US Senate Bill Would Break Up Google and Add Transparency to Digital Advertising

A bipartisan group of high-ranking U.S. senators introduced a bill today that, if passed into law, would require Google to break up its ad-tech business as part of a plan to bring regulation and transparency to the historically murky world of programmatic advertising. The bill, entitled the Competition and Transparency in Digital Advertising Act, is led by Sen. Mike Lee (R-Utah), and co-sponsored by Amy Klobuchar (D-Minn.), Ted Cruz (R-Texas) and Richard Blumenthal (D-Conn.). According to the terms of the bill, no business with more than $20 billion in digital ad revenue can own a digital advertising exchange if it also owns a demand-side platform (DSP) or sell-side platform (SSP), or if it also sells digital advertising space. Such a business cannot also own both a demand-side platform and a supply-side platform. A publisher with more than $20 billion in digital ad revenue also cannot own an SSP or DSP. While not explicitly named, Google is the business most implicated by these terms, as it owns the largest demand-side platform, sell-side platform and exchange used in programmatic auctions, while also being one of the largest publishers on the web, projected to capture 28% of US digital ad revenue in 2022, according to emarketer. The bill is the second U.S. attempt to regulate Google’s power in digital advertising auctions. In December 2020, a group of attorneys general led by Texas' Ken Paxton brought an anti-trust complaint against the business in the southern district of New York. The suit compares Google’s power in digital advertising exchanges to if the New York Stock Exchange both controlled and participated in the stock market. Lee told The Wall Street Journal that he supports the Texas suit but that the lengthy nature of legal battles requires more immediate action. “We could be waiting nearly a decade, and by then, a lot of the harm has been done,” he said to the newspaper. Sources have previously told Adweek that if Google was forced to sell its advertising technology business, it would not significantly dampen the company’s market power in digital advertising, given its dominance in search and browser and its control over cookie deprecation. “Advertising tools from Google and many competitors help American websites and apps fund their content, help businesses grow, and help protect users from privacy risks and misleading ads,” a Google spokesperson said. “Breaking those tools would hurt publishers and advertisers, lower ad quality, and create new privacy risks.” “In short, this is the wrong bill, at the wrong time, aimed at the wrong target,” added the spokesperson, who cited the real problem as being low-quality data brokers. Regulating the ad-tech industry While big tech is a focus of the new bill, smaller ad tech could also face regulation. Any company that brings in more than $5 billion in revenue is required to act in the best interest of its customers, to seek the most favorable terms for its customers, and be subject to new transparency requirements. The bill defines revenue as the amount of spend a DSP or SSP transacts or the sum of the clearing prices bought and sold through a digital advertising exchange. That means a smaller company like The Trade Desk, whose revenue was nearly $1.2 billion but generated almost $6.2 billion of total spend on its platform in 2021, could be included in the impact of the proposed law. Larger companies like Google would also be subject to these standards. This transparency requirement would require a DSP or SSP to provide detailed bid-level data to its advertisers and client publishers. This means that Google might finally have to share log-level data with publishers and advertisers, said Jason Kint, CEO of trade association Digital Content Next. Publishers have long complained that Google doesn’t allow them to see log-level data, which makes it hard to audit their digital advertising businesses. Google has said that it refrains from sharing this data because it would violate user privacy. The bill seems to try to solve for this by requiring ad-tech companies to anonymize information tied to a particular user and mandating that publishers and advertisers can only use the information to verify a tech company’s legal compliance. The law also specifies that any ad-tech company covered by the law must tell its customers “the source and nature of any compensation paid or received in connection with transactions.” Take rates, or transaction fees, that ad tech companies charge advertisers and publishers for their services has been historically opaque, with recent research highlighting that take rates can be highly variable and, at times, make up the majority of the price a publisher gets for selling digital ad space. “The best-interest obligation limits ad-tech firms' ability to use the transactions for their own profits opaquely, including the data that comes through,” Kint said. Why Google Divesting Its Ad-Tech Stack Won't Dent Its Dominance