judge in their case doesn't know or use social media and TikTok and Instagram, et cetera, it tells you once again that a judge that understands the law and sits there for four weeks plus all the pretrial stuff

and listens to the evidence, can understand these issues.

The most important ingredient, I think, was the Justice Department who really understood the case in a way that they could dive deep and then explain it to the judge.

And they succeeded to do that.

So it kind of reminds me, so during some of the Google Ads trial things, you talked about the spaghetti thing where they were trying to do this kind of sleight of hand thing and they're like, ah, it's too impossible to understand.

Like it's too complex.

And they turned it into that ridiculous thing.

That's right, they did, and yeah, and that tells you that that is not going to be a successful defense, is trying to confuse a judge who has never used a or would understand ad tech.

That's that's not going to work.

The Justice Department succeeded in explaining it, they kept it simple.

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So what happens next?

What are the next moves with this pub?

Well, a reminder, this is

what's called the rocket docket, the Virginia district, Eastern District of Virginia.

And so the judge moved really, really fast.

That's why they have that name.

This case was filed in January of 2023.

And so we got to a trial, you know, 18 months later in a decision that took, you know, frankly, the decision took a lot longer than anyone thought it was going to take to come out.

People were starting to get nervous, but it just took time.

And she clearly wrote a really clear opinion.

And

it's very easy to read through.

So

that keeping in mind, I think she'll probably move fast.

They have a meeting,

I think it'll be tomorrow in terms of what's the schedule going forward for remedies.

And so I would expect the dates to all be in the the next few months.

But what would the remedies be?

So they would have to break off the three-part, like the ad side.

They would have to break off the sell side.

Like, what are they going to have to do in theory?

I realize you're just guessing.

I'm just guessing, you know, that the findings are clear enough that there's going to be structural separation that they're going to be pushing for.

You know, how

the buy side gets handled is going to be really important because a reminder, and this doesn't come out really in the proceedings as much, but the ad tech case is downstream from the search case.

And the arguments were that the reason Google was able to dominate the buy side and the sell side in ad tech was because of the monopoly power in search, which we also have remedies now that started on Monday.

And so

these things are going to start to swirl together.

And when you think about Google having to divest Chrome and some of the other remedies within the search case,

it's quite possible that there'll be some larger settlement that will be proposed or a larger structural separation that needs to play out between the two decisions.

So, as you've been hinting at,

there was the verdict last year that Google did have a monopoly over search.

How do you think that these two things are going to play together?

You kind of got it there, but what are the ways in which this could go?

Well, the search decision was not, there were two monopolies that they were found of abused one was search the other was search text ads it was the ads that we see in search which is google's largest business right and so

just so i'm clear you're saying that there's the monopoly over a search engine and then the advertising on said search engine exactly and so and that advertising on said search that advertising on said search engine is is what allowed them according to the justice department to then dominate in the ad tech stack.

And so I think that's the connection point between the cases and will also start to be a part of the discussion of the remedies.

Both cases involve network effects.

Both cases involve using data to

maintain market power and to abuse it.

Right.

So the potential remedies, it sounds like, could be almost breaking up Google into multiple different companies.

With this case, the baby bells

idea of what happened to ATT

should be much more difficult.

What happened there for just several listeners?

They

divided ATT up into

pieces.

And so

not just forcing them to divest one piece of their business.

And so

with the ad tech case, again,

there's settlements that can happen, there's appeals that will happen, but the argument for

should Google have to divest not just its advertising ad tech business, but also, you know, other areas of its business, I think becomes much stronger.

You can imagine Chrome, you can imagine Android, you can imagine YouTube.

Yeah.

Actually, here's a good question for you.

I know Chrome, and I'm sure many listeners know Chrome as a free browser, not really a business entity.

How does selling off Chrome meaningfully help with the monopoly situation?

Chrome, Google's entire advertising business is based on targeting ads based on signals

and data that it gathers from the various ways that it can touch the user.

And so Chrome as a web browser is an incredible way to harvest data about how you're browsing the web and where you are, location, search, et cetera.

And so

where Google believes it has permission to use that data to target ads and train its into its machine learning and AI training, that is very valuable.

I didn't, so wait, so Chrome, so this is perhaps I'm very stupid.

So Chrome collects data on your browsing habits for every user.

Not for every user.

There's privacy, you know, settings and all sorts of things you can do.

You can go into incognito mode.

But if Google is acting as your browser, it has access to your browsing history and what you're doing on the web.

