New York Times:
Facebook was going to compete with Google for some advertising sales but backed away from the plan after the companies cut a preferential deal, according to court documents.
Facebook never said why it pulled back from its project, but evidence presented in an antitrust lawsuit filed by 10 state attorneys general last month indicates that Google had extended to Facebook, its closest rival for digital advertising dollars, a sweetheart deal to be a partner.
The agreement between Facebook and Google, code-named “Jedi Blue” inside Google, pertains to a growing segment of the online advertising market called programmatic advertising.
In the milliseconds between a user clicking on a link to a web page and the page’s ads loading, bids for available ad space are placed behind the scenes in marketplaces known as exchanges, with the winning bid passed to an ad server.
A method called header bidding emerged, in part as a workaround to reduce reliance on Google’s ad platforms. News outlets and other sites could solicit bids from multiple exchanges at once, helping to increase competition and leading to better prices for publishers. By 2016, more than 70 percent of publishers had adopted the technology, according to one estimate.
Seeing a potentially significant loss of business to header bidding, Google developed an alternative called Open Bidding, which supported an alliance of exchanges. While Open Bidding allows other exchanges to simultaneously compete alongside Google, the search company extracts a fee for every winning bid, and competitors say there is less transparency for publishers.
This whole piece is riveting, and highlights the utter lack of transparency in the advertising market. Google called Facebook’s potential adoption of header bidding an “existential threat”. Sound familiar? That’s the same term Facebook used when referring to Apple’s push for transparency in ad tracking. Tiny sympathy violins here.