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TL;DR:
In December 2017, AdTrader launched both an individual damages case and a class-action lawsuit against Google. Both cases are predicated on a seven-month long investigation during which it was discovered that Google has been illegally appropriating advertisers’ funds. In the meantime, an independent investigation was being conducted by the Wall Street Journal that lead to the same conclusion. As a result of the WSJ article, Google promptly changed millions of AdWords contracts to prevent advertisers from obtaining redress.
Several media outlets rushed to cover the lawsuit, unfortunately missing the main point by focusing too narrowly on AdTrader’s potential damages instead. While they might interest a select group of readers, our personal losses are certainly not of significant importance to the public. Google’s systematic theft, however is, and it is why we decided to share more details about our investigation and invite all affected advertisers to join our class action lawsuit.
Our mission.
Bringing simplicity and transparency to an increasingly crowded and opaque ad ecosystem.
AdTrader’s mission has always been to make the digital advertising space a healthier and more efficient ecosystem. In an industry plagued by an endless array of intermediaries, overwhelming complexity, and tremendous inefficiencies, we set to offer an alternative solution. Four years ago, we decided to build an ad platform that would bring more simplicity, transparency, and accountability for publishers and advertisers, and most importantly, a more useful and pleasant advertising experience for users. We partnered with some of the major advertising companies to expand our reach and offering, and started building both the technology we needed and the team which would eventually bring our vision to fruition.
In the past six years, the number of middlemen has increased more than fivefold:
Source: Scott Brinker, http://chiefmartec.com/2017/05/marketing-techniology-landscape-supergraphic-2017/
The ever-expanding intermediary landscape was, and still is, a constant source of frustration for advertisers and publishers. We were doing our best to successfully navigate across it and deliver the most optimal results for our clients. We were managing a bootstrapped and steadily growing advertising business right until the day Google seized $0.5M of our earnings accrued by over 200 publishers from 25 different countries.
Our conscious decision to remain independent from VC funding had made us financially vulnerable to such unforeseen misconduct from our largest business partner. Nevertheless, we were determined to protect our publishers and compensate their seized earnings out of our own pocket. This left us nearly bankrupt, but it was undoubtedly the right thing to do. We eventually pulled through and are now focused more than ever on the goals ahead of us.
Why are we writing this post?
We felt obligated to share publicly our discoveries of Google’s systematic misappropriation of funds.
While we surely have better things to do than rant about our competitors, Google’s illegal appropriation of funds has such far-reaching implications for the entire advertising ecosystem that we felt obligated to share publicly our discoveries. Google’s monopolistic misconduct has been covered extensively in the news this past year, from its anti-competitive practices in shopping search [1], to abusing its Android smartphone monopoly [2], and tying up AdSense publishers to exclusivity agreements that throttle competitors [3]. However, little attention was given to one of the key drivers of Google’s revenue — display advertising. This post intends to take you through some of the steps in our investigation and hopefully encourage advertisers to look more critically at their dealings with Google.
In May 2017, our four-year partnership with Google’s DoubleClick Ad Exchange (AdX) was abruptly terminated and 476,622.69 USD accrued by our publisher clients were seized from our account. Despite our persistent requests for an explanation, Google did not provide any specific reason for this action. It did, however, repeatedly stress that all publisher earnings would be returned to the advertisers. The unexpected chain of events and the lack of information compelled us to further investigate the matter in an effort to understand what had gone wrong. While digging deeper, some alarming findings started to surface. The significance of these findings extended far beyond our personal case. We confirmed through multiple sources, both within and outside of Google, through our Google invoices, and data collected from Google APIs that Google never actually refunded any of the confiscated publisher earnings to the advertisers. In fact, Google’s own support team admitted that they never had a system in place for such refunds. Google’s demand-side platform for advertisers, DoubleClick Bid Manager (DBM), could apparently only filter invalid impressions in real-time, before they are ever charged to the advertisers. It did not have a mechanism for retroactive refunds. This was later confirmed by a Google spokesperson, who announced that they have only recently began to devise measures for refunds on DBM [6].