And they can, where they believe they have the rights, they can use that data to

help

provide further information on

both for search, but also for what content to serve up and what ads to serve up.

What they're actually doing becomes a bigger question.

Right.

So, and was that not, was that established at a trial?

Not, it was in the search, in the search case,

but it was more specifically focused on

the default settings for search from the browser, right?

And so within Chrome, if you type in your location bar, you're always going to be doing a Google search.

It's pretty clear that how that data then gets passed from the browser to the search engine.

Yeah.

And if they have billions of users, then they can, like, everyone is searching using Google because they have, because it's the default.

That's so crazy.

But the thing with Chrome as well is it isn't a revenue driver, is it?

Like a direct source of revenue for Google.

You know, it's if you

think about the search case again, I mean, Google was paying Apple, you know, $25 billion.

Let's say I'm estimating 20 was 20 billion a few years ago, but let's say 25 billion dollars they were paying to Apple to be the default search on Safari and all of the access points on iOS.

So

Chrome technically is making revenue off of those search queries.

It's just Google's paying itself, right?

And so

that's the issue.

Well, the reason I bring that up is one of the remedies, the idea of selling Chrome off.

Why would you, like, what value would there be in Chrome if the whole value of it is to just be kind of a flume towards Google?

Like a, like a kind of like a way to, like almost like a marketing arm of Google.

If you sold off Chrome, surely it wouldn't have as much business value.

It wouldn't have as much business value to Google.

The The whole point would be it'd be an independent business that would be making decisions.

I mean, technically, a browser is supposed to be a user agent.

It's supposed to be making decisions for the user and what they value, right?

So

a new one.

I just mean as an autonomous business.

Yeah.

Because right now

it's not like people pay for credit.

It just doesn't feel like that is a practical thing to do.

Because if the whole value proposition of it is that it's a free product that makes Google money and it doesn't make any money for anyone else, or like it isn't, you know what I mean?

Yeah, so it could make a decision to point to you know a new Amazon search site or a

gets into search, right?

And so, and get paid for it, right?

Yeah, I mean, it almost feels like this could lead to, I don't want, I'm not going to say the death of Google in the sense that Google will cease to be, but the death of modern Google as we know it.

It definitely, you know, all leads towards a very different Google, whether it be structurally different or just being hamstrung by the appeals of all these cases.

I mean, it's,

I cannot think of anyone who got more lucky than it being Good Friday than Google right now, because it's good.

We're recording this on Good Friday, and it's like they didn't, like, the markets are closed, so they didn't immediately get the markets just pummeling them as they should, because they've lost both now.

They don't, like, whatever appeals they may do are not not going to really, I don't think they're going to stop everything.

Markets are complex.

I would, I would hesitate to wonder, you know, to predict why the stock did what it did yesterday, even when the announcement came out.

You know, there are some arguments that having to divest, you know, divest parts of the business could actually create more value back to shareholders.

What value would that be?

Well, typically when you spin things off,

you often see a, or you sell things, often the stock you know can go up because of that.

And so, you know, are the sum of the parts worth more than the whole?

You know, those questions all come into play,

but that's all you know, that's all up to the markets.

And sometimes the markets aren't as smart as we think they are, and they take time to understand and unpack things.

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Yeah,

I agree, and I've seen the same thing with Core Weave recently, which is a company that has driven me insane.

On to more sane things, though.

So we're recording this.

It's going to be next week, but the beginning of the remedies for the search trial is on the 21st.

So what can people expect there?

I don't think there's going to be as much excitement and drama as we saw with the actual liabilities trial.

I think, you know, for the folks that follow the industry closely, what you should expect is all the AI companies are involved.

And so either through depositions, discovery, and some testifying.

So you've got Anthropic, OpenAI, Microsoft.

So when you think about the shaping of the AI world going forward, you're going to have all the major players.

Apple is...

Apple tried to actually intervene,

but the judge didn't allow them.

So they've they've got a strong interest because they've got estimated to be i think 10 to 15 percent of their profits are tied to their google deal right and so well because google pays them to use just so just for the listeners so google pays apple billions to have to be the default search right that's right and the and the you know the remedies are that they can't do that anymore and so the reason they weren't allowed to intervene according to to judge meta was because he didn't see a difference in Apple's interests from Google's interests.

He basically said,

you have the same interests.

Yeah.

Well, I mean, the interest being that Apple needs Google to keep their monopoly so that Apple can keep getting a chunk of their revenue.

That's exactly right.

Yeah.

So, yeah.

So Apple cares a lot.

Microsoft cares a lot.

All the big players care.

