United States v. Google/Findings of Fact/Section 5A
- A. Search Advertisements
167. Search advertisements are a form of digital advertising. Search advertisements are paid, or “sponsored,” postings published in response to a user’s query on a search platform. Id. at 1173:15-16 (Dischler). Search advertisements appear on GSEs and SVPs, as well as occasionally on social media platforms.
168. A “signal” within the context of search advertising is an indicator of a consumer’s intent to purchase a good or service. Id. at 404:25–405:16 (Varian).
169. Search ads are the product of a uniquely strong signal because they are delivered in response to a user’s query. See UPX910 at 753 (“The vast majority of our profits come from search ads, because the signal from a query is s[]o strong.”). “The big idea is that when you search for a product or service, chances are you’re interested in purchasing that product or service.” UPX428 at .010.
170. This signal is all the more powerful because it represents the user’s declared intent in real time, that is, at the moment the intent is manifest. See UPX910 at 753 (a query for “tennis racquet” is a “strong indicator of interest in buying a tennis racquet,” and “[m]uch stronger than what you searched [] three days ago,” “[o]r what article you read yesterday”); UPX26 at 764 (“Search ads are an effective form of advertising since queries are a strong signal of user interest and intent and the ads appear immediately after the query is entered.”); Daniels Dep. Tr. at 31:4-8 (search consumers express “clear intent”).
171. As a result, advertisers view paid search as particularly efficient at driving conversions. See, e.g., Tr. at 4854:23–4855:1 (Lim); UPX441 at 802 (JPMorgan Chase email: “Search can drive acquisition based on some of the strongest intent signals made available[.]”); Daniels Dep. Tr. at 31:13-19 (search customers express “the clearest preference” in the digital marketing ecosystem); Alberts Dep. Tr. at 45:18–46:16 (“[P]aid search can be an incredibl[y] powerful way to get in front of the consumer who is . . . actively looking to make a purchase or looking to sign up or enroll.”); see also infra Section V.D (describing differences in intent among users on various ad channels). A conversion typically is a sale or, for some goods or services, a new account or enrollment. Tr. at 4842:7-8 (Lim); id. at 5121:1-5 (Booth).
- 1. Search Ads on GSEs
172. GSEs earn revenue through the sale of search ads. Id. at 361:21–363:16 (Barton); id. at 1138:2-5 (Dischler) (the majority of Google’s revenue is ad revenue). When a user clicks on a GSE search ad, they are taken to an advertiser’s website or platform and encouraged to complete a sale or some other indicia of conversion. Id. at 1398:11-12 (Dischler).
173. There is a direct relationship between a GSE’s scale and its monetization of search advertising. Id. at 2646:18-22 (Parakhin). More users on a GSE means more queries, which in turn means more ad auctions and more ad revenue. See, e.g., id. at 5142:3-13 (Booth); id. at 6595:12-25 (Vallez); Stein Dep Tr. at 185:14-22.
174. Google does not serve ads in response to all queries. FOF ¶¶ 37–38. It does so only in response to queries that convey a “commercial intent,” which Google assesses by determining whether an advertiser is willing to pay for an ad in response to the query. Tr. at 1170:11-13, 1171:23–1172:1 (Dischler).
175. There are two primary types of search ads sold on GSEs: (1) general search text ads and (2) shopping ads, or product listing ads (PLAs). Id. at 1177:2-4 (Dischler). The figure below illustrates how those ad types can appear on a SERP. Other types of ads that appear on SERPs include local ads, hotel ads, and other travel ads. Id. at 1346:14-23 (Dischler).
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DXD3 at 2.
176. As shown, text ads resemble the organic links on a SERP. When a user types in a query, text ads generally appear at the top of the SERP with a designation indicating that they are paid advertisements. On Google, that designation is the word “Sponsored.” See id. Occasionally, a text ad will include an image. See Tr. at 408:7-9 (Varian).
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UPXD13. As depicted in the two prior images, the number of text ads served can vary based on the query. Google’s policy, however, is to serve no more than four text ads on a SERP. See Jain Dep. Tr. at 262:16–263:11 (discussing UPX746).
177. PLAs, also known as “[s]hopping ads[,] are designed for retail advertisers,” that is, sellers of tangible goods. Tr. at 1353:3 (Dischler); id. at 3998:7-9 (Juda). “The reason why is because when users are shopping, they often want to see pictures and prices and other relevant information about products.” Id. at 1353:4-6 (Dischler).
178. Google developed PLAs both to meet this consumer need and to compete with Amazon’s retail offerings. Id. at 1354:3-15 (Dischler). A depiction of shopping ads on a SERP appears below.
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UPX32 at 145.
