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Twitter, Elon Musk Talks Continue, Focus on Financing, Litigation

Representatives of

Twitter Inc.

TWTR -3.72%

and

Elon Musk

continued Thursday to work to hammer out an agreement that would allow the billionaire’s purchase of the social-media company to proceed, with the parties racing to seal a pact by Monday, a person familiar with the matter said.

Mr. Musk effectively kicked off the negotiations earlier this week with his surprise proposal to close the deal at its original price after seeking for months to get out of it.

The negotiations, which follow an earlier effort to negotiate a lower price, are focused on ensuring that Mr. Musk’s debt financing will remain in place and on conditions to stay litigation over the deal until it closes, as The Wall Street Journal reported Wednesday. Mr. Musk is now requesting that the deal be contingent on his receipt of the necessary debt financing.

The lawyers are trying to reach an agreement that would pause a trial planned for Oct. 17 in the next few days, the person said. That would avert a deposition from Mr. Musk, which after being postponed is now scheduled for Monday.

The idea is to put the litigation on hold until the deal closes, at which point it would be dropped. That could take days or a few weeks.

Meanwhile, Mr. Musk’s team in a Thursday filing asked the court to stay the lawsuit. It said in the filing that the financing banks are working to fund the deal so it can close, which it expects to happen on or around Oct. 28. His team argues that proceeding with the litigation, as it says Twitter prefers, could keep the deal in limbo longer.

The two sides remain in active dialogue and things could change quickly, the person cautioned.

Mr. Musk agreed to buy Twitter in April for $54.20 a share, or $44 billion. He later moved to get out of the deal, claiming among other things that Twitter had misrepresented the number of bots on its platform. Twitter sued him over the summer and he countersued.

Renewed uncertainty about the deal has weighed on Twitter shares, which closed down 3.7% at $49.39 Thursday. They had shot up above $52 earlier in the week after Mr. Musk signaled a willingness to close the deal after all.

Write to Cara Lombardo at cara.lombardo@wsj.com

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The Elizabeth Holmes Trial: Theranos Founder Takes the Stand

SAN JOSE, Calif.—Elizabeth Holmes took the witness stand Friday afternoon to defend herself against criminal-fraud charges tied to the failure of Theranos Inc., the startup she founded in 2003 as a 19-year-old college dropout.

Ms. Holmes, who appeared composed and polished, opened her testimony at the beginning of the Theranos story: discussing her laboratory work as a college freshman at Stanford University, the mentorship she received from a Stanford professor and her vision even as a teenager to change healthcare. Her appearance—unmasked for the first time in court—energized a case that is heading toward its 12th week of testimony.

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Google Charges More Than Twice Its Rivals in Ad Deals, Unredacted Suit Says

Google takes a cut of 22% to 42% of U.S. ad spending that goes through its systems, according to a newly unredacted lawsuit by state attorneys general, shedding new light on how the search giant profits from its commanding position in the internet economy.

The share the

Alphabet Inc.

GOOG -3.43%

subsidiary takes of each advertising transaction on its exchange—a marketplace for ad buyers and sellers—is typically two- to four-times as much as the fees charged by rival digital advertising exchanges, according to the suit, which is being led by Texas.

The unredacted filing on Friday in the U.S. District Court of the Southern District of New York came after a federal judge ruled last week that much of the antitrust suit could be unsealed.

“[T]he analogy would be if Goldman or Citibank owned the NYSE [New York Stock Exchange]” one senior Google employee said, according to the suit.

Google has called the lawsuit flawed. “This lawsuit is riddled with inaccuracies and our ad tech fees are actually lower than reported industry averages,” said Peter Schottenfels, a Google spokesman.

The suit alleges the company has deployed strategies to “lock in” publishers and advertisers and help the company’s ad buying tools win more than 80% of auctions on its exchange, a newly revealed figure. It gives a window into Google’s overwhelming dominance of advertising, citing Google documents that say the company served 75% of all online ad impressions in the U.S. during the third quarter of 2018.

The suit cites programs, with code names such as Bell, Elmo and Poirot, that helped Google generate more than $1 billion in sales.

