In an antitrust case against Google, economist Michael Whinston testified that in 2017, Google changed its advertising auction method, causing prices to rise by 15% and potentially earning the company billions in additional revenue.
Google’s auction system had winners pay just one cent more than the runner-up. In 2016, Google discovered that the runner-up often bid only 80% of the winner’s offer. To close this gap, Google gave the second-place bidder a built-in advantage to make their offer more competitive.
Whinston stated that Google’s ability to modify these rules illustrates its control over online advertising. The U.S. Department of Justice alleges that Google unlawfully maintains a monopoly over online search by paying web browsers and smartphone makers to make it the default option.
Search ads make up over 60% of Google’s total revenue, amounting to more than $100 billion in 2020. The case continues to unfold, with potentially significant implications for Google’s future in the advertising industry.
Source: Financial Express