179. Text ads differ from PLAs in several ways. Text ads can be used to advertise almost any product or service. So, virtually any seller can advertise using a text ad. See Tr. at 408:10-13 (Varian); id. at 3810:25–3811:5 (Lowcock); id. at 3995:11–3996:9 (Juda). PLAs, however, are used to market only tangible goods. Id. at 3811:22-24 (Lowcock).
180. A significant portion of Google’s search advertisers can purchase a text ad, but not a PLA. Id. at 1180:7-24, 1183:13-19 (Dischler); id. at 4251:2-9 (Juda) (“[P]roduct listing ads only appear on searches that are more retailer product oriented.”); id. (“[S]ince text ads offer a more free-flowing way for advertisers to target searches, they will sort of run the whole gamut of the kinds of searches that they may show against.”). For example, a financial institution like JPMorgan Chase purchases text ads but not PLAs. Id. at 4848:1-11 (Lim). Moreover, many of Google’s top advertisers by ad spend are online travel companies that do not purchase PLAs. See PSX867.002.
181. Text ads are thus the predominant form of advertising on Google, whether measured by revenue or number of advertisers. Tr. at 1180:25–1181:13, 1476:25–1477:5 (Dischler). In 2020, text ads made up about 80% of Google’s search ads by revenue. Id.; id. at 1282:9-11 (Dischler). In terms of ad types, 52.8% of ad dollars spent on Google come from advertisers who purchase only text ads; 46.9% is generated from advertisers who purchase both text ads and PLAs; and a mere 0.1% is originated by PLA-exclusive advertisers. Id. at 4649:5-15 (Whinston) (discussing UPXD102 at 37); accord PSX867.003 (54.7% of revenue comes from advertisers who purchase only text ads versus 45.1% from advertisers who buy both text ads and PLAs). When measured by number of advertisers, 92.5% of Google’s advertisers purchase only text ads, 5.5 % purchase PLAs and text ads, and 2% purchase only PLAs. PSX867.003; accord Tr. at 1476:25–1477:5 (Dischler).
182. Advertisers have significant control over the “copy” of a text advertisement. Tr. at 423:15-20 (Varian); id. at 3810:13-23 (Lowcock); id. at 1184:16–1185:1, 1185:13-15 (Dischler) (“Q. Would you agree that a text ad gives an advertiser more control when their ad appears on a search engine results page? A. It does.”). For example, advertisers can tailor the text of the advertisement to include a heading and description or add “extensions” such as additional site links or contact information. See UPX12 at .005; Tr. at 1180:3-6 (Dischler). These are sometimes known as “formats.” Tr. at 4791:1-4 (Whinston); see id. at 5128:4-18 (Booth) (discussing PSXD2, Home Depot’s use of an extension to promote a Labor Day sale).
Anatomy of an Ad
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UPX12 at .005.
183. By contrast, advertisers have less input into the final copy of a PLA. Tr. at 1185:2-15 (Dischler); id. at 5133:9-10 (Booth) (“There are fewer controls or ability to be able to custom tailor a product listing ad or a shopping ad.”). Google generates PLAs using machine learning, based on inventory information provided by the advertiser. Id. at 1185:4-6, 1353:7-11 (Dischler) (“The retail advertisers will provide us with a product feed that has structured information which is analogous to an ad creative[.]”).
184. Advertisers also have more control over text ads because they are purchased through keywords. A query that includes an advertiser’s selected keywords might trigger an advertisement from that source. Id. at 1185:16-19 (Dischler). Advertisers do not select keywords when buying PLAs. Id. at 1185:20-22 (Dischler). “Shopping campaigns rely on the feeds for letting the engines know when it is relevant to serve [the] product.” UPX926 at 698. “Since Shopping campaigns are not keyword-based, the information included in [the] product titles and descriptions will be the main source of what the engines will be crawling before serving ads.” Id. at 699. But cf. id. at 701 (advertisers can use negative keywords to target PLAs); infra Section V.F.3.b (discussing negative keywords).
185. Both text ads and PLAs are sold using an auction, although those auctions are different. Tr. at 1197:9-13 (Dischler); id. at 3812:9-12 (Lowcock); see infra Section V.F (describing text ads auctions). In 2017, Google considered and rejected a combined auction for text ads and PLAs. See UPX1013 at .003 (deciding against integration in part because “user intent and advertiser value is different across the units, and as a result advertisers are not bidding on the same thing on Shopping and Text ads”). At present, changes to pricing of text ads auctions does not impact the pricing of PLA auctions. Tr. at 1203:21-24 (Dischler).
186. Both text ads and PLAs are sold on a cost-per-click (CPC) basis. “[T]he advertisers only pay[] if the user clicks on a link within their ad.” Id. at 1195:14-16, 1177:5-20 (Dischler); UPX1 at 538–39. PLAs cost less than text ads. See UPX1013 at .003 (“While PLAs are a great user experience and provide a great deal of advertiser value, the CPCs tend to be lower than text ads.”); Tr. at 4650:2-20 (Whinston) (discussing UPXD102 at 39) (concluding that “text ads are more expensive than PLAs” and while “PLA prices have been flat or, if anything, a little decreasing, [] text ad prices have been going up”); cf. id. at 4782:23–4783:2 (Whinston) (discussing UPXD102 at 65) (opining that the CPC of text ads has doubled between 2013 and 2021).
