Last month, a study by Virginia-headquartered industry association for newspapers, the News Media Alliance, estimated that Google may have earned approximately $4.7 billion in 2018 in search advertising revenue through links to news content. That number was significant. It brought into sharper focus questions on internet giants’ business practices, not just in the US and Europe, but also Australia and India.
At the heart of the tension between publishers and Big Tech — a term used to describe large technology companies such as Google, Facebook and Amazon, among others — is control over content, including news, distribution and monetisation, especially through the advertising technology (ad tech) stacks Big Tech currently owns.
Google, some publishers say, owns the entire supply (and demand) chain for ad tech and structures it in a way that disincentivises companies from working with any third-party products. The Big Tech player disagrees.
“There is a significant amount of technology disruption right now,” says Kate Beddoe, Google’s head of news partnerships in Asia-Pacific, in a telephonic interaction with ET. “Our own products are better when there is a vibrant, healthy and thriving ecosystem, and that’s why we launched our Google News Initiative. We structure our relationship in a way that we do better when news does better. We make money and grow when news makes money and grows.”
She adds, “There is a lot of complexity (in Google’s advertising practices), but the fundamentals haven’t changed. There is a marketplace or an exchange that happens between advertisers and audiences. Our role is really as a technology provider to facilitate that in a digital environment.” Facebook did not respond to ET’s questions.
These practices, publishers say, are central to Big Tech cornering a lion’s share — 52.1% in 2019, according to an estimate by market research company eMarketer — of the $130-billion digital advertising business in the US, and its similar dominance elsewhere. In India, the ‘duopoly’ of digital advertising — Google and Facebook — has a combined market share of 68%, as per a 2018 SeekingAlpha report. Indian digital advertising business, a January 2019 report by Dentsu Aegis Network says, will reach $3.6 billion (Rs 24,920 crore) by 2021, growing at a CAGR of 31.96%.
“Never before in the world — through no company, government or group of governments — has power and control been concentrated in the hands of a single entity… (No one) has control over the world as Google has,” says Anant Goenka, executive director, Indian Express Group. Goenka is also in charge of the company’s digital division.
“They not just control the demand and supply, but also the marketplace. Today, no matter which business you are in, you have to build your business keeping Google in mind,” he says. The Economic Times competes with The Financial Express, also part of the Indian Express Group.
The end result is the sheer dominance of two companies — more Google than Facebook — in the search and advertising market, partly due to network effects that, in turn, create high entry barriers, as the European Commission noted. While announcing a €4.2-billion fine on Google in 2018 for abusing its dominant position in the search engine market, the European Commission wrote, “The more consumers use a search engine, the more attractive it becomes to advertisers. Profits generated can then be used to attract even more consumers. Similarly, data a search engine gathers about consumers can, in turn, be used to improve results.” Two questions are critical. How does this dominance work? What can be done to create a fairer market?
DECODING THE AD STACK
Understanding Google’s ad tech stack is a complex exercise. There are three areas of concern on Google’s control of this supply chain, according to various publishers ET spoke to as part of research for this story. They requested strict anonymity, as they are not authorised to speak to the media… First, attribution.
In order to target ads with Google (and the same applies to Facebook), an app must use their sof tware development kits.When an advertiser measures performance, Google and Facebook analytics tools will tell them how many ‘conversions’ (or, instals) come from ads on Big Tech platforms. However, in case a user clicks on more than one ad before converting, Google counts that as its own conversion alone, as per its policies.
For instance, a user sees an ad from Google to download a streaming app. He clicks on it but doesn’t download it. Two weeks later, the user sees another ad, say, on a newspaper website, which says “Watch IPL” on this streaming app. If the user now clicks and downloads the app, Google’s ad tools, used by most advertising buyers, credit the conversion to Google and not the newspaper.
“Google and Facebook have built their attribution tools in a way that favours their own ad platforms,” says a publisher aware of how Google’s ad stack works. The publisher explains, “Attribution is the means through which money earned from the advertiser is fairly and judiciously shared between various advertising platforms that have contributed to the sale or advertiser’s goal. Unfortunately, in the ad tech ecosystem, there have been systematic efforts from Google (and Facebook) to almost disable attribution, that is, nobody else can attribute other than them.”
Naveen Tewari, cofounder and chief executive, InMobi Group, says, “From the advertisers’ point of view, the industry thrives because of them. They are the ones who write the cheque, which becomes revenue for downstream industry participants. Advertisers spend their money not only on walled gardens such as Google or Facebook but also on other platforms such as InMobi.”
He adds, “However, despite fuelling the industry, advertisers don’t have a complete and accurate view of the customer because of a lack of access to data. This is mainly because walled gardens are able to use their scale and control of data, to attribute the success of the platform to themselves.” In a way, Tewari explains, this is similar to football, where the goalkeeper could have made the initial move in a goal-scoring effort with many players in between, but it is the striker who gets the credit. “Only when one has a view of the complete move, does one get the accurate picture,” he adds…
The second area of concern is interconnectivity of Google’s ad tech products. In the ad tech ecosystem, the advertising buyer and publisher are represented by publisher-side and demandside platforms. The market dynamics between them essentially dictates how open and free the market is. However, Google, publishers say, supplies both sides of the spectrum.
DoubleClick (the server that manages the process of delivering ads to websites or apps) and integrated AdX (Google’s programmatic ad exchange where people bid for ads) are tools for publishers to run ads and monetise their inventory. This fact was incidentally noted by News Corp in its submissions to Australia’s competition commission in March. It wrote, “Since Google’s integrated ad tech services operate along the entire ad tech supply chain and on both advertiser and publisher sides of the market, it creates the potential for anti-competitive conduct. For example, there have been allegations that Google is manipulating DoubleClick to favour its own ad intermediation services.”
