Google Digital Ad Market Anticipates Change
The Competition and Transparency in Digital Advertising Act proposed by a group of senators on the antitrust judiciary subcommittee will force Google to sell some of its digital ad tools. The legislation will drive two major changes.
First, the rule bars companies with over $20 billion in digital advertising revenue from owning the tools applied in buying and selling the online ads or operating the exchange that conducts these transactions.
Additionally, under the new ruling, companies with more than $5 billion in digital ad revenue must provide more significant data collection transparency alongside stricter processes regarding winning bids and charging fees. Google ranks as the top name in online advertising and controls an estimated 28.6% of the $211.2 billion in digital spending in the U.S. last year.
A Brief History of the Google Paid Media Saga
The latest proposal follows ongoing antitrust scrutiny of Google's digital ad processes, which originated from the Pichai Signoff in 2018. A coalition of 15 states and Puerto Rico led by Texas Attorney General Ken Paxton filed a case against the search engine giant for illegal agreements with Facebook, codenamed Jedi Blue, in orchestrating digital ad manipulation. European Union authorities have also launched similar investigations into Google's monopoly of the digital ad space.
Alleged ad auction manipulations arose from Google's control over the biggest buyer platform, ad exchange, and publisher platform. As such, the arrangement gave the company an advantageous position of representing the auction platform alongside buyers and sellers, resulting in a flagrant conflict of interest.
For instance, Google purportedly targets users with unmatched precision through the company's DoubleClick ad server. The Google exchange assigns a unique code string or hashes to the ID of Google site visitors and passes it to an external ad purchasing platform. Buyers go on to match the IDs with the hashed versions to authenticate a match via cookie syncing.
According to antitrust scholars, cookie syncing has proven inefficient in matching businesses with the right target audience in some instances. However, Google bypasses cookie syncing by allowing its ad-buying platform and exchange to view and check DoubleClick IDs for security reasons, resulting in an unfair advantage.
Implications in the Digital Market
If the U.S. Congress passes the bill, businesses may need to seek new vendors to sell and buy web ads successfully. Historically, Google has dominated the PPC and paid media market, serving online companies as a one-stop advertising solution provider. Thus, the expansion of digital ad vendor networks depends on Google's decision regarding the business components it retains.
While the new ruling encourages businesses to support the diversification of the digital ad market, it might pose long-term risks that call for added caution in paid media campaigns.
According to a Google spokesperson, "Breaking those tools would hurt publishers and advertisers, lower ad quality, and create new privacy risks. And, at a time of heightened inflation, it would handicap small businesses looking for easy and effective ways to grow online. The real issue is low-quality data brokers who threaten Americans' privacy and flood them with spammy ads. In short, this is the wrong bill, at the wrong time, aimed at the wrong target. "
Based on a HubSpot report, 65% of customers click on Google PPC ads, driving the exponential growth of the company's ad revenue each year. PPC has proven more effective in online conversions than other digital marketing options such as SEO or content-based campaigns. Additionally, an estimated 33% of mobile advertising comes from Google as mobile shopping becomes increasingly popular among modern customers.
The Competition and Transparency in Digital Advertising Act could force a breakdown and redistribution of Google's longstanding digital ad business and general equality among competing paid media vendors.
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