Turkish Competition Authority published its preliminary report on 07.04.2023 within the scope of the Online Advertising Industry Review, which was launched on 21.01.2021. In this article, we reviewed the Competition Authority's detailed and comprehensive industry report on the online advertising industry.
Online Advertising Industry
According to the findings of the report, over the years, online advertising has started to become widespread. Impression-based, video, search engine and other digital media investments, internet advertising, e-mail, pop-up ads, and online advertising activities in different forms through social media and content have developed in accordance with the requirements of the era. In the market, it has been observed that the share of online advertising in advertising expenditures has increased, especially in 2020 and beyond.
Online Advertising Industry Preliminary Report
In addition to being written in great detail, the report not only drew attention to the reservations and solution proposals regarding competition but also included the technical details of the sector. Therefore, the first part of the report includes data on digital advertising and its development. At the same time, the trend from traditional advertising to digital advertising is explained and in this context, the use of Facebook, Twitter, LinkedIn, Instagram, Youtube, Snapchat, and Pinterest applications are included.
Within the scope of the first part of the report, it is strikingly seen from the data how the trend towards digital advertising occurred with COVID-19 after 2020. Moreover, it is obvious that the Competition Authority has taken a step with this review in order to prevent possible competition violations and to protect the consumer at the end of the day, with this major change. On the other hand, the report also showed that the trend is formed by personalization in digital advertising, being interesting together with interactivity, lower cost and strategic planning based on data analysis.
In the second part of the report, first of all, types of online advertising are examined and in this context, search-based advertising, display advertising and listing advertising is focused. Afterwards, market definition, pricing models and concentration analysis were made. As a result of the analysis, it was concluded that "it is observed that the online display advertising industry has a concentrated structure in terms of Meta and Google economic integrity". Since this section contains both industry information and information obtained directly from companies, it has been redacted because it is a trade secret. In this context, it should be underlined that the data provided by the advertising companies to the Competition Authority, even if it is a trade secret, is a part of the important analysis.
In the third section, technical information about online advertising technology is given. Also in this section, in addition to the online advertising technology system in open display advertising services, advertising exchanges, ad networks and data measurement services are included. In this context, the close relationship between online advertising and data protection legislation is also a preview in the report. At the same time, in the concentration analysis for these services, it was mentioned that Google has a wide range of data advantages and services. The findings of Australian and UK competition authorities regarding online advertising technologies are also included.
In the fourth chapter, which deals with the ecosystem, the importance of Google and Meta in terms of online advertising is explained. When we look at the results of the concentration analyses made earlier in this section, it can be seen that an ecosystem has been created for both companies and they are dominant in the markets defined in the previous sections. On the other hand, the reasons for the actors in the market to act as an ecosystem were examined.
In the fifth chapter, as mentioned before, data is mentioned as the most critical tool of competition in the market.
Meta was fined €786 million last year for data rights violations by data protection authorities, which we reviewed in our previous articles. Similarly, Google has become a target for data protection authorities. Therefore, an area where data protection and competition areas especially converge has been the protection of consumer data rights. While one area focuses on protecting the rights of the data subject regarding personal data, it also drew attention to the data advantage brought by the dominant position in terms of competition law.
Finally, in the sixth chapter, prominent competitive concerns in terms of advertising technology are examined in detail.
Competition Assessment
In terms of competition concerns in the sixth chapter, both the source of the problem and possible scenarios were examined. The concerns mentioned in the report are summarized as follows:
Conflicts of Interest Brought by Vertical Integration in the Industry
It has been stated that vertically integrated advertising technology providers, which also serve in different sub-sectors in the advertising sector, may remain between the interests of their own services and the interests of their customers. It has been stated that although the conflict of interest itself does not constitute a violation of competition, its consequences may constitute a violation of competition.
Google's Practices to Favor Its Own Services
The report focuses on competitive concerns about Google's use of its power in the general search advertising market to strengthen its own DSP, the restrictions it imposes on purchasing YouTube inventory only through its own DSP, the way Google redirects demand from its DSPs to its SSPs, and the relationship between the publisher ad server and its SSP, and the different circumstances.
Google and Data Merge
It has a large amount of quality data due to the different services Google provides and its high market share in the market. Reference was made to the Doubleclick decision along with the data analysis. On the other hand, in terms of Meta group, it has been decided to impose an administrative fine on the undertaking, since it causes the deterioration of competition by combining the data with personal-purpose social networking services and complicating the activities of its competitors operating online display advertising markets and creating barriers to entry to the market.
Transparency in the Supply Chain
Information asymmetries result from a lack of transparency regarding the performance of ad technology services; It is stated that it harms advertisers, publishers and ultimately consumers and that the lack of transparency in the market causes stakeholders to make wrong choices, which harms competitiveness in the online advertising industry.
Concerns for News Publishers
In this regard, it is about digital platforms undermining publishers' incentives to invest and produce quality news content by refusing to pay fees to news publishers who contribute to generating traffic to these platforms with their news content. The other concern is that the various applications of digital platforms affect the advertising revenues of most news publishers and thus the creation of news content. As a result of these practices, there is a risk that digital platforms will prevent news publishers from producing quality content and indirectly cause disinformation in society and cause great social harm.
Google and Privacy Sandbox
Emphasizing the importance of third-party cookies for online advertising activities in terms of Privacy Sandbox, it was stated that the phasing out of Chrome's support for third-party cookie information may have significant effects on competitors' ability to access and target data. Additionally, the CMA states that targeting based on first-party data and authenticated user data does not require cross-site tracking and is not affected by the deprecation of third-party cookie information; therefore, it has been noted that major embedded platforms with leading consumer services such as Google and Meta are much less dependent on third-party cookie information for the delivery of high-performance targeted ads. In this context, it is considered important to develop the Privacy Sandbox application in a way that will not harm the competition and therefore the consumer. In this context, it is considered that the developments and changes related to the subject and their effects on the competitive structure of the advertising industry can be actively followed up with the support of the Information Technologies Department.
Other competitive concerns regarding Meta and Google are also explored later in the report.
Conclusion
In Turkey, where the market share of online advertising is 46%, it is of great importance to examine competition concerns. In terms of these concerns, the importance of regulation studies is seen.
In the report, the historical development of online advertising, infrastructure reviews in terms of online advertising technology providers offered in the market, and possible competition violations by undertakings operating in the online advertising sector are mentioned. Along with the report, the dominance of Google and Meta in the market, as well as competition concerns in terms of the advertising industry are included.
This article has been written according to the information and statistics given within the scope of the "Online Advertising Sector Review Preliminary Report" published by the Competition Authority on 07/04/2023.
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