United States v. Google/Findings of Fact/Section 5E
- E. Shifting Spend
225. An advertiser will “determine the objectives of their advertising campaign on a campaign basis and they set an overall budget for their entire advertising spend.” Tr. at 3805:2-4 (Lowcock). From there, the advertiser will determine how to allocate their budget to different channels to meet campaign goals. Id. at 3805:5-10 (Lowcock); see, e.g., UPX926 at 683–84 (“Campaign segmentation should be done at a granular level where you can control the investment amount allocated towards a campaign. Orienting these campaigns with the customer journey is critical so that you can align all assets housed within the campaign to a common and consistent goal.”); Tr. at 4857:12-18 (Lim) (“Paid search budgets are for paid search only. Where we have investment mobility would be if you think about just digital or just a programmatic investment for a campaign, we could optimize to or from various different websites within that campaign. But it is not transferable between a programmatic buy across web pages and paid search. They are distinct and different and separate.”).
226. One common campaign driver is seasonality: Certain times of year are associated with product popularity and purchases. E.g., DX187 at .069 (“Escape rooms are very seasonal. You’re going to see a spike in the summer months, and around the holidays, Christmas. So, a bit of a mixture of seasonality and available impression.”).
227. Another driver is return on investment (ROI), or return on ad spend (ROAS), which are metrics advertisers use to evaluate the effectiveness of their ad spend. Advertisers will shift spend to more effective ad channels to maximize their overall ROI. See, e.g., Tr. at 5340:23–5341:5 (Dijk) (ROI is the “key” metric for decision-making); James Dep. Tr. at 35:19-23 (Amazon bases some of its bidding strategies in part on ROI); Tr. at 5141:14-17 (Booth) (“So we would continue to lean our investment into what is producing the greatest return on advertising spend or ROAS, and that’s a consistent practice that our teams are always doing.”); DX187 at .066 (ROI is “the top factor affecting short term [] and long term [] spend”).
228. But it is challenging for advertisers to calculate ROI and ROAS. See UPX441 at 803 (privacy measures have made it “more challenging for [JPMorgan Chase’s] teams to have real-time access to performance data at a granular level”); Tr. at 3981:14-17 (Lowcock) (“[B]ecause ROI requires confidential client information, . . . the client might not share that data with us, nor would it then be provided to third parties to optimize ROI.”); UPX519 at .001 (“There is no good sense, both within Google and outside, for what the true ROI of advertising channels are (and consequently how they compare).”) (2017); UPX506 at .012 (“Overwhelming majority of adv[ertisers are] nowhere closer to measuring ROI,” only a “[s]elect few players with the resources can build models” to do so, “but analysis have shown they are all over the place.”) (2017).
229. Google believes that advertisers’ ability to calculate ROI has improved significantly in the last six years, in part due to the development of AI and new ad channels, such as social media. Tr. at 1385:3-12 (Dischler). Also, now available to advertisers is automated bidding software, which attempts to discern and compare the ROI of different ad types to further the advertiser’s business objectives. See id. at 1357:7–1358:19 (Dischler). These automated tools shift ad spend between social media ads and search ads on GSEs and SVPs. Id. at 1406:4-8 (Dischler). Google has an automated bidding product, Performance Max, that some of its advertisers use (although not many of its largest). Id. at 1371:4-11, 1372:5-24 (Dischler).
230. Though advertisers do try to estimate and maximize ROI and ROAS across channels, they do not substitute away significantly from search ads to other channels, like display or social. These channels are less effective at achieving the same marketing goals as search ads. Advertiser witnesses uniformly testified that purchasing search ads on Google is essential to digital ads campaigns because search ads are uniquely able to capture high-intent consumers. See, e.g., id. at 3826:14-15 (Lowcock) (“I would go so far as search would be mandatory in any advertising campaign.”); id. at 4849:6-7 (Lim) (“We think of search as an always-on acquisition driver for the firm.”); id. at 6506:24–6507:1 (Hurst) (“[T]here isn’t a great substitute for the volume of high-intent customers you can find on Google.”); id. at 5236:24–5237:1 (Dijk) (“Google is kind of the exclusive, dominant . . . pool of high-intent, new customers for us to find.”); id. at 6585:25–6587:3 (Vallez) (agreeing that no paid media channel better captures user intent than paid search because search reflects “the moment right when they’re about to make a decision”); DX412 at 665 (Kohl’s presentation showing search spend as unchanging while other ad types, including display, social, and video, fluctuate); Tr. at 5450:6-10 (Jerath) (discussing UPXD103 at 23) (Booking.com record explaining that “Search and Display Ads are not seen as substitutable to one another . . . because they target users in very different situations/environments,” and the “resulting performance is very different”). There is no evidence that advertisers have significantly shifted spend away from search ads at any point.
