This Thursday, the Republican senator from Utah Mike Lee presented a bill that, if approved, will shake the foundations of the google ad empire.
The draft Law on Competition and Transparency in Digital Advertising Advertising Law has the support of prominent both Republican legislators as Democrats (Democratic Senators Amy Klobuchar and Richard Blumenthal and Republican Ted Cruz, among others.) Meanwhile, in the House of Representatives, Republican Ken Buck and Democrat Pramila Jayapal have joined forces on a similar initiative.
According to the authors of this draft, the new law would restore and protect competition in digital advertising by eliminating conflicts of interest that have allowed major market platforms to “manipulate ad auctions and impose monopoly rents on a wide swath of the US economy.”
In a press release, Senator Lee has bluntly attacked the tech giants, teaching himself in particular with Google and Facebookwhich he has accused of “exploiting his unprecedented troves of detailed user data to gain almost absolute control over digital advertising, amassing power on all sides of the market and using it to block competition and take advantage of his customers.”
The Republican lawmaker has called the current digital ad system “broken” and smeared the tech giants for failing Americans “in so many other ways: undermining our privacy, censoring our speech, and exploiting our children.” In a more measured tone, Ted Cruz shared his pride in participating in this bipartisan initiative that honors the “long history of fighting monopolies” in the United States.
Democrats Klobuchar and Blumenthal have closed ranks with Lee, recalling that “For too long, Google and Facebook have dominated the digital advertising market at the expense of advertisers, publishers and consumers.”
In the words of the Connecticut State Representative in the Senate, “The Big Tech claim that they simply preside over a free and open market, But in a truly free market, the same party cannot represent the seller, the buyer, set the rules, and conduct the auction. And that is unacceptable in a free enterprise system: it hurts consumers and it hurts competition.”
Today, Google owns the platform where ad space is transacted, as well as running the tools advertisers use to sell and buy those ads. Critics like the bill’s architects argue that such market dominance allows companies like Google and Facebook to overcharge brands seeking to place ads online.
80% of Google revenue in check
In 2021, the business of $211.2 billion in digital advertising in the US it was led by Google, which controlled around 28.6% of the market, followed by Facebook (23.7%) and Amazon (11.6%).
Once approved, this bill would prohibit companies that manage more than 20,000 million dollars a year in digital advertising transactions from participating in more than one part of the process, in addition to requiring higher levels of transparency. The main affected would be Alphabet, a group to which Google belongs, Meta – owner of Facebook, Instagram and Whatsapp – and Amazon.
In the case of Google, we would be talking about more than 80% of its annual income, since of the 68,010 million dollars in income generated by Alphabet in the first quarter of this year, 54,660 million came from its advertising business. According to analysis by Paul Verna of Insider Intelligence, Google would generate an estimated $174.81 billion in net revenue from digital advertising in 2022, an increase of 17.3%.
Facebook would also have to abandon part of its investments in the sector to comply with the new law. Amazon would also have to consider a new strategy for what is fast becoming its best business. The company founded by Jeff Bezos published for the first time the results of its advertising business, whose annual turnover exceeded 31.2 billion dollars in 2021.
Apple, Bytedance (creators of TikTok), Microsoft, Comcast, The Trade Desk, Verizon, ViacomCBS / Paramount complete a far from negligible list of companies that follow the future regulation of Internet advertising with more fear than interest.
USA versus Big Tech
Recent actions by the Senate Judiciary Committee make it clear that Democrats and Republicans have found a common enemy in Big Tech.
So far this year, this Senate body has introduced two bills aimed at improving competition in the digital economy (American Online Choice and Innovation Act and Open Application Markets Act). Both bills focus on preventing big tech companies from favoring their own products in the markets they manage.
If Senator Lee’s bill were to materialize, companies like Google and Facebook would have a year to abide by the new rules.