Finance

Google raised ad prices without telling advertisers: exec

A current Google executive testified that the company has silently raised ad prices within its search results in order to hit revenue goals — and that the stealth changes resulted in hikes from 5% to 10% for advertisers.

The bombshell admission by Jerry Dischler, Google’s vice president of advertising products, came Monday during the landmark trial in response to questions from Justice Department antitrust lawyers who say the Big Tech firm has built an illegal monopoly over online search to drive massive revenue growth.

Dischler said Google often tweaks ad sales metrics for its advertising auctions, which determine which ads appear as top results in response to user prompts on the company’s search engine, by raising rates or the minimum required spending to secure placement.

“We tend not to tell advertisers about pricing changes,” Dischler said on the stand, according to Bloomberg.

Dischler also acknowledged the accuracy of previous sworn testimony he gave in 2020, when he told investigators that the changes could mean increases ranging from 5% to as high as 10% for some search queries.

Dischler claimed that price increases beyond 10% would be a “dangerous thing to do” because it could drive Google advertisers to simply relocate to rival platforms like Meta or TikTok — though he conceded it would not necessarily drive away enough clients to hurt revenue.


Google raised prices on its ad search clients without notifying them, Jerry Dischler testified.
REUTERS

The feds also cited a May 2019 email in which Dischler and other Google ad employees fretted about “shaking the cushions” to hit the company’s publicly stated revenue targets put forward by CFO Ruth Porat and avoid a bloodbath for its stock price.

If Google missed its “quota for the second quarter in a row and we miss the street’s expectations again, which is not what Ruth signaled to the street, so we will get punished pretty bad in the market,” Dischler said at the time.

Dischler, who finished testifying on Tuesday, said Google earned more than $100 billion in search ad revenue in 2020, which comprised the bulk of the company’s overall proceeds.


Jerry Dischler
Google executive Jerry Dischler delivered a bombshell testimony about the company’s ad practices.
Google

Google defines an advertising auction as “the process that happens with each Google search to decide which ads will appear for that specific search and in which order those ads will show on the page.”

Several factors determine top placement, including bidding price and the relevance of a particular ad’s keywords, according to the company.

Much of the trial at the federal court in Washington, D.C., which is in its second week, has been held out of earshot of reporters after Judge Amit Mehta agreed with Google lawyer John Schmidtlein that all discussions about the tech giant’s pricing strategies be in a closed session.

On Wednesday, the hearing again began behind closed doors with Google Finance VP Mike Roszak being questioned for the second day, according to Bloomberg reporter Leah Nylen.

The DOJ has also been ordered to remove all files pertaining to the case that were posted to its website by Mehta, an Obama-era appointee presiding over the 10-week case, Nylen reported on Tuesday. 

The Justice Department has stated that Google spends more than $10 billion annually on payments to prominent partners, from smartphone makers like Apple and Samsung to mobile carriers like Verizon and AT&T, to maintain a dominant hold on online search.


Google
Google is facing the biggest antitrust trial in more than 20 years.
REUTERS

Google, meanwhile, has denied wrongdoing and argued that users opt to use its search engine because it is a high-quality service, not because it is enabled by default on a variety of smartphones and other devices.

The company said the payments to partners are fair compensation.

If Google were to lose the 10-week antitrust trial — the largest of its kind in more than two decades — it could be required to sell off portions of its business or end some practices.

A verdict is expected next year.