In February 2020, the Morrison Government instructed the ACCC to launch an inquiry into Digital Advertising Services in the Australian market. On 28 September 2021, the ACCC released Final Report from this inquiry.
The main issues centred around competition in the Australian ad tech services market, the steadfast dominance of Google in that market, data protection and inadequacies of current legislative measures in addressing systemic competition concerns.
Ad tech services are a complex network of services used to buy and sell digital display advertising. Digital display advertising covers everything from display ads, like pop-ups and banners, to online search advertising and classified ads on sites like Gumtree and Marketplace. The process of navigating the ad tech supply chain is complex and requires interaction with a number of complex algorithms and players – from the publishers who sell ad space or inventory on their platforms, to the professional media agencies that plan and buy media, to the advertisers whose ads appear on the platform and many others. A key issue is understanding around how the services work and levels of transparency offered to those using the services.
Having sound competition among ad tech services providers is not only critical for advertisers and publishers, but also for consumers. Where competition in the ad tech chain lacks, advertisers pay more to advertise which results in poor return on ad spend, which ultimately leads to the consumer wearing the increased costs that advertisers incur. The digital advertising landscape is ever expanding and evolving – such that advertisers, publishers and consumers have a clear interest in ensuring that the chain is regulated, diversified and competitive to ensure that those interests are protected and valued.
The report made six key recommendations:
Recommendation 1: Google to amend its public material to clearly describe how it uses first-party data to provide ad tech services
Google’s dominance in the Australian ad tech market was the centrepiece of this report. The tech giant accounted for 90-100% of impressions for publisher ad services and 80-90% of impressions for advertiser ad services in Australia in 2020. Issues around Google’s use of data, significant competitive advantage, exclusive inventory, self-preferencing and minimal competition have culminated in multiple recommendations as to how Google should be conducting its extensive and varied services.
This recommendation requires that Google clearly state how they use non-aggregated first party data (data about a single consumer) and aggregated first party data (combined data from multiple consumers) to provide ad tech services. Doing so will ensure that advertisers are privy to information that can held them to make informed choices about accessing ad tech providers.
Recommendation 2: The ACCC be given powers to develop sector-specific rules to address competition and conflicts of interest in the ad tech supply chain
The report notes the current inadequacies of taking enforcement action under the Competition and Consumer Act for concerns in the ad tech space, such as lengthy delays and rigid remedies. The recommendation proposes that the ACCC develop a set of rules carrying penalties for non-compliance, created in consultation with industry that would be enforced by the ACCC. Importantly, these rules would apply to Google’s suite of ad tech services.
Recommendation 3: Increased powers for the ACCC should enable the ACCC to address competition issues caused by an ad tech provider’s data advantage
The powers in Recommendation 2 will include increased scope for the ACCC to implement measures tackling data advantages currently enjoyed by some key players in the market (i.e. Google). These measures would include data separation to prevent an ad tech provider from using first-party data to provide ad tech services on third-party sites, and data access requirements.
Recommendation 4: Industries should establish standards to require ad tech providers to publish average fees for ad tech services
This recommendation was implemented in response to concerns around the opacity of the ad tech supply chain. The issue with limited transparency is that advertisers have limited grasp over total fees and processes, therefore limited ability to make informed decisions and understand the return. Given Google’s dominant place in the market – it is unsurprising that where Google’s services are opaque, the entire supply chain follows suit. This recommendation suggests that standards be implemented to require providers to publish average fees and take rates for ad services. This would start out as a voluntary industry standard, following which the ACCC could use its power in Recommendation 2 to enforce a measure of compliance if necessary.
Recommendation 5: Google should provide publishers with additional information about the operation and outcomes of publisher ad server auctions
In its dominant and largely unchallenged position in the market, Google has entrenched itself as an indispensable and unavoidable element of the ad tech services chain. This recommendation suggests that Google should provide publishers with information allowing them to compare bids received through Google’s bidding platform. Doing so is set to improve transparency of auctions and provide an opportunity for those publishers to make an informed choice that best serves the interests of their platform.
Recommendation 6: The ACCC should be given powers to develop and enforce rules to improve transparency of price and performance of ad tech services
This recommendation builds on powers conferred to the ACCC in recommendation 2 to allow for powers to introduce transparency requirements across the ad tech supply chain. These measures would be developed in tandem with industry consultation and would apply across the industry as a whole.
Advertisers use ad and media agencies to manage the buying and planning of digital advertising. This includes things like strategy, channel selection, ad spend and purchasing digital advertising across various platforms – separate from services like creative development, production and PR. Agencies also often negotiate discounts and deals with publishers and ad tech providers that facilitate better outcomes than an advertiser could achieve on their own. Where an advertiser chooses not to use an agency (generally a smaller advertiser will forego agency services due to cost), the alternative is self-managing ad services on platforms like Facebook Marketplace and Google Ads.
Agencies are a critical piece of the ad tech services puzzle. In the quarter to March 2021, 41% of general display advertising in Australia was purchased by ad and media agencies on behalf of advertisers.
While ad and media agencies offer an important service – it is also an added layer of complexity in an ever-entangled ad-tech services pipeline. This is increasingly the case where agencies are part of a larger corporate group, within which different trading desks and data services are available for use by subsidiaries. Contrast this to a smaller, independent agency who has to outsource these services.
The ACCC’s main concern when it comes to ad agencies is transparency and conflicts of interest:
Transparency: the advertising supply chain is long and complex. Ad and media agencies, having the benefit of expertise and experience could hide behind the complexity of the supply chain by providing advertisers with services that meet the best interests of the agency, rather than the advertiser.
Conflicts of Interest: arise when publishers have relationships with certain ad and media agencies and offer incentives by way of rebates and discounts. The ACCC is concerned that these rebates and discounts can have a detrimental impact on how an agency and its advertiser chooses to spend ad dollars (i.e. preferencing the publishers who the agency has a relationship with, even when that publisher may not be the right choice for the advertiser).
Essentially, the two concerns are interrelated – if advertisers have greater insight into the discounts and relationships that ad and media agencies have with publishers, then they can be informed as to choice. This has flow on effects for selecting an agency to begin with, price considerations, performance measures etc. Transparency can be facilitated by agencies in many forms – one in particular that the ACCC suggests is itemised commission-based remuneration modelling. By including granular detail of costs for each service, the advertiser has more information about what they can expect in return to underpin their choice in agency.
The ACCC recommends accessing resources created by industry led bodies that help to provide checklists, templates and guidance on how the ad tech landscape should operate. These include:
Transparency: The recommendations are grounded in transparency and choice for advertisers, publishers, and consumers. With new rules and regimes in place, the goal is to ensure that stakeholders interacting with ad tech providers are informed as to the process and have a genuine choice as to the providers and services they engage with.
Data: Changes to how ad tech services operate may have flow on effects for how advertisers and publishers can use consumer data. Data collection is a critical aspect of ad tech services, acting as a means of facilitating targeted advertising.
Global Alignment: The ACCC’s recommendations aim to bring Australia’s ad tech services industry into line with global standards. By considering comparable steps taken in this area by other jurisdictions, particularly the US and the UK, the implementation of these recommendations would have the effect of bridling Google’s dominance not only in Australia, but on a global scale.
If you have questions about how these recommendations may affect you, or about what you should be doing as an advertiser, agency or publisher – please get in touch with the team at von Muenster Legal.