Four months into our research, we were surprised to find out that The Wall Street Journal had conducted their own investigation into the subject, reporting facts that further solidified our discoveries [4]. Most significantly, six days after the WSJ article was published, Google swiftly changed their AdWords contract, effectively forcing millions of advertisers to waive their respective rights to trial by jury and prohibiting them from bringing any class actions against Google. Advertisers would now have to go through the expensive process of bringing individual arbitration to resolve disputes. The timing leaves little doubt that this was done in direct response to the WSJ article to prevent small and mid-size advertisers from suing and obtaining redress.
Because of the far-reaching implications of these events, in December 2017, instead of just filing a claim for individual damages, we filed a class action lawsuit against Google. The case spurred some media attention but none of the articles published in Business Insider [5], The Register [6], AdExchanger[7], and other media outlets really captured the essence of the story. So, we decided to set the record straight. Moreover, we owe it to our publisher clients to finally share with them what had really happened. Since we did our best to cover their losses from Google, most of them were oblivious to the whole situation. Ironically, by protecting our publishers from Google’s theft, we were simultaneously protecting Google’s reputation.
Events leading up to the lawsuit.
By being positioned on both sides of the Google Ad Exchange, we could easily check if the money was returned to the advertisers.
On Friday, May 19 2017, we received an auto-generated email from the DoubleClick Ad Exchange team stating that our account had been disabled. No action was required from our side, no specific reason was given, and we were informed that all our earnings totaling 476,622.69 USD had been withheld and would be:
refunded to advertisers in connection with the publisher’s failure to comply with the Ad Exchange agreement.
It was not stated which of our publishers was in violation, nor what the violation was. No explanation was given as to why all earnings were withheld, as opposed to just the amount accrued by the publisher who allegedly violated the terms. It is also important to note that the traffic which generated those earnings had already passed Google’s monthly audit and only 0.1% of it was marked as sub-quality — an insignificant amount compared to industry averages.
Our account was terminated on a Friday evening, without any prior notice, and right at the end of the payment cycle, shortly before our publishers were due to receive their earnings. Anecdotal evidence suggests that this is common practice in Google’s policy for terminating publisher accounts.
To understand what had gone wrong, we contacted some senior executives at Google. In a telephone call, one of those execs explained that our account was terminated due to a violation, the nature of which he did not know. He repeatedly stated that every single cent of our earnings had been refunded to the advertisers, and also stressed that even if we successfully appealed Google’s decision to terminate our account, we would not receive any of the withheld funds back. This final revelation was so absurd that it prompted us to dig up everything we could about Google’s policies for refunding advertisers. There was so much deliberate regulatory obfuscation that we dedicated an entire section of this post to demystifying the advertising refunds conundrum. But before we get to this, we shall first attempt to decipher the alleged policy breach.
Strangely, no notifications of any violations were reported in our DoubleClick for Publishers account. More significantly, pretty much all of our publisher clients were still monetizing their inventory with Google, either through AdSense or their own AdX accounts. This was not only evident from the publishers’ websites where Google ads continue to feature prominently, but was also confirmed by data from Google’s own reporting system, showing that Google Ad Exchange continues to offer inventory from those publishers. This was peculiar since according to Google’s policies, publishers whose AdX accounts have been disabled are not allowed any further participation in any of Google’s monetization products. We began wondering whether there was, in fact, any violation at all.
Google’s compartmentalization of oversight has apparently resulted in little to no internal communication between the different departments in its ecosystem of products. So, what the Google execs on the publishing side had neglected was that AdTrader was one of few companies positioned on both sides of their ad exchange. Some of our bidding activity on behalf of advertisers was conducted through DBM and happened to be on sites under our AdX account. This meant that we could easily check if the money was, in fact, returned to the advertisers. This is precisely why Google rarely tolerates companies sitting on both sides of its ad exchange. It provides far too much transparency into the money flowing in and out of their platforms.
After going through dozens of reports we started to connect the dots. Much to our surprise, according to records pulled from non-other but Google’s own reporting system, no refunds or credits were issued to the advertisers. To verify this, we reached outside of our client portfolio and asked a few agencies and advertisers across different markets whether they had received any refunds from Google. They confirmed that they had not.
The further we dug, the more evidence kept piling up. We briefly outline some of the main points below, for a more complete record please refer to the AdTrader v Google complaint [8].