The testimonies is going to be a lot of experts and

less CEOs.

Who will be doing the testimonies?

It'll be experts from both sides.

so academics that study these issues.

It will be executives from the AI companies.

I think we'll probably hear from Eddie Q again at Apple, who's one of their top executives.

We'll probably hear from Sundar Peshai again from Google as CEO.

They're on the list.

And so in those two weeks, what's going to happen?

So it's basically another trial to say how they will deal with their monopoly in search.

That's right.

And I guess one thing that's interesting is they're still pretty far apart.

So Google's proposed remedies for itself are basically a slap on the wrist and

kind of embarrassing for anybody that studies these things.

So when you say a slap on the wrist, is it like a fine they're offering?

No.

What is Google offering them?

They're offering some restrictions on the way they do things, but nothing that touches on structural separation in any way, shape, or form.

Nothing that prevents them from doing an Apple-like deal.

And so it's, you know,

the bare minimum that the only way I can read it, and I'm just, you know,

spitballing here, but is that they're not giving an inch right now because they think either they can do some sort of transactional deal settlement with the current administration or that they can win on appeal and they don't want to show their cards by moving the line in any way because it's so far removed from the decision itself.

Right, because if they got defensive, then

they would kind of reveal their hand for when they go to appeal, you're saying that's right.

That's right.

And so, what is the Department of Justice?

So, the Department of Justice is saying they should sell off Chrome, or is there anything else they're asking for?

They should sell off Chrome and they're struck, you know, divest Chrome.

They may need to divest Android, but it basically says, Let's see how that goes, but we can still do that.

And then,

very importantly, they're requiring them to share some data with other search engines that would help other search engines have a more level playing field.

And as it relates to publishers, who, again, I do a lot of work for the, I work for the publishers,

it requires Google to

allow publishers to narrowly define what Google can crawl and use data for.

And so the publisher can say, hey, you can crawl my website for the purpose of search, but you cannot then use it to train your AI engines.

And so the DOJ is pushing to make sure that's the case.

The DOJ is very smartly understanding that if they don't put real constraints on Google around AI,

then they're only addressing past behavior, but they're not actually making sure that there's a level playing field going forward in which Google won't be able to just abuse and run over the AI marketplace, too.

It really feels like we're kind of on the precipice of something changing in the next few years with the web, because if Google has to even share data from search, that will change.

Like we will get competition in search for the first time really meaningfully in decade, like

decades, I guess, like since the Lycos and Alta Vista days, because these two cases are so inherently intertwined.

Absolutely.

Yeah.

And don't shortchange Gopher or web crawler in that.

Yeah.

But yeah, there hasn't been

other search engines since the late 90s.

Oh, no.

I think I said excite.

So, okay,

changing gears before we wrap up.

You've been at the FTC case with Meta.

How's that going?

And also, what is that about?

So that is about whether or not when Meta when Facebook at the time acquired Instagram and WhatsApp, that they were doing that to maintain their monopoly power in a market for personal social networking services.

And so

that is actually explicitly to break up Meta.

So force them to divest WhatsApp and Instagram.

And the testimony I saw was Mark Zuckerberg, the CEO, who was on the stand for, I don't know, roughly seven or eight hours, which is a lot for any CEO.

He's the key witness.

And so now they're rolling into the other witnesses.

I think it's going well to answer your question, yeah.

So, what are some of the highlights of things that Marky Mark said?

He, you know, he confirmed there's a lot of emails in that case.

And unlike the Google case, where there was real problems with preservation of evidence and there were emails that were and messaging that were deleted and all sorts of things that, by the way, Google's Kent Walker got slammed by the judge for for not preserving evidence um for like the third or fourth time now um and you you mentioned that during our interviews as well that the judge was pissed about this the judge was pissed and it came out in her opinion yeah uh that nice abuse of of attorney client privilege she basically said the only the way i read it was the only reason i'm not sanctioning you is because i found you liable of breaking the sherman act so and that's kind of what happened in the search case too and it's kind of in the app store case they did get sanctioned so there's the third antitrust

loss that Google has in which they've been, you know, nailed by the judge.

And they've got more trials coming.

So it's a problem for them.

And

so the difference, the flip side of that is that Facebook and Meta,

you know, there's a wealth of emails.

And, you know, Mark clearly ran the company very tightly and drove the product decisions very tightly.

And he documented a lot of that in emails.

And some of them are pretty damning.

You know, I think the one that has always gotten the most attention is emails where he discussed why would we buy Instagram and focused in on the reasons of neutralizing a competitor and buying time.

