Google Made Billions With Secret Change to Ad-Auction Algorithm, Witness Testifies

An economist testified that Google made billions of dollars in extra ad revenue starting in 2017 - by making a secret change to its auction algorithm that bumped their revenues up 15%. Bloomberg reports:Michael Whinston, a professor of economics at the Massachusetts Institute of Technology, said Friday that Google modified the way it sold text ads via "Project Momiji" - named for the wooden Japanese dolls that have a hidden space for friends to exchange secret messages. The shift sought "to raise the prices against the highest bidder," Whinston told Judge Amit Mehta in federal court in Washington. Google's advertising auctions require the winner to pay only a penny more than the runner-up. In 2016, the company discovered that the runner-up had often bid only 80% of the winner's offer. To help eliminate that 20% between the runner-up and what the winner was willing to pay, Google gave the second-place bidder a built-in handicap to make their offer more competitive, Whinston said, citing internal emails and sealed testimony by Google finance executive Jerry Dischler earlier in the case... About two-thirds, more than 60%, of Google's total revenue comes from search ads, Dischler said previously, amounting to more than $100 billion in 2020. In 2021 Google was also accused of running "a secret program to track bids on its ad-buying platform," according to the New York Post (citing reporting by the Wall Street Journal). A Texas-led antitrust suit accused Google "of using the information to gain an unfair market advantage that raked in hundreds of millions of dollars annually, according to a report." And the Post's article also mentioned "an alleged hush-hush deal in which Google allegedly guaranteed that Facebook would win a fixed percentage of advertising deals."

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