- Google Service Agreement stating that Google has the right to withhold payments to publishers only if (i) such earnings were a product of invalid activity and (ii) the withheld amounts are refunded to the advertisers.
- AdX account showing insignificant amount of invalid traffic detected.
- DoubleClick for Publishers account showing no AdX policy violations.
- All publishers still running Google ads, confirming no violations.
- Statements from Google executives insisting that every single cent of our publishers’ earnings has been refunded to the advertisers.
- Data from Google’s APIs showing our advertisers’ bidding activity in some of our AdX publishers whose earnings were confiscated.
- DoubleClick Bid Manager invoices showing that no refunds were issued to these advertisers.
- Statements from DoubleClick Bid Manager’s support team explaining that there is no system for retroactive refunds.
- Public statement from a Google spokesperson, admitting that Google only recently started to devise measures for refunding its DBM advertisers.
- Other advertisers and agencies confirming that no refunds were received.
- Wall Street Journal revealing that Google does not offer full refunds to advertisers [4].
- AdWords Terms and Conditions changed six days after the WSJ article was published, prohibiting advertisers from seeking trial by jury or filing class action lawsuits.
- Multiple articles in Google’s AdWords Help Centre [9] and Ad Traffic Quality Resource Centre [10], claiming that Google reimburses advertisers affected by invalid traffic.
- Google Inc. Advertising Program Terms asserting Google’s obligation to issue credits to advertisers for invalid traffic.
- Article in Google’s AdSense blog [11], admitting that Google’s policies sometimes result in good publishers having their accounts disabled without much recourse.
- Article in Google’s AdWords blog [12], stating that Google has terminated more than 250,000 publisher accounts in 2013 alone.
At this point, it was clear that we had to take legal action.
Withholding publisher earnings and falsely claiming to return them to the advertisers is the very definition of theft.
We started talking to lawyers and it quickly became clear that what we had uncovered so far extended beyond our personal claims. We continued collecting evidence that would eventually build up both our individual and a class action case.
Allowing a partner to accumulate close to $0.5M of earnings, without any warning of improper practices, waiting right until the end of the payment cycle when the partner has generated the most amount of money, and then abruptly refusing to pay out any of those earnings by means of auto-generated e-mails is nothing short of evil.
Withholding money from publishers and falsely claiming to return those funds to the affected advertisers, on the other hand, is the very definition of theft. With hundreds of thousands of publishers terminated each year [12], this potentially means billions of dollars of illegally appropriated funds that have never reached the advertisers.
The advertising refunds conundrum.
While Google is claiming to publishers that it cannot pay out their earnings as they have already been refunded to the advertisers, it is simultaneously claiming to advertisers that it is able to only refund a fraction of that amount (their platform fee) as the rest had been paid out to the publishers.
If by now, some are still wondering why we are making this case public, instead of quietly pursuing our individual damages, this section aims to eliminate any confusion.
Google has always claimed that it refunds or credits advertisers for any invalid traffic bought through their platforms:
[…] when invalid activity is found through analysis and reactive investigation, we mark those clicks as invalid and issue credits to any advertisers affected by this activity.
This and similar claims were repeatedly made in the Google Service Agreement, in the Google Advertising Program Terms, on multiple pages in its AdWords and AdSense Help Centre, as well as in our direct communication with the Google team.
It was not until August 25 2017, that The Wall Street Journal made it publicly known [4] that Google did not give complete refunds or credits to its advertisers for what was determined by Google’s own detection system to be invalid traffic. The WSJ had made this discovery independently from our case, but their findings were more or less pointing in the same direction. The article explained that instead of refunding advertiser the full amount, Google had only offered to refund their platform fee which would typically range between 7–10% of the total amount spent. Google insisted that this was appropriate because: “they don’t control the rest of the money spent”.
The truth is, Google does control most of the money spent, as most of it is spent on its very own DoubleClick Ad Exchange. A simple report from DoubleClick Bid Manager would show that over 50% of the advertising revenue from the platform flows directly into Ad Exchange. Google themselves admit in their Ad Exchange Seller Help Centre [13] that most of the media buying from its own platforms AdWords and DoubleClick Bid Manager happens on Ad Exchange. Other industry experts such as Brian O’Kelley, CEO of AppNexus, have also been vocal about Google giving an unfair advantage to their own ad exchange when allocating demand from their demand-side platform DoubleClick Bid Manager. In an interview with the AdExchanger [14], he states that:
[…] most DBM buyers we talk to say more than half of their spend goes to AdX when they use DBM.
