Ad-Tech Rigor Is Overdue, but New Bill Has Its Problems

Sunlight is the best disinfectant, right? That seems to be the sentiment in Washington this week, when a bipartisan group of senators introduced the Competition and Transparency in Digital Advertising Act, which if passed, could bring transparency to the notoriously murky world of ad tech. The bill would require companies that process more than $5 billion a year in ad-tech transactions to adhere to a “best interest duty” on behalf of their customers. That includes meeting new transparency requirements, such as requiring supply-side and demand-side platforms to provide detailed bidstream-level data to their customers—and share the compensation they receive for digital ad sales. The bill further stipulates that each ad-tech company must make their auction processes publicly available, including information on the most frequent winners of their auctions and the ad-tech platforms’ take rates. Currently, digital advertising auctions are largely unregulated, which critics say makes it easier for publishers to lose out on revenue and advertisers to have no lever of accountability. A landmark PwC report found in 2020 that 15% of digital advertising spend could not be accounted for, suggesting that vendors in the ad-tech supply chain are collecting higher fees than they declare. Bringing more regulatory muscle to the industry is long overdue, sources said, but they disagree over whether Congress’s draft is the right approach. For one, digital ad auctions are run on user data—as brands compete to target an ad to a specific person in real time—thus more transparency could bring the unintended consequence of undermining user privacy. Ad-tech execs also disagree with the arbitrary nature of the bill’s $5 billion in transactions threshold. More transparency, more problems The bill could potentially worsen the state of consumers’ digital privacy, according to a private Twitter thread by privacy researcher Zachary Edwards, which Adweek has permission to share. Giving more organizations access to sensitive bid-stream data is a concern, especially coupled with the bill’s other regulation: forcing ad giants that process over $20 billion in transactions a year, notably Google, to break up their ad-tech business. “So if Google is required to sell off …. we will get more privacy from Google, less privacy from all other ad tech, guaranteed,” Edwards wrote. “This is a data handout of Google’s bidstream, without teeth to punish noncompliant usage.” The bill does state that the bidstream data that ad-tech companies would now be required to provide must be anonymized—and that customers could only use it for the purpose of auditing their tech partners. These are not strong enough provisions to prevent inappropriate usage, Edwards notes. On the flip side, publishers have said that Google uses privacy as a convenient excuse to prevent them from auditing digital ad auctions, the majority of which are run by Google auction-level information. Under the bill, publishers and advertisers would get to own—and would help publishers with revenue optimization and making monetization calls—like whether an audience member is of higher value serving an ad to or as becoming a paying subscriber, according to previous Adweek reporting. Further, an antitrust complaint against Google alleges the company rigged ad auctions for its own benefit, making an audit to determine whether the tech giant really is an honest broker more important. However, three sources said that it would be possible for ad-tech firms, including Google, to hand over bidstream data without compromising users’ identities. US Senate Bill Would Break Up Google and Add Transparency to Digital Advertising “Privacy is a red herring when it comes to transparency,” said Ari Paparo, CEO of ad-tech media company Marketecture Media and founder of DSP Beeswax, adding that it was possible to remove all the identifiers and user-level data from the individual impressions advertisers and publishers would be auditing. “You can be transparent without giving away anyone’s data.” Not only that, reading log files is complicated and requires data scientists, making it harder for bad actors to use the information easily. Either way, the tussle between transparency and privacy is far from over. “That’s [not an] issue has been settled in the industry,” said Richy Glassberg, founder of digital privacy regulation-focused tech company SafeGuard Privacy, adding that log files can be both harmless and expose user data. “The industry has to figure out whether log files are dangerous.” Going too far … or not far enough? Given the importance—and potential risks—of the bill’s transparency requirements, its scope is of particular importance. Currently, only companies big enough to meet the bill’s $5 billion transaction threshold are subject to regulation. This would encompass a few more companies than just Google, including potentially major DSP The Trade Desk, but not too many more, sources said, given the fragmented nature of ad-tech. Some sources question why big ad-tech companies are the only ones that need to be transparent. “It seems to me like the transparency stuff should apply to companies of all sizes,” Paparo said. Brands Are Overconfident With Their Privacy Approach An ad-tech executive who asked for anonymity to protect industry relationships said, in contrast, that the bill should have perhaps only focused on Google, which the executive said was the most egregious offender of customer transparency. Ultimately, sunlight is a good disinfectant. The bill could help people by showing the ways ad-tech companies violate their privacy. “Transparency is good for the industry,” Glassberg said. “We have no idea about the unintended consequences and [whether we] are really protecting the consumer because it’s too early.”

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Ad-Tech Rigor Is Overdue, but the New Bill Has Its Problems

Critics say the bill is narrow in scope and could undermine user privacy

Catherine Perloff

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Catherine Perloff