This story was delivered to BI Intelligence "Digital Media Briefing" subscribers. To learn more and subscribe, please click here.

The furor over a new ad product from Google underscores the vast power that the company wields in the ad-tech market.

The product, called EBDA (exchange bidding in Dynamic Allocation) is designed to halt the growth of header bidding technology, which is itself an attempt by rival ad-tech firms to overcome Google's near-monopoly in the digital advertising. Now these competitors are calling EBDA unfair and unethical, as Business Insider reports.

This conflict is rooted in Google's control over the digital-ad market, and more specifically, Google's DoubleClick for Publishers (DFP) platform, which is used by virtually every publisher on the internet to serve ads on their websites. Within DFP is a feature called “Dynamic Allocation” which enables publishers to pit programmatic sales against their in-house (direct) sales unit when auctioning ad inventory. When doing this, Google favors its own ad exchange, AdX, over rival exchanges in the programmatic bidding process: if AdX meets the price floor for an ad slot, then it automatically wins, without allowing other exchanges to table their own bids. This predictably hurts rival ad exchanges who are preempted from participating in the auction, as well as publishers who miss out on unrealized revenue.

Header bidding was developed by ad-tech companies to bypass Google's favoritism of AdX in Dynamic Allocation. The technology works via a piece of code that publishers insert in their webpages to initiate ad requests before AdX gets involved. With this, publishers can auction their ad slots to all demand sources — ad exchanges, ad networks, and demand-side platforms (DSPs) — and maximize the revenue from their inventory. In this situation, Google loses out because rival exchanges can beat AdX to a publisher's most lucrative ad slots, and then sell it on to advertisers.

Google’s EBDA product is widely perceived as a counter-punch to header bidding. The product opens Dynamic Allocation to third-party exchanges, and by allowing these exchanges to bid on alongside AdX, Google can make header bidding redundant. For publishers, Google has framed EBDA as a solution that boosts demand for their ad inventory, is easily installed in a click, and mitigates slow page load times. In contrast, header bidding must be coded into a page's HTML, and the multiple requests that it sends to demand sources slows down the page when loading.

But while EBDA might be agreeable to publishers, for ad tech companies, Google's pitch has been less than convincing. In particular, ad tech companies are taking issue with EBDA for the following reasons:

Google has full control over the auction . It determines how long an auction lasts before the ad slot is finally awarded to the highest bidder. This is a power typically retained by publishers, since the auction's duration has a direct impact on their performance, both in terms of page load time (waiting for an ad to load), and ad revenues (a longer auction increases yield). And by getting the last look at every auction, Google can in theory outbid its competitor in the final instance on the margin. Ultimately, this creates a similar danger as the original that threat header bidding sought to resolve.

. It determines how long an auction lasts before the ad slot is finally awarded to the highest bidder. This is a power typically retained by publishers, since the auction's duration has a direct impact on their performance, both in terms of page load time (waiting for an ad to load), and ad revenues (a longer auction increases yield). And by getting the last look at every auction, Google can in theory outbid its competitor in the final instance on the margin. Ultimately, this creates a similar danger as the original that threat header bidding sought to resolve. Ambiguity over the terms and price of admission. Companies wishing to participate in EBDA must pay a fee to Google. However, this fee does not appear to be implemented in a consistent way across the client base. For instance, one ad tech company is reportedly paying Google 15% of its revenue share, while others are paying a mid-to-high single digit percentage on each bid. Alternatively, in some instances it is publishers who are reportedly paying a commission fee to Google.

Companies wishing to participate in EBDA must pay a fee to Google. However, this fee does not appear to be implemented in a consistent way across the client base. For instance, one ad tech company is reportedly paying Google 15% of its revenue share, while others are paying a mid-to-high single digit percentage on each bid. Alternatively, in some instances it is publishers who are reportedly paying a commission fee to Google. A lack of transparency surrounding the product. Google has clouded the pricing structure of EBDA by issuing non-disclosure agreements (NDAs) that prohibit companies from talking to one another. Closing the communication channels has caused further uncertainty and unease among those involved. Aside from this, ad exchanges only have visibility into aggregate bidding prices, and not into specifics about individual winning bids. Consequently, they are unable to see how much AdX bids when it wins an ad slot and how much Google is paying each publisher.

Google has clouded the pricing structure of EBDA by issuing non-disclosure agreements (NDAs) that prohibit companies from talking to one another. Closing the communication channels has caused further uncertainty and unease among those involved. Aside from this, ad exchanges only have visibility into aggregate bidding prices, and not into specifics about individual winning bids. Consequently, they are unable to see how much AdX bids when it wins an ad slot and how much Google is paying each publisher. Inability to integrate their own demand channels. Though ad tech companies are able to integrate their sales exchanges (supply-side) to sell ads directly through EBDA, they are unable to integrate their DSPs to bid for ads directly through their own platforms. Instead, these companies must bid via third-party exchange, namely AdX. This creates two problems for ad tech companies: on the one hand, they are forced to incur an additional bidding processing fee; on the other, relying on a third-party exchange slows the speed at which their bids are processed relative to AdX's.

Though ad tech companies are able to integrate their sales exchanges (supply-side) to sell ads directly through EBDA, they are unable to integrate their DSPs to bid for ads directly through their own platforms. Instead, these companies must bid via third-party exchange, namely AdX. This creates two problems for ad tech companies: on the one hand, they are forced to incur an additional bidding processing fee; on the other, relying on a third-party exchange slows the speed at which their bids are processed relative to AdX's. Perverse incentives and monopoly structure. EBDA places Google in the unique position of being both the middle man and a party in all transactions. In other words, Google is facilitating the bidding process for other exchanges, while simultaneously bidding against these exchanges too. The result is a distorted marketplace in which Google can unduly influence market outcomes. The severity of this scenario is illustrated when acknowledging that rival ad exchanges can only succeed in their bids where Google fails.

To receive stories like this one directly to your inbox every morning, sign up for the Digital Media Briefing newsletter. Click here to learn more about how you can gain risk-free access today.