A 🧵on Google’s Project Bernanke, one of the way the states allege that Google manipulated online ad auctions to its benefit
https://twitter.com/leah_nylen/status/1482015512234278915
The newly unsealed complaint includes a ton of details about HOW Google allegedly manipulated its online ad auctions. To follow how it worked, you need to know a little bit about how different types of auctions work.
The type of auction on TV w/ people raising their hands in the air is known as a “first-price” auction. Everyone bids in the open and the highest bidder wins. Simple. So, if Henry bids $19, Alice bids $18 and Scott bids $9 — Henry wins and pays $19.
Economists don’t love these kind of auctions because they can lead to people paying more than they need to to win.
Hence, the creation of a “second-price” auction (also known as a Vickery auction). In this type, the winner is still the person who bids the highest. But they only pay how much the second-place person bid.
en.wikipedia.org/wiki/Vickrey_a…
en.wikipedia.org/wiki/Vickrey_a…
The idea behind this is people will be more likely to bid higher for things they want with the knowledge they will only have to pay as much the second-place person bid. It’s the same way eBay auctions work.
So in our analogy, if Henry bids $19, Alice bids $18, and Scott bids $9 — Henry is the winner but he will only pay $18.
One more type of auction: third-price auction. The winner is again whoever bids the highest but they pay the amount bid by the third-highest bidder. So, if Henry bids $19, Alice bids $18, and Scott bids $9 — Henry is the winner but he will only pay $9.
According to Texas, Google told everyone that its online ad auctions were second-price auctions. But in reality, it was using third-price auctions and then pocketing the difference.
Going back to our previous analogy, in a real second-price auction, the winner (Henry) would have paid the second-price ($18). The publisher would have taken home $14.40 after Google took out its 20% fee ($3.60)
In reality, Google would tell the website publishers that the winning bid was $9. The publisher would get $7.20 after Google took its 20% fee ($1.80). Meanwhile, Google would tell the advertisers that the winning bid was $18.
The extra $9 between the two bids, Google put into a “pool” that it would use to secretly raise the bids by advertisers using its tools to ensure they would always win out over advertisers using non-Google tools. 
Bernanke increased Google’s annual revenue by $230 million per year, the states allege.
The states allege that Bernanke was part of Google's efforts to monopolize the online ads market but also a violation of state consumer protection laws that outlaw deceptive conduct.
Google's conduct was deceptive, they allege, because it told publishers/advertisers one thing (it was using second-price) when it was doing another (third-price).
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