So neutralizing Instagram and buying time.

And a lot of the

contemporaneous evidence shows that they were very, very concerned over a

one-year to 18-month period where Facebook was behind in moving to mobile.

Instagram was growing very, very quickly.

And they had screwed up by building the Facebook app for HTML5.

That's a technical thing instead of their own native app.

And they were freaking out.

And there's a lot of emails about that.

That's fascinating.

So

it really, and kind of returning to what I was saying previously as well, it feels like the results of these trials could just fundamentally rebuild the web.

Because if Instagram was competitive with Facebook, by which I mean they had to spin it off and make it its own company, And Google could no longer monopolize all the parts of the ads.

It's going to change the economics of everything underlying the internet because the internet is mostly paid for by ads.

That's right.

That last part's really, really important, Ed, that you're making.

We're talking about a lot of the user behaviors and stuff, but there's $100 and whatever, $40 billion

of U.S.

digital advertising that goes to those two companies, I would

estimate.

And so most of the growth in digital advertising over the last decade has gone to Google and Facebook in some way, shape, or form.

And so how does it affect the advertising business becomes really, really important to all of us.

And the way it would affect it is it could be cheaper for advertising, but it could also be

more chaotic because

especially with Meta's advertising product, from what I understand, it's like almost the equivalent of Google Macs in that.

You give Meta money and it goes into the greater metaverse.

I don't mean, I mean that with capital.

Damn, I can't say that shit.

But it goes into the greater meta series of products in the same way that Google Macs, you put money in and it goes across all of Google's stuff.

That being broken up would be like Google, like 90-something percent of meta's revenue is ads as well.

Like this would

destroy the company potentially.

Yeah,

they're 96, 97% of their business is advertising.

And so you imagine a world where advertisers are buying through a different buy platform or a neutral one, let's let's call it a neutral one that actually can buy ads on Instagram versus the Facebook app and actually make decisions on that in real time of what's best for the advertiser.

I feel like they also have to compete for business in the way they've never had to, or like justify their business and provide analytics that they don't already.

I've always asked the question of like when Facebook started to, you know, really get described as a toxic waste dump in like put like 2018, 2019, where they started to just run into some real difficulties like Instagram if I were Instagram I would act differently if I wasn't part of the of the the larger corporation right and and they probably Instagram would have put the screws to Facebook at that time and vice versa you know and and so it really changes the dynamic of those two platforms where they're actually having to compete with each other both for users and for ads um the the the parent company the brand is you know one of the least you know according to like the the axios reputation survey, it's like number 99 or something like that in the 100 brands.

So the brand is significantly challenged despite the success of the company.

So as we wrap up, it almost, I know that

this show is not necessarily the most optimistic, but I kind of feel a little optimistic seeing all of this stuff.

It feels like there could be a better internet that comes out of it.

I agree with that.

And I also, you know, make a broader point that it does make me optimistic to see courts doing what they're supposed to be doing, judges actually understanding the complexity of technology, having

attorneys that can describe it to the courts in a way that

can be applied to antitrust law that's been around for more than a century.

And by the way, it should be said, too, that these cases were brought by the Trump administration through a Biden

administration, and now they're being enforced and we're getting decisions under a Trump administration again.

So they're incredibly bipartisan.

And I had a chance to testify a few weeks ago in front of the Antitrust Committee, and that was incredibly bipartisan too.

And so

these are issues that stretch across the parties that's pretty unique in this in this current moment.

And it kind of feels like the doomerists out there are saying, oh,

they'll just pay off Trump.

And it doesn't even feel, it feels like the administration's, both of them kind of had the same willingness to do this.

That's right.

I mean, the Wall Street Journal reported.

Obviously, we don't know.

Well, yeah, but the Wall Street Journal reported that Mark Zuckerberg met with

the Trump administration or Trump himself, I think, three times in the last few months and offered to settle for $450 million.

And the FCC wanted $30 billion.

And so you can see that there's a

pretty big delta between the two.

And I think the Trump administration understands why these issues are issues regardless of party and politics.

And too much power in the hands of too little people is always a problem.

Couldn't agree more.

All right, Jason, where can people find you?

They can find me on Twitter at Jason underscore Kint on Blue Sky.

They can always email me at DCN's website.

I'm around.

I'm always looking to engage.

So thank you very much.

Such a pleasure to have you, sir.

And you can, of course, find me on the internet, Google, the man who killed Google search.

That's how you find me.

This has been Better Offline.

I'm Ed Zitron.

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