187. Google views text ads and PLAs as different products. Tr. at 423:12-14 (Varian); id. at 1188:10-16, 1188:25–1189:1 (Dischler) (“[F]rom the perspective of Google, shopping ads and text ads are different products.”); PSX191 at 722 (“Shopping and Text Ads are different products with different goals.”); id. at 723 (“Today these two formats are siloed in their own world and don’t compete[.]”); UPX1084 at 477 (slides summarizing differences between text and shopping ads); UPX440 at 590 (“[W]e believe that both supplement each other and provide useful information to the user.”). Accordingly, Google has separate teams for text ads and PLAs, and those teams have different goals. Tr. at 1188:25–1189:3 (Dischler); id. at 1498:9-16 (Dischler) (Google plans to continue selling text ads and PLAs as separate products).
188. Retail advertisers, however, often have the same goal when using both types of ads, which is to drive sales. Id. at 1183:22-25, 1190:4-8 (Dischler). Accordingly, retail advertisers “often will relatively allocate their budgets on text ads or shopping ads in order to achieve that objective at the lowest possible cost and highest effectiveness.” Id. at 1355:5-9 (Dischler); infra Section V.E.
189. Because tangible goods can be advertised using either a text ad or PLA, both ad types sometimes will appear on the same SERP. Certain retail advertisers attempt to purchase both to maximize their visibility on a given SERP. For example, if a user searches for a particular branded product (e.g., see below entering the query “pampers”), the brand can attempt to “own the SERP” by purchasing the top placements for both text ads and PLAs. See Tr. at 5137:14-17 (Booth) (“[T]he SERP has got limited real estate, and so the more that we can take up that real estate, the higher consideration we would have for somebody to select one of our ads.”).
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UPX12 at .003.
190. Google recognizes that some advertisers use text ads and PLAs together to maximize their SERP “real estate.” See Tr. at 1354:18–1355:5 (Dischler); UPX464 at 155 (PLAs “[c]omplement[] text ads to increase an advertiser’s ‘shelf space’ on SERPs[.]”).
191. An advertiser may also purchase its rivals’ branded keywords to “conquest” by diverting rivals’ potential customers towards its platform. See Tr. at 3864:19–3865:25 (Lowcock). Conquesting thus is most effective through text advertising, which uses keywords. See id. at 4846:23–4847:8 (Lim) (“branded keywords” are those that contain a firm’s “owned and operated terms”); id. at 5131:22-25 (Booth) (text ads are better suited to branded keywords, as a query for “Home Depot” is too general to assign to a single product).
192. Google’s market share in the text ads market measured by ad spending is 88%. See id. at 4777:21–4779:6 (Whinston) (discussing UPXD102 at 62). Of those text ad dollars, 45% comes from text ads that are displayed in response to a query entered into a default search access point covered by Google’s distribution agreements. Id. at 5772:20–5773:2 (Whinston) (discussing UPXD104 at 39).
- 2. SVP Search Ads
193. SVPs also display search ads, which are almost exclusively PLAs. SVP PLAs also use a feed-based system to select ads. See Alberts Dep. Tr. at 39:22-40:13 (describing Amazon and Target as serving PLAs “powered by product feeds”).
194. In order to place a search advertisement on an SVP, “the client needs to have their product or services available for purchase on the[] online retailer websites.” Tr. at 3854:13-15 (Lowcock); see, e.g., James Dep. Tr. at 105:20-23 (“[A]n Amazon-sponsored product ad would require the . . . advertiser . . . to be selling that product on Amazon.”). A user that clicks on a search ad delivered on an SVP thus will remain on the platform, unlike a click of a GSE search ad that takes the user to the advertiser’s website. See Tr. at 485:11-13 (Varian); id. at 1398:4-10 (Dischler) (“One particular feature of Amazon’s product ads is that since they’re also the platform on which products are sold, it means that they can close the loop, which means that anytime a conversion happens, when a purchase event happens, it happens on Amazon.”). SVPs like Amazon take a “cut” of the final sale, which drives their profits. See DX501 at .015–.017.
195. As a consequence, a firm that does not sell on an SVP also will not advertise on it. For example, because Home Depot does not sell goods on Amazon, it does not purchase search ads on Amazon. Tr. at 5124:10-23 (Booth).
196. As of 2023, Google estimates that Amazon’s revenues are larger than Google’s in retail advertising. Id. at 1403:20-21 (Dischler) (discussing DX231 at .003).