The AdTech Underbelly

Recently, I found myself in a debate with some random person on Hacker News who had this bizarre point of view about ad-blocking. He felt that he shouldn’t have to view ads because, by buying products from companies, he already paid for the advertising that led to the ad budgets in the first place, therefore he already did his job.

I pointed out online advertising has never worked this way, and this logic was depriving publishers of revenue. After a lot of back-and-forth, he said he wanted ads to work like they always did in the pre-online era, where companies would pay for the space whether you saw the ad or not.

So, you might be wondering, why has it rarely worked this way? Certainly publishers would be doing a lot better if it did. And, as it turns out, the answer to this question can be found in a book I recently took a gander at, Yield: How Google Bought, Built, and Bullied Its Way to Advertising Dominance. The book, written by digital ad industry lifer Ari Paparo, is the tale of how an industry built around aggressive ad-optimization strategies came to be dominated by just one company: Google.

The concerns about how Google reshaped the ad industry bubbled over into an antitrust trial that Paparo covered in person—a trial that Google, notably, lost. Paparo caught some of the history that led to this moment up close: Back in the late 2000s, he spent time at DoubleClick, likely Google’s most fundamental acquisition outside of YouTube.

The adtech sector, as it’s called, is immensely confusing, often going completely above the heads of both the average user and even some of the publishers who rely on it for revenue. It’s perhaps for that reason that the entire front of the book hits you with a basic timeline of events, charts highlighting how common ad systems function, and a glossary priming you for in-the-weeds specifics. You are likely going to need that glossary, because those terms come up a lot.

Example: “Header bidding,” a term that means absolutely nothing to the average person, turned into an important tool for publishers as Google’s monopoly came to overwhelm outside players. Likewise, Paparo takes time to explain exactly how a seemingly small Google policy change around AdX, a dynamic ad exchange tool essential to publishers, became a turning point for the company. It was perhaps the reason there was even an antitrust trial for Paparo to cover.

Paparo (who maintains a very active presence on X) has a clear, Google-shaped target in this book. But in many ways, his decision to explain how Google gained its ad market dominance clears things up for outsiders. I’m a guy who has been running independent websites and dealing with ad networks for more than 15 years and this book demystified a lot for me.

This book streams through companies whose original names were lost three mergers ago, pivotal hacks that proved essential for future adtech innovations, and large companies who leaned hard on adtech startups. (Those companies, which included some very big names, couldn’t quite make their respective swings connect.) Dudes running ad networks in dorm rooms were inventing techniques that would eventually build empires.

Firms with names that would be unlikely to stand out in a lineup—Right Media, PubMatic, AppNexus, OpenX—turned into essential parts of the ecosystem.

But it was ultimately Google that steamrolled through, and over time, the company’s ethical compass began to slip as people left or moved elsewhere within the company, leaving behind the profit-minded. (A great example of someone who left: Neal Mohan, who played a key role at DoubleClick, especially after Google’s 2007 acquisition of the company. Reflecting the role that DoubleClick, and Mohan, played in Google’s rise as an advertising giant, Mohan is now YouTube’s CEO.)

Along the way, Paparo explains exactly why the online display advertising business works so differently from print or broadcast advertising, answering the very question my Hacker News foe had. From page 102, he lays it out plainly:

There were two important factors that made the display advertising market deeply different from the TV market or other traditional media like print or radio. First, if you did not control for quality, there was a huge imbalance between demand and supply, in the favor of the buyers. As David Rosenblatt noted, the supply of websites is virtually unlimited, with little barrier to entry and lots of methods (some shady) for attracting audiences. The web was a lot different from the limited set of channels on TV. If you could place your ads anywhere, why lock in at premium prices?

The more profound issue was that web ads could be targeted on a one-by-one basis according to data collected about each user. This meant that every single impression could, and ideally should, have a different value to each and every advertiser. This fact was in a sense the insight that drove the invention and growth of ad exchanges—the expected value of each impression varied enormously.

The latter point added a whole lot of complexity to the ad ecosystem, as different techniques came into play and new strategies came to dominate. As the tools got more complex, the biggest ad players became more dominant, until one stood above the rest.

(It’s enough to make you think that we would have been better off with static ads without any of that targeting.)

Privacy questions were always back of mind—even as far back as 1999, when a cookie-database scandal nearly derailed DoubleClick just as the dot-com bubble was itching to pop. And as companies like Apple took steps to go after privacy invasions and Google desperately attempted to offer up a plan B for the third-party cookie, publishers kept experimenting, looking for new ways to squeeze water from a stone.

Eventually, clever publishers found a workaround to Google’s dominance in the form of header bidding, a way to swap more valuable ads in without going through Google’s ecosystem. But Google was always on the lookout for new ways to protect its cut—and that put the company head-first into a federal courtroom last fall.

(The story is still evolving, by the way, but unless you’re reading ad-industry publications, you may not have heard. Paparo’s already planning on showing up for an upcoming trial that will determine a proposed Google breakup.)

Paparo, while coming at this with a background in adtech and an insider’s voice, approaches his subject with a journalist’s eye, talking to dozens of sources who may not always be directly quoted, but clearly inform his words. He brings that context to the trial, too.

The result is a book that doesn’t denounce its industry, but the bad actor that has overwhelmed it for years. AdTech is probably one of the most unloved tech-adjacent industries out there, and while Yield may not make you a fan, it’ll at least help you understand where it’s coming from.