231. Advertisers rely heavily on search ads for traffic and revenue. When advertisers have experimented by turning off search ads for a portion of queries or products, they have lost revenue. See Tr. at 422:22-24 (Varian). In 2020, for example, Home Depot—one of Google’s largest advertisers—studied the effects of cutting off paid search on its revenue. When it turned off paid search in % of United States markets, its revenue dropped %. PSX676 at 240. Home Depot concluded that for every $1 it invested into paid search, it earned over $ in revenue. Id.; accord Tr. at 5284:6-8 (Dijk) (Booking.com cannot stop purchasing text ads from Google and sustain its business.).
232. When it comes to general search text ads, advertisers have a fixed budget that largely mirrors the relative market shares of Google and Bing. Tr. at 4869:7-23 (Lim) (90% of JPMorgan Chase’s search text ad spend is on Google, 10% is on Bing); id. at 5141:23-24 (Booth) (“It’s industry standard, probably 90 percent versus 8 to 10 percent on Bing.”); id. at 6501:11-14 (Hurst) (Expedia’s spend allocation is 10 to 1, Google to Bing); UPX441 at 803 (Google is a “[c]ore partner in search due to overwhelming market share”). Advertisers buy nearly all of their text ads from these two GSEs. Tr. at 4874:10-12 (Lim).
233. Advertisers consistently testified that shifting significant ad spending from Google to Bing would be ineffective (and unwise) because of Bing’s lack of scale. Id. at 4869:7–4870:11 (Lim) (“Bing doesn’t have an equivalent volume so we would be unable to move budgets between those two partners.”); id. at 4875:19–4876:4 (Lim) (stating “there’s [nowhere] else to go” once it maximizes spend on Bing); id. at 5143:5-24 (Booth) (Home Depot’s 90/10 spend split has remained constant); id. at 6533:16-20 (Hurst) (“I don’t think there is a way to shift enough spend to Bing to make up for that gap. I’m actually very confident there is not a way to spend that much money in Bing and find all the travelers you had in Google by using one instead of the other.”); id. at 5282:7-12 (Dijk) (“Q. Are text ads that Booking.com purchases on Bing generally less expensive than on Google? A. Very difficult to say. It depends very much on the keywords and the searches. But as I told to you, it doesn’t really matter. I would gladly spend far more with Bing, but I’m constrained because the demand is clearly not there.”); accord UPX519 at .017 (Google study reflecting that “Bing was mentioned as having good ROI but too low volume for them to seriously invest”).
234. For advertisers that purchase both text ads and PLAs, the shifting of spend between those two formats is more common. See Tr. at 5181:22–5182:6 (Booth) (Home Depot reshuffles its text ad/PLA spend allocation daily). But only retail advertisers can shift spend from text ads to PLAs. Id. at 1493:11–1494:3 (Dischler); id. at 7580:9-17 (Raghavan) (stating that the determining factor in whether an advertiser could shift spend from text ads to PLAs is whether their products “have visual appeal”).
235. Some of Google’s largest advertisers cannot make that shift. Dr. Raghavan agreed that among Google’s top 20 queries in the United States in 2018, only three pertained to a physical product for which advertisers could shift spend from text ads to PLAs. See id. at 7578:8–7580:17 (Raghavan) (discussing UPX342 at 859).
236. Even for retail advertisers, PLAs are not perfect substitutes for text ads. See id. at 5218:23–5219:5 (Booth) (Home Depot would be unable to use PLAs to advertise a storewide sale). But see id. at 1356:25–1357:3 (Dischler) (“I believe that they’re equivalent. In the view of the advertisers, they’re equivalent and substitutable.”); id. at 1476:20-24 (Dischler) (“[T]he advertiser has a singular business objective which is to sell products, and they could use shopping ads or text ads in order to achieve that business objective for the retail advertisers that are eligible to use shopping ads.”).
237. That said, some retail advertisers are increasingly embracing PLAs and spending more of their search ads budget on that channel. Id. at 5182:7-21 (Booth) (Home Depot’s spend is greater on PLAs than text ads); id. at 1356:22-24 (Dischler) (“You know, as advertisers become more comfortable, they’ve been shifting more budgets to shopping ads versus text ads.”).