Google's Ad-Tech Stack Faces Antitrust Scrutiny

Google’s ad-tech stack, a line of business that is neither the major driver of the company’s revenue nor its most well known, is under new scrutiny from a panoply of governments. Last week, the U.K.’s Competition Market Authority announced it was investigating whether Google has broken the law by restricting competition in the digital advertising market. CMA is concerned Google may have favored its ad exchange services to curb competition. As a result, regulators will examine Google’s dominance over demand-side platforms (DSPs), where advertisers and media agencies buy a publisher’s available ad space and supply-side platforms (SSPs), which allow Google to automate the sale of publishers’ ad inventory and decide which ad to show based on bids received from exchanges or direct deals between advertisers and publishers. It's the latest in a series of governmental actions to regulate Google’s market power in advertising technology. Last month, the Senate introduced the Competition and Transparency in Digital Advertising Act, which would prohibit Google from owning its ad-tech business and introduce new transparency requirements to other parts of the industry if passed. This follows a 2020 antitrust complaint from a group of U.S. attorneys general and the European Commission’s investigation into Google’s ad stack, the latter of which launched last year. IAB Tech Lab Is Building a Universal Framework for Domestic and Global Privacy Laws Regulators are also investigating Google for other potential abuses, from its dominance in search to its handling of user privacy to the cookie deprecation process. But sources have told Adweek that targeting ad tech makes sense for regulators, who can point to the company's dominance in multiple sides of a transaction; the company's potentially negative impact to consumers via violations of user privacy can be thornier to prove. “The reason regulators choose publishers is it’s easy to understand an unfair auction screws up the seller,” said Adam Heimlich, co-founder of supply path optimization company Chalice. While Google’s ad stack is not its most famous business, it powers much of the digital auctions that keep the internet free. According to a CMA survey of the U.K. advertising industry, Google’s market share of DSPs and SSPs is around 50%-60% and its share of publisher ad servers was 90%-100%. For advertiser ad servers, it commanded around 80%-90% of market share. Given this, if Google had to exit any part of the ad-tech stack, it could have massive ramifications for the digital advertising industry, potentially opening space for other ad-tech providers and changing who owns the systems where the majority of business is done. The judicial probes into Google’s ad business, which include efforts from the CMA, and the group of attorneys general in Texas could be more of a slow burn compared to legislative action that could have immediate revenue impacts on the ad industry, sources told Adweek. But they were divided as to which approach would improve the ills of ad tech. “Advertising tools from Google and many other companies help websites and apps fund their content, help businesses of all sizes grow and help protect users from privacy risks and misleading ads,” a Google spokesperson said. “There is vigorous competition in online advertising.” Different methods, different ramifications “Google and the other big ad companies need to be watching the Europeans first and foremost,” said a leading data privacy lawyer who requested anonymity. However, the state-side Texas antitrust complaint can see some potential movement. Previously, the state has successfully rolled out controversial laws that allow Texans to sue social media companies over their content moderation policies. But the impact of the lawsuit, which includes weak analogies that could undermine the efficacy of the case, is unclear, a data privacy lawyer, who requested anonymity, noted. For example, Texas attorney general Ken Paxton compared Google to the likes of a stock trade in the New York Stock Exchange, where Google charges as high as 22% on every transaction, akin to the NYSE charging $22,000 on every $100,000 stock trade. “The problem with that analogy is that it says Google's actually making the market. And the stock exchange is not necessarily making the market; they're just providing the platform,” the attorney said. The Competition and Transparency in Digital Advertising Act takes a legislative approach to breaking up Google’s business, banning companies that process more than $20 billion annually in digital ad transactions from participating in multiple parts of the ad stack. But sources saw pros and cons to both the judicial and legislative routes for generating outcomes the industry desired. On the one hand, legislation like the Digital Advertising Act could have broader outcomes for the industry, introducing new standards and bringing reform to companies besides Google. Not only could the provision, which involves companies that process more than $20 billion in transactions, affect other Big Tech companies, but the law also requires ad-tech firms that process more than $5 billion in transactions to adhere to new transparency requirements. “We were particularly interested in the legislative proposal,” said an advertising consultant, who requested anonymity to protect relationships. “It’s no doubt the most wide-ranging and ambitious proposal.” More overreach can also have unintended consequences, especially when the legislative branch tries to take on the job of judicial enforcement, said Mike Woosley, COO at identity solutions firm Lotame. “In effect, it could curtail a massive amount of commerce overnight, which runs through Google, whether they control it all or not,” the attorney added. Reform is needed Publishers have previously told Adweek that Google’s ad-tech business engages in practices they feel undermine their business models, from inconsistent payouts in transactions to a lack of transparency for auditing the digital auctions they pay Google to manage. These concerns were exacerbated earlier this year, when unredacted parts of the Texas-led antitrust complaint came to light, claiming Google systematically rigged auctions to underpay publishers and overcharge advertisers. Given Google’s power in the market, publishers frustrated by Google may have trouble taking their business elsewhere, Heimlich said. “I have not run across a big publisher whose auction is not run by Google except those who have taken extreme measures,” he added. A Google spokesperson said other companies like Microsoft, Amazon and Comcast offer integrated tools for both advertisers and publishers, which help aid the digital auction process. But advertisers are also frustrated by Google’s dominance in the market, concerned the company’s vertical integration across the ad stack could lead to higher prices, the advertising consultant said. “[Advertisers] would welcome a regulatory framework that would create confidence among brand owners that the service being delivered doesn’t include any conflicts of interest, is transparent and allows for competition to blossom.” US Senate Bill Would Break Up Google and Add Transparency to Digital Advertising

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Google's Ad-Tech Stack Faces Antitrust Scrutiny From All Sides

A guide to the various regulatory attacks on the company's ad-tech stack

Catherine Perloff

Trishla Ostwal

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Catherine Perloff

Trishla Ostwal