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Australia takes aim at Google’s dominance in ad technology

By Robert Whitehead

McPherson Media Group

Sydney, Australia

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Australia has formally opened another front in its campaign to rein in the power of the global digital giants, releasing the interim report of its inquiry into the operations of advertising technology services. 

The 222-page report, which is likely to act as a ready-reference on the topic for overseas lawmakers, finds that Google’s dominance gives it the “ability and incentive” to affect the market and competitors and lists a string of recommendations to solve the problem. 

Ad tech has played an increasingly critical role in the advertising market and the wider digital economy, said Rod Sims, chairman of the regulator, the Australian Competition and Consumer Commission. “But there is a real lack of competition, choice, and transparency in this industry. ... These issues add to the cost of advertising for businesses, which will ultimately impact the prices paid by consumers.” 

The timing of the report’s release had long been in the schedule, but it lands at a critical time in Australia’s high-profile antitrust push to force Google and Facebook to pay higher fees to publishers for the distribution of their journalism on their platforms.  

That separate process has culminated in the introduction of an Australian media bargaining code, which is in the final days of a review by a parliamentary inquiry. It is expected to be tabled in parliament for a vote in a fortnight and has the backing of all major political parties and media groups. Both Google and Facebook have threatened to withdraw key business operations from Australia — Google its search business and Facebook all news in its feed products — if the bill passes in its current form. 

The ad tech report will add to the pressure on the tech giants and is a deep-dive into the little-understood inner workings of the stack of technologies and services that fuels all ads on the Internet. 

The inquiry defines ad tech as the services that deliver targeted, personalised digital display advertising — whether viewed in Web browsers or in apps — as well as those in the video streaming services funded by advertising. The tech stack includes all technology behind publishers’ ad servers, advertisers’ ad servers, as well as the tech that manages the supply-side and the demand-side platforms.

The ACCC has said it has collaborated with overseas regulators that are working on the same topic, specifically mentioning the latest U.S. court case filed against Google by 10 state attorneys general. That case has revealed a deal Google entered into that gives Facebook preferential treatment in later stages of automated digital ad auctions in a move that worked against publishers.   

What the inquiry found 

  • Google has the “ability and incentive” to negatively impact the competitors in the ad tech market.

  • There is a lack of transparency about pricing and effectiveness of the ads themselves.

  • Google has 90% of the Australian market as measured in impressions, and its tech handles 70% of the revenue across the US$7 billion Australian digital ad supply chain.

  • Their dominance hurts advertisers, consumers, and media companies.

  • Google had a conflict of interest in many transactions. 

Key recommendations 

  • Introduce conflict of interest rules to prevent Google from giving preference within the ecosystem to its own business units.

  • Break up the data sets so ad tech competitors can properly compete.

  • Introduce measures to cut barriers to entry around data sets.

  • Promote expansion and competition within the ad tech supply chain.

  • Investigate how demand-side platforms should allow independent verification as part of improving transparency of deals for those paying. 

  • Implement common transaction and user IDs for clear attribution.

How they explained the report

ACCC Chair Rod Sims said the market had competition and transparency issues. 

“Google has got massively dominant market share. It’s on both sides of transactions representing both the advertiser and the publisher, [and it] has got the space on which the advertisement occurs,” he told The Australian Financial Review after launching the report.

“There’s an element in which you can say that Google’s marking its own homework because only it knows how effective the ads actually are — everybody else has got to take Google’s word for it,” Sims said. 

Having a market of this importance dominated by one player is “worrying because we don’t want advertisers paying more than they need to to show ads, otherwise it’ll just raise consumer prices,” Sims said. “And we don’t want publishers receiving less than they should receive, because that’ll affect the availability of content on the Web.” 

The report said: “We have heard concerns from parties about potential conflicts of interest from Google’s various roles in this industry. This includes Google very often acting on behalf of both publishers and advertisers for the same ad sale across the ad tech supply chain, while also selling its own ad inventory.” 

Another example cited of conflict was the selling of ads on YouTube, which is owned by Google and which can only be sold exclusively through Google ad tech. 

Google also does not participate in so-called “header bidding” auctions that are run by media companies. These are where publishers and broadcasters offer ad inventory for auction to advertisers through an auction involving real-time bidding. As an alternative, Google’s publisher ad server developed and launched its own Open Bidding auctions. This effectively means publishers that wish to receive real-time bids from advertisers using Google’s ad tech services are required to use Google’s publisher ad server to do so.

How they reacted

Already at loggerheads with the commission and the Australian government over the media code, Google swiftly rejected the commission’s findings of overall market dominance. 

“Ad tech is a competitive market with low barriers to entry,” Google said in a media statement. “There are many companies, large and small, working together and in competition with each other to power digital advertising across the Web, each with different specialities and technologies. Google is just one of these many players, and we’ve made it easier for others to choose who they want to work with. Google has made significant efforts and investments in innovation and promotion of a healthy ad tech ecosystem, and we always aim to do so in a way that balances the interests of users, advertisers, and publishers.” 

One of the company’s most vocal critics, News Corp, said the problems went beyond the media sector. Michael Miller, its Australasia executive chairman, said the report “shines a light on Google's pervasive commercial power that impacts the entire Australian economy, not just the publishing industry.” 

The managing director of the Australian offshoot of the United Kingdom’s Guardian group, Dan Stinton, said steps were needed to stop Google “exploiting its market power to preference its own business.” The market, he said, needed to work with greater transparency “to give consumers, advertisers and publishers more confidence in the way it operates.”

One more thing 

Noteworthy is the fact the Australian regulator refrained from making negative findings on advertising agencies, including the multi-national chains. The commission had expressed disquiet during its original digital platforms inquiry reports in 2018-19 that participants in the ad supply chain had been reluctant to provide data or share their views. 

This time around the ACCC said it did not have competition concerns about the role of the advertising agencies other than noting transparency issues remained. “The ACCC’s preliminary conclusion is that potential issues relating to ad agency conduct may be mitigated through advertisers informing themselves about the impact of certain practice (e.g. rebates, discounts and incentives, agency-wide fee models, and whether the agency owns any ad tech services) and seeking protections in contracts to ensure their contracting agency acts in their best interests.” 

What happens next

The interim report is open for public submissions for the next month. The final ACCC ad tech final report is due for release in August, which is seen as a fast turnaround in a murky and technically complex field.

The commission said it would examine proposals that regulators have made in the European Union and United Kingdom recently to stop conflicts of the interest in the ad tech ecosystem to see if they could be adopted in Australia. 

It also noted it would continue to closely monitor developments in the U.S. investigations and prosecutions in this space. 

While the ad tech inquiry is separate from the ACCC’s media code that covers commercial conduct between media publishers and the digital platforms, it is inevitable the ad tech investigation will be rolled into its politics.  

Such is the profile of the code, barely a day goes by at present where the government’s battle with the tech titans does not make home page news. The release of the ACCC’s ad tech report means the digital platforms are unlikely to be out of the spotlight in Australia any time soon.

About Robert Whitehead

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