In May, Senators Mike Lee, Amy Klobuchar, Ted Cruz, and Richard Blumenthal introduced the “Competition and Transparency in Digital Advertising Act.” The bill, also called the “Digital Advertising Act” or just “DAA” for short, is an ambitious attempt to regulate, and even break up, the biggest online advertising companies in the world.
The biggest trackers on the internet, including Google, Facebook, and Amazon, are all vertically integrated. This means they own multiple parts of a supply chain – specifically, the digital advertising supply chain, from the apps and websites that show ads to the exchanges that sell them and the warehouses of data that are used to target them. These companies harm users by collecting vast amounts of personal information without meaningful consent, sharing that data, and selling services that allow discriminatory and predatory behavioral targeting. They also use vertical integration to crush competition at every level of the market, preventing less-harmful advertising business models from gaining a foothold.
The DAA specifically targets vertical integration in the digital advertising industry. The bill categorizes ad services into, roughly, four kinds of business:
- Publishers create websites and apps, and show content directly to users. They sell ad space around that content.
- Ad exchanges run auctions for ad space from many different publishers, and solicit bids from many different advertisers.
- Sell-side brokerages work with publishers to monetize their ad space on exchanges. These are sometimes called “supply-side platforms” in the industry.
- Buy-side brokerages work with advertisers to buy ad space via exchanges. These are sometimes called “demand-side platforms” in the industry.
In broad strokes, the bill would prevent any company that makes more than $20 billion per year in advertising revenue from owning more than one of those components at a time. It also creates new obligations for advertising businesses to operate fairly, without self-preferencing, and prohibits them from acting against the interests of their clients. The bill is complex and nuanced, and we will not analyze every provision of it here. Instead, we will consider how the main ideas behind this bill might affect the internet if enacted.
How would this affect the real world?
The DAA would likely apply to all three of the biggest ad tech companies in the world: Meta, Amazon, and Google. As we’ll describe, all of these companies act as both publishers and service providers at multiple levels of the ad tech “stack.”
Meta is a “publisher” because it operates websites and apps that serve content to users directly, including Facebook, Instagram, Whatsapp, and Oculus. It also operates a massive third-party ad platform, called “Audience Network,” which sells ad space in “thousands” of third-party apps that reach “over 1 billion” people each month. Audience Network essentially acts as a supply-side platform, a demand-side platform, and an exchange at the same time. Furthermore, Meta uses both its user-facing apps and those “thousands” of third-party Audience Network apps to gather data about our online behavior. The data it gathers about users on its social media platforms are used to target them in Audience Network apps; those apps, in turn, collect yet more data user behavior. This kind of cross-platform data collection is common to all of the ad tech oligarchs, and it helps them target users more precisely (and more invasively) than their smaller competitors.
Amazon has been rapidly developing its own advertising business. While online advertising was once widely viewed as a duopoly of Google and Facebook, today the ad market is better characterized as a triopoly. Amazon operates several third-party advertising services, including Amazon DSP, an analytics platform called Amazon Attribution, and a supply-side ad server called Sizmek Ad Suite. It also sells ad space on Amazon properties like its flagship website amazon.com, its Kindle e-readers, Twitch.tv, and its many video streaming services. Like Facebook, Amazon can use data about user behavior on its own properties to target them on third-party publishers and vice versa.
Google is the biggest of all. It makes billions of dollars selling ads on its user-facing services, including Google Search, YouTube, and Google Maps. But behind the scenes, Google’s ad infrastructure is even more expansive. Google operates at least ten different components that handle different parts of the ad business for different kinds of clients. Its ad exchange (AdX, formerly Doubleclick Ad Exchange), supply-side platform (Google Ad Manager, formerly Doubleclick for Publishers) and mobile ad platform (AdMob) all dominate their respective market segments. Its trackers, inserted into third-party websites, are far and away the most common on the web. And in addition to the massive information advantage it has over competitors, Google has repeatedly been accused of using its different components to secretly self-preference and directly undermine competition. As a result, the company is currently the subject of several different antitrust investigations around the world.
All of these companies likely meet the revenue threshold specified by the DAA. That means if the bill becomes law, all three may be required to divest their advertising businesses. Google could operate YouTube and Search, or the infrastructure that serves ads on those sites, but not both. Furthermore, if all of its advertising components were spun off into one “Google Ads” conglomerate that still made over $20B in revenue, the resulting company would have to choose between its ad exchange, its supply-side platforms, or its demand-side platforms, and spin off its other parts. Essentially, the ad giants will have to break themselves into component parts until each component either falls below the revenue threshold or operates just one layer of the ad tech stack.
Why do break-ups matter?
Google and Facebook build user-facing platforms, but their main customers are advertisers. This central conflict of interest manifests in design choices that sell out our privacy. For example, Google has made sure that Chrome and Android keep sharing private information by default even as competing browsers and operating systems take a more pro-privacy stance. When advertiser interests conflict with user rights, Google tends to side with its customers.
Splitting user-facing platforms apart from ad tech tools would cut right through this tension. Chrome and Android developers would face competitive pressure from rivals who design tools that cater to users alone.
Separating ads from publishing can protect rights that US privacy laws do not address. A majority of proposed and enacted privacy laws in the U.S. regulate data sharing between distinct companies more strictly than data sharing within a single corporation. For example, the California Privacy Rights Act (CPRA) allows users to opt out of having their personal information “shared or sold,” but it does not give users the right to object to many kinds of intra-company sharing—like when Google’s search engine shares data with Google Ads to enable hyper-specific behavioral targeting on Google properties. Breaking user-facing services apart from advertiser-facing businesses will make it easier to regulate these flows of private information.
Splitting ad empires apart also holds the promise of a fairer ad market. Removing tech companies’ content and app businesses from their ad businesses, and splitting the sell-side and buy-side of the ad-tech stack, will make self-preferencing, bid-rigging, and other forms of fraud and cheating less profitable, less lucrative, and easier to detect. This will help media producers and individual creators get their rightful share of revenue from the ads that run against their work, and it will help protect small businesses and other advertisers from being price-gouged or defrauded by powerful, integrated ad-tech businesses.
The Digital Advertising Act is a bold, promising legislative proposal. It could split apart the most toxic parts of Big Tech to make the internet more competitive, more decentralized, and more respectful of users’ digital human rights, like the right to privacy. As with any complex legislation, the impacts of this bill must be thoroughly explored before it becomes law. But we believe in the methods described in the bill: they have the power to reshape the internet for the better.
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