All third parties, in essence, are dependent on Google, as the entire chain — analytics, search and ad platforms — is owned by Google. The publisher quoted earlier in the story adds, “Currently, there is opacity and bias in how publisherside solutions (provided by Google) operate with Google’s advertiserside platforms. This is inherently anti-competitive, as it does not allow third-party solution providers the same ease of integration and efficiency with publishers who use Google’s advertising ecosystem.”
Equally, third-party advertising networks get secondary access to inventory on AdX. In effect, as the publisher explains, Google tells publishers to “deploy the AdX unit to get revenues and while it allows you to intermediate other networks, AdX takes the best inventory and gives secondary inventory to other companies.”
TIL also owns and runs Columbia, a leading ad network in Asia-Pacific.
Google, Tewari feels, has to open its stack up to create a level playing field. “Every publisher ends up having their stack and therefore, there are challenges as it is not open. Also, the dominance they’re doing from so many different directions is a challenge,” he says, before adding, “It’s not just us. The publishers face it, the advertisers face it, and platforms like us are facing it.”
The fundamental issue, those from the platform side such as Tewari, feel, is around data. “Basically, it means they don’t let data leave them. They’re not letting you become smarter as much as you should — it’s like what happened on your platform is with them (Google and Facebook) and not with you. So, you are not able to utilise all of it.”
PUBLISHER OR NOT?
Third, Google is also one of the largest publishers online, though it refuses to call itself one. It has sites like Google.com, YouTube and Gmail, all of which sell banner ads. But the question is if these Googleowned sites get preferential access or “self-preference” to its advertising solutions over other exchanges and sell-side platforms, given the size of these sites and market share of the advertising solutions.
The publisher quoted above says, “This preferred access to Googleowned sites gives an unfair advantage to advertising solutions because they now have much larger scales and user understanding, as these solutions track their behaviour on these large sites.”
The company is slowly even controlling the demand chain for content, especially in India, where they are publishing content themselves — election results, cricket scores and stock market updates.
“Google needs to stop getting into every avenue available,” says Goenka, before adding, “Now having learnt user behaviour, it is becoming a publisher and competing by selling its own ads, ending up controlling who gets to see those ads. It’s the last piece in their puzzle.”
Google’s Beddoe, however, says Google is first and foremost a technology company “and, most importantly, a very user-centric technology company.” She adds, “Our job is to make sure users get answers from the most trusted and authoritative sources, as quickly as possible. There are quick, fact-based answers to some questions — like “What is the temperature?” or “What is the score?” but the news is not just quick, fact-based answers but about who, what, why and how —and that is what makes one trust anews organisation over another.”
In a statement, a spokesperson for TIL said, “Innovation is at the heart of the digital economy and our ecosystem thrives most in an environment that encourages competition. As digital advertising becomes a critical form of marketing, there should be transparency and neutrality on platforms that connect buyers and sellers, so the best offerings get a fair chance of succeeding.”
REGULATION OF DIGITAL ADVERTISING?
Executives from the digital advertising industry say the time has come for regulation on lines of traditional advertising, with a monitoring mechanism in place. “Digital advertising is run using old rules. India has not done much in digital ad regulation and that’s not helping the industry,” said Jessie Paul, chief executive, Paul Writer Strategic Advisory, a Bengalurubased marketing advisory firm.
InMobi’s Tewari adds, “Walled gardens thrive because they are not only able to control data they generate but are able to do it at scale. However, this data really belongs to consumers. I firmly believe regulators need to step in and provide a framework that lets consumers own their data and be in control of who, meaning platforms, they want to share the data with.”
Besides, those like Tarun Wadhwa, chief executive of strategy and advisory firm Day One Insights, feel there is also a need for Google to be more transparent. “Google has massive tentacles across the Web. Google and Facebook store user data. They have advantages and they are years ahead,” he says, before adding, “How Google ranks pages, information, connects with users and gets ads is done via an opaque algorithm. They extract power and money from their software tools.”
Paul adds, “There’s no transparent way to verify you are getting what you were promised. Most advertising is based on platform providers’ tools and these are not shared; neither do they encourage third-party tools. There’s a need for a strong mechanism to monitor advertising.” But beyond calls for regulation of digital advertising, publishers such as The Indian Express’ Goenka feel that if nothing else, Google should “increase the proportion of revenue that goes to the end publisher.”
Equally, he believes Google must pay for all data the publisher is giving the Google marketplace. “For instance, I have a price comparison story on Express Drive, saying which car to buy — a Hyundai i10 or a Maruti Swift — the Google ad network serves him ads of both cars wherever he goes. That is based on user behaviour on the publisher’s end. Why should they not pay us for data generated by us?”
The fact of the matter, Goenka adds, is that Google was just “smarter than anyone else in investing resources to build a digital advertising ecosystem, but it also stands to lose if the publisher ecosystem diminishes.” He says, “As publishers, we create content that has engagement. With the sheer volume of
content the top 5 publishers in India create — around 800 URLs a day each (4,200 new URLs/day collectively) — even if half the number is duplicated, nearly 2,000-2,500 new pieces of content are being created every day by publishers who control 50% of the market.”
Realistically, publishers say they are merely seeking a “level playing field” so the digital ad ecosystem doesn’t end up becoming a monopoly. The publisher quoted earlier feels there is a need for both Google and Facebook to expose impression-level data or smart data (how many times the ad has been served and seen, who saw the ads, etc) to thirdparty platforms and decouple it from the Google stack, besides making it available for all players in the ad tech ecosystem.
“Currently, this is clearly an unfair environment for other players. Without options, this could lead to the global advertising industry quickly becoming a single option monopoly,” he says, adding that Google must also ensure all privileges it provides to its own products and platforms are equally provided to other advertising solutions.