The Department of Justice is investigating the U.S.’s largest tech firms for allegedly monopolistic behavior. Roughly 20 years ago, a similar case threatened to destabilize Microsoft. WSJ explains.

The case argues that Google’s business practices inflate advertising costs, which brands pass on to consumers in higher priced products. It also alleges that Google suppresses competition from rival exchanges and limits websites’ options for ad delivery.

Led by Texas Attorney General

Ken Paxton

and joined by 15 states, the suit complements a separate antitrust case by the U.S. Justice Department and 38 state attorneys general focused on Google’s search services, as well as a Utah-led lawsuit targeting Google’s Play app store. Those cases are set for trial in 2023 or later. The Justice Department is exploring a separate suit against Google’s advertising business.

Lawyers for the group of states in the Texas-led suit put a focus on the role of Google’s advertising exchange, called AdX, which they say charges a fee of between 19% and 22% of the prices advertisers are paying on the exchange to reach publishers. That is double to quadruple what AdX’s nearest competitors charge, according to the suit.

The company’s commanding market share in advertising helped it secure those larger fees, according to the suit.

Smaller advertisers pay even larger fees. Transacting on a separate system called Google Display Network, they pay fees ranging from 32% to 40% to Google. The rates are in line with Google’s public statements that publishers receive 68% of revenue from AdSense, a tool to serve ads to smaller websites.

In internal discussions about Google Display Network, executives said the company’s ad networks make “A LOT of money” in commissions because “we can,” according to the suit. “Smaller pubs don’t have alternative revenue sources,” a Google employee said.

When a system called header bidding opened Google’s ad auctions to rival exchanges about five years ago, a change that followed accusations that the tech giant’s systems were anticompetitive, a Google executive wrote in an email that the system posed “an obvious dilemma” that could reduce Google’s profit margins to “around 5 percent,” according to the unredacted suit.

The company deemed the threat of header bidding existential because the system would circumvent Google’s tools. In 2016, one employee worried that competition from rival exchanges would show that the 20% fee Google charged for its exchange “likely wasn’t justified,” according to the suit. Others strategized to “kill” it.

“AdX is the lifeblood of our programmatic business,” a company executive wrote in an email in 2017. “What do we do?”

The search giant sought to undermine header bidding through partnerships and software that protected its position, the suit says. Google offered an alternative to header bidding that appeared to be a concession to the competitive pressure, but the suit says it secretly developed a program called “Jedi” to ensure that Google’s exchange won auctions.

Google employees anticipated that the Jedi program could create blowback from clients and the public, saying it “generates suboptimal yields for publishers and serious risks of negative media coverage if exposed externally,” according to newly unredacted material.

The company’s staff also discussed playing a “jedi mind trick” on the industry by “getting publishers to come up with” the idea of removing rival exchanges “on their own”—primarily by fostering concern that header bidding would strain a publisher’s servers, the suit says.

In 2018, Google struck a previously-reported deal with Facebook that it code-named “Jedi Blue.” The complaint alleges that

Facebook

engaged in an “18-month header bidding strategy” to increase its leverage in such a deal.

The complaint alleges Google also developed Accelerated Mobile Pages, or AMP, a version of a website hosted on Google’s servers designed to load quickly on mobile phones, in part as a way to combat header bidding. Google explicitly designed AMP pages not to work well with header bidding, the suit alleges, and deliberately made ads that didn’t use AMP load with a one-second delay to give AMP what Google called “a nice comparative boost.”

Publicly, Google claimed the AMP sites loaded four times faster than non-AMP pages. But internally Google employees said they grappled with being asked to “justify” a system that actually made websites “slower,” according to the complaint.

Google internal documents show that AMP pages brought 40% less revenue to publishers, according to unredacted sections of the suit.

Texas Attorney General Paxton said that Google’s internal communications show it can’t justify its ad fees. “Only a monopolist can charge rates that are double the rates of its competitors and yet still increase their market share,” Mr. Paxton said.

Google’s Reach in Internet Economy

Write to Keach Hagey at keach.hagey@wsj.com and Tripp Mickle at Tripp.Mickle@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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