So, while Google is claiming to publishers that it cannot pay out their earnings as they have already been refunded to the advertisers, it is simultaneously claiming to advertisers that it is able to only refund a fraction of that amount (their platform fee) as the rest had been paid out to the publishers. Clearly, the two statements contradict each other and to further confuse matters, neither is entirely true.
In reaction to an article by The Register [6] reporting on our lawsuit, a Google spokesperson admitted that Google only recently started to put a system in place for refunding its DBM advertisers:
We have a longstanding policy of refunding advertisers for invalid traffic. As we recently announced, this is currently being expanded to include ads purchased via DoubleClick Bid Manager.
The announcement was made in September last year and according to our invoices, up until November, not a single refund was made to the advertisers. Given that Google has had over a decade to implement a refunding mechanism, we believe that the timing of this announcement is directly related to the WSJ article that came just weeks before.
Looking back on all the inconsistencies, deliberate obfuscations, and blatant cover-ups, in our opinion, the most significant is the AdWords contract change, as it demonstrates abuse of power on a level that can hardly be neglected. Contractual relationships with millions of advertisers were summarily redacted in the blink of an eye. Not only is Google stealing money but it now has the legal safety net to continue to do so without risking any reprimands.
Implications.
Google uses and abuses its monopolistic power on the buy and sell side to profit at the expense of everyone using their platforms.
As a platform, Google only has a pass-through authority. Any funds, outside of its platform fee, belong either to the advertisers or the publishers. By illegally appropriating earnings from its publishers and falsely claiming to have refunded them to the advertisers, Google is generating hidden profit margins that far exceed its revenue from platform fees. It is therefore reasonable to argue that Google came to be the largest advertising company in the world not merely on account of its search monopoly but equally so because of its overblown profit margins.
AdTrader had to pay a steep price for trusting Google as a business partner, as we are sure many others also did. But was it not for this, we would not have uncovered the broader issue that affects not just us but the entire advertising community — that Google uses and abuses its monopolistic power on the buy and sell side to profit at the expense of everyone using their platforms. By taking legal action, we hope to put an end to this. Google have to commit to being a platform with a pass-through authority. Anything outside of its platform fee either belongs to the publishers or to the advertisers. It is not Google’s to keep.
As for AdTrader, it was never our intention to get involved in a multi-year lawsuit with one of the most resourceful companies in the world. But what happened was beyond our control and we have to fight it back. We are doing so on two independent fronts — technological and legal. The former has been a work in progress for approximately three years now and we are working harder than ever on our new products. As for the latter, we have made sure that we can take this lawsuit to the very end and will do it in the best interest of all advertisers locked in Google’s monopoly.
We invite all affected DoubleClick Bid Manager and AdWords advertisers, agencies, and trading desks to come forward and join our class action lawsuit. Given Google’s decision to change all its contracts, this might be our last chance to act and we cannot afford to miss it! Please get in touch with us because together we can get our voices heard and level the playing field.
References:
[1] http://europa.eu/rapid/press-release_IP-17-1784_en.htm
[3] http://www.telegraph.co.uk/technology/2017/11/11/eu-closes-google-prepares-second-antitrust-fine/
[6]https://www.theregister.co.uk/2017/12/13/google_click_fraud_lawsuit
[7] https://adexchanger.com/ad-exchange-news/friday-12152017/
[8] https://adtrader.com/downloads/AdTrader_v_Google_complaint.pdf
[9] https://adwords.googleblog.com/2006/03/invalid-click-credits.html
[10] https://www.google.com/intl/en_ALL/ads/adtrafficquality/invalid-click-protection.html
[11] https://adsense.googleblog.com/2012/12/working-better-together-protecting.html
[12] https://adwords.googleblog.com/2014/01/busting-bad-advertising-practices-2013.html
[13] https://support.google.com/adxseller/answer/7014770?hl=en
[14] https://adexchanger.com/platforms/appnexus-ceo-brian-okelley-waging-price-war/