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10 October 2019

Report: Google’s Ad Tech Monopoly Is Damaging Journalism

Google’s dominance of the ad tech marketplace is having a significant negative impact on news media publishers and damaging journalism, a new report from a European competition law firm has found.  

In a research piece authors Damien Geradin, who met with the News Media Association board today, and Dimitrios Katsifis from Euclid Law examine Google’s switch to a single unified first-price auction and the consequences for the marketplace.

The paper asserts that, despite Google describing the change as a “move towards a fair and transparent market… evidence suggests that Google’s switch may increase the opacity of its services and undermine the competitive constraint exercised by header bidding.”

Entitled ‘”Trust me, I’m fair” Analysing Google’s latest practices in ad tech from the perspective of EU competition law’, the paper states: “The Unified Auction presents all the problems we identified with regard to Exchange Bidding in our first paper.

"The reason is that it is an auction run by Google on its servers and in which Google also participates, while having access to the vast bidding data of its rivals.

“There are thus ample opportunities for Google to favour its own exchange vis-à-vis rival exchanges. For example, Google might allow its own exchange to bid a millisecond later than its rivals, effectively affording it a new type of “last look” advantage.

“Or Google might simply pass less information to rival exchanges about the user or the impression or make it harder for them to identify the user.”

The paper asserts that Google will continue to run “black box” auctions enabling it to “tilt the scale in its favour” without being held accountable.

The paper alleges that Google has engaged in practices that could eliminate the constraint posed by header bidding – an auction run by the browser which results in increased revenue for publishers but no commission for Google.  

Buyers using Google’s programmatic channels, as opposed to header bidding, will receive extra information, the minimum bid price to win, that will allow them to adjust their bidding strategy and potentially buy the same inventory at a cheaper price.

“We would thus expect rational buyers to concentrate their budget towards Google’s channels and away from header bidding, as receiving this additional information could help them buy the same inventory at a lower price,” the paper states.

Also, the introduction of the new Bid Data Transfer file could deliver a “fatal blow” to header bidding as publishers will have to deal with two completely irreconcilable data sets, one for Google-controlled channels and one for non-Google-controlled.

The paper adds: “Therefore, our preliminary conclusion is that Google’s switch to a Unified Auction warrants further scrutiny under competition law, in that it threatens to remove the competitive pressure exercised by header bidding.

“It presents the characteristics of a prima facie anti-competitive leveraging conduct, where Google uses its dominant position in the ad serving market to eliminate – or at least substantially weaken – competition in ad intermediation.  The Commission’s decision in Google Shopping provides ground for scrutinizing such conduct.”

The paper concludes: “In our research, we have tried to document how Google, ever since its acquisition of DoubleClick, has engaged in various practices that prima facie seem to distort competition in ad tech and facilitate the extraction of monopoly rents from its customers, advertisers and publishers. If substantiated, this conduct has likely resulted in significant welfare losses.

“A reduction in competition among ad exchanges and among ad servers would lead to higher prices for advertisers and consumers (if advertisers pass on such higher prices), as well as loss of innovation. In addition, surplus that would have accrued to publishers is instead captured by Google, reducing publishers’ incentives to innovate and invest in content generation. Producing lower-quality content may have significant negative spillover effects for society at large.

“That is particularly the case for news publishers, whose online advertising revenue have been unable to offset the dramatic drop in their print revenue. There is evidence that a reduction of high-quality journalism results in a loss of civic engagement and ultimately undermines democracy, especially at the local level.”