Once again the eyes of European regulators are focused on Google and Facebook (now Meta). On this occasion, the European Union announced that it has opened an investigation into the Jedi Blue agreement, signed by the technological giantsdue to alleged anti-competitive practices in the advertising market.
Jedi Blue, the advertising pact between Google and Facebook that they will have to justify against the EU
The investigation announced by the EU and the Competition and Markets Authority (CMA) of the United Kingdom, focuses on the accusations related to the collision known as Jedi Blue between Google and Facebook, a pact by which they agreed on the prices of advertising in both companies and excluded those who could compete for advertising space.
Margrethe Vestager, Vice President and European Commissioner for European Competition, explained that Through the Jedi Blue agreement, the scope of competitors within Google’s open bidding was limited, which reduced the impact of their ads on apps and websites.
uy6tThus, the objective of the Commission will be to investigate the scope of Jedi Blue and whether this agreement concentrated the advertising market to the detriment of rivals Google and Facebook.
An agreement that joins the long line of monopolistic accusations of the internet giants
Google and Facebook are already part of the daily life of all of us. But beyond the relevance of its services such as social networks, search engines and different applications, there is something that has left them on everyone’s lips in recent years: the different lawsuits and accusations of monopolistic practices that both Google and Facebook have received.
At the beginning of last December 2020, Facebook faced a lawsuit for the acquisition of the WhatsApp and Instagram platforms, being accused of monopoly in the social network sector. Shortly after, it would be Google’s turn, which is accused of monopoly in the internet advertising market.
Although both cases are not related to each other, the latter involves both companies in an agreement: the Jedi Blue that in fact is already under scrutiny in the United States, a country in which the tech giants are accused of taking advantage of their dominant position in the advertising market and manipulated it in their favor, by giving Google preferential rates and prioritizing Facebook’s choice of ad placements in exchange for the social media giant supporting its ad system and not creating competing ad technologies or using the rival header bidding system.
Jedi Blue: the origin of the problem
The header bidding is a technology of programmatic advertising that emerged in 2017 as opposition to the monopoly held by Google. This renewed approach to advertising gives parties a clearer view of the spaces available and the reach they could have by advertising in them.
Before the arrival of header biddingthe automated buying and selling of advertising space worked in a relatively ineffective: calls to an ad were sent to each ad network in a staggered manner within the adserver. If the first network was not interested in buying the ad space, the offer was sent to the next one and so on until it was finally bought or not. It is what is known as cascade system.
Thanks to header bidding, publishers can create a situation of bidding between multiple buyers in real timeinstead of selling your inventory to a single buyer. This allows the publisher to sell their advertising inventory at the highest possible price.
Not wanting to be left behind, Google in turn developed the Open Bidding platform, which seeks to rival Header Bidding, while maintaining strong control over the entire supply and demand process of the spaces to be advertised. Open Bidding allows advertisers to bid in real time through a unified auction, and for any impression the winner is the advertiser who pays the bestsince all networks have the same priority (including Google itself).
Initially, in 2017, Facebook decided to opt for Header Bidding, which was a blow to Google as it was the leading company in the online advertising market. However at the end of 2018 he turned back and then decided to join Google and its Open Bidding, leaving many in the market puzzled. Now imagine this union of the great giants of online advertising: the result is that advertisers would have access to millions of potential consumers for their ads.
This is where the dark agreement, called Jedi Blue, between the two giants takes place. Of course, seeing this abrupt change in Facebook’s decision raised some suspicions, which took shape in December 2020, by initiating a series of lawsuits in the United States by 10 of its states against Google. The idea is that such an agreement shows favorable treatment of Facebook by Google, as well as monopolizing behavior in the market.
Information on the draft of this agreement was published by New York Timesand it clarifies a series of concessions to the social network in exchange for its cooperation and assistance in case of investigation, as well as the cessation of rivalries. The advantages offered to Facebook are unfavorable for the other participants of the Open Bidding service, as some anonymously expressed to the media.
Among the concessions provided by Google is a longer time to bid on advertising bids. While the other participating companies have around 160 milliseconds, Facebook gets almost double this with a cap of 300 milliseconds.
Direct relationship with the website
Likewise, while all Open Bidding participants have Google as an intermediary, who controls the price information, as well as the offers won by each site. Facebook, on the other hand, has a direct billing relationship with the website where you advertise, allowing complete clarity on the prices and earnings of your offers.
To better understand users, both companies agreed that Google would help identify 80% of mobile users and 60% of computer users who were reached by Facebook advertising. Assistance that apparently no other participant of this service has.
One of the most worrying is the supposed determination of a fixed number of successful bids for the social network, that is, regardless of the bid made by the other companies, the auction would still be in favor of Facebook.
In addition to these, the agreement also stipulates that Zuckerberg’s company should bid in at least 90% of the auctions where the target user identifies. It also commits to spending around $500 million on advertising.approximately 400 million euros, for the first four years of Jedi Blue.
Spokespersons for both companies have denied the existence of concessions of this type, alleging that the agreement is equivalent with the other companies. Now, the EU and UK have decided to investigate whether Meta was an active participant in the alleged open bidding manipulation scheme, or whether Google acted alone.
“We have not yet concluded if it is something of Google alone or if they were together. It is not a fact that Meta was aware of the effects of the deal and that is what we have to investigate,” Vestager said.
Stay informed of the most relevant news on our Telegram channel