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Google Walled Gardens Amazon Advertising

Is it time to demonopolize big tech for real?


By Chris Sutcliffe, Senior reporter

November 15, 2021 | 9 min read

As part of The Drum’s Data Deep Dive, we ask what it would take for antitrust measures to break up big tech.

Apple data

An antitrust lawsuit ruled that Apple would no longer be allowed to ‘anti-steer’

For as long as digital advertising has existed, there have been the companies that monopolized it. In the very early days, Yahoo and AOL were the beneficiaries of digital ad spend. Now it is Google, Facebook and Amazon. The difference – as some arguments go – is that those companies control demand, supply and everything in between.

In the US alone, digital ad spend is set to exceed $200bn this year. That’s 38.3% growth from the previous year and marks a triumphant return for ad spend following a turbulent two years. It led to celebrations from many publishers and marketeers, many of which have reported record digital advertising revenues and reach already this year. The one sour note among the celebrations? They weren’t the biggest winners – the tech giants were.

The big three tech giants (Google, Facebook and the insurgent Amazon) are set to reap around 64% of all that spend. And this is not a new situation – it is about the same share of the market they possessed in 2020, and a slight growth on the year before.

In the UK, that figure is starker. Those three companies enjoy a share of around 80% of the £14bn digital advertising market, according to the Competitions and Market Authority. Their dominance has led the CMA’s chief executive Andrea Coscelli to adopt the term ‘duopoly’ for Google and Facebook’s command of ad spend specifically.

In February this year, Coscelli argued that a shake-up of the landscape was required as the duopoly had a negative impact on publishers, consumers and politics: “We think it would be good if we got to a situation where others had a bigger share of the market.

“When companies have too much economic power, that creates a number of distortions, first for competitors, secondly for consumers and at some level potentially in terms of the political process as well, in some cases.”

That perception was lent more weight later in the year when documents revealed in court that Facebook and Google had reached a preferential ’sweetheart’ deal with one another regarding header bidding, which reportedly led to Facebook Audience Network (FAN) winning bids with a frequency of 90%. At the time, Google’s director of economic policy Adam Cohen wrote: “Our agreement with Facebook Audience Network simply enables them (and the advertisers they represent) to participate in Open Bidding.

”Of course we want FAN to participate because the whole goal of Open Bidding is to work with a range of ad networks and exchanges to increase demand for publishers’ ad space, which helps those publishers earn more revenue. FAN’s participation in Open Bidding doesn’t prevent Facebook from participating in header bidding or any other similar system. In fact, FAN participates in several similar auctions on rival platforms.”

Breaking the walls

It’s a situation that has been exacerbated by the entrenchment of the walled gardens – effectively digital environments owned and operated by tech companies, which dictate the terms of commerce and services within them. While platforms including Facebook act as effective walled gardens, the more stringent ones are those operated by hardware providers, which can dictate what other companies have a presence on their app stores.

That situation reached a head last year with the ongoing battle between Apple and Epic Games, which had originally attempted to circumvent the cut of revenue Apple takes for any purchases made in-app.

The resulting antitrust lawsuit – which found in Apple’s favor for the most part – did create a crack in the walled garden when it came to Epic’s complaint about payments. The court sided with the Fortnite maker regarding restrictions on in-app purchases. The ruling found that Apple would no longer be allowed to ‘anti-steer,’ preventing developers from effectively pointing to other means of payment beside Apple’s own payment systems.

In Europe, a similar complaint from Spotify led to the term ‘Apple tax’ entering wider parlance, with the EU accusing Apple of antitrust violations around the provision of music services across its device. The EU’s executive vice-president Margrethe Vestager, in charge of competition policy, said: “App stores play a central role in today’s digital economy. We can now do our shopping, access news, music or movies via apps instead of visiting websites. Our preliminary finding is that Apple is a gatekeeper to users of iPhones and iPads via the App Store.

“With Apple Music, Apple also competes with music streaming providers. By setting strict rules on the App store that disadvantage competing music streaming services, Apple deprives users of cheaper music streaming choices and distorts competition. This is done by charging high commission fees on each transaction in the App store for rivals and by forbidding them from informing their customers of alternative subscription options.”

For publishers, which have long been subject to the 30% Apple tax when it comes to selling digital subscriptions through their apps, the threat of antitrust legislation against the tech provider has had a tangible impact. In addition to the removal of anti-steering, the company has made overtures to some of the largest newspapers and magazines offering better terms in terms of revenue share – with the caveat, however, that they have to enter its Apple News Partner Program.

Trust and antitrust

However, the sheer scale of the tech companies makes antitrust measures or regulation difficult to accomplish. In the UK, Coscelli has yet to endorse a break-up of either Facebook or Google: “Our current proposal is not to break them up, it’s to have pro-competitive regulation to deal with some of the issues, but it would allow the companies to maintain all the current activities that they have.”

Representatives of the duopoly have variously stated that the best argument against a breakup is that digital advertising as a whole is benefited by their presence and that their success is directly correlated with that of the success of the ecosystem.

Madhav Chinnappa, Google’s director of news ecosystem development, told me: “The way that we interact with the news ecosystem is very much around a revenue share model. In this space that we operate in, the space that’s relevant to digital advertising to publishers, we only make money when publishers make money because we’re an adtech supplier.

”That’s different from the other tech companies, but it’s important to understand our role in that. And so, therefore, we’re sort of selfishly incentivized to want the news ecosystem to thrive, because if they thrive and they make more money, we end up making more money.”

The argument against that, levied by organizations including the American Antitrust Initiative (AAI), is that such alignment extends only as far as the duopoly’s focus on growth and profit allows.

Following the failure of two pieces of antitrust legislation against Facebook, the AAI’s vice-president of policy Laura Alexander said: “I think it’s incredibly important to recognize that antitrust is a powerful tool with a long history and that it absolutely can be used to check conduct and hold tech companies to account,” adding that the US government should consider using data protection measures to the same end.

While chips have been made in the walled gardens’ walls, the stats around advertising spend share speak to the extent to which the duopoly (and, increasingly, Amazon) dictate the terms of the discussion. Big tech companies, from the hardware producers to the providers of advertising products, are firmly entrenched in the entire ecosystem. Whether or not antitrust measures are brought against them – and ultimately whether or not those measures succeed – depends upon whether they can convince that their influence over those ecosystems is beneficial for their users as well.

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