by Jamie Walsh
At the start of the month, the Competition and Markets Authority (CMA) called for the government to introduce “a new pro-competition regulatory regime to tackle Google and Facebook’s market power”. Click here to see the press release.
What They Said
According to their report, of £14bn UK digital advertising spend, 80% went to Google and Facebook. They also found that Google has more than 90% market share in the search advertising market in the UK whereas Facebook has over 50% of the market share in the UK display advertising market. The CMA is concerned that these platforms have developed such unassailable market positions that rivals can no longer compete on equal terms, listing barriers to competition such as:
Large user bases being a source of market power
Unmatchable access to user data
Default settings nudging users to use services and give up data
Presence across many different markets
They claim that competition here is essential for improving innovation and choice whilst also decreasing costs. They even found that Google's prices were 30-40% higher than Bing on like-for-like terms.
They also claim that, due to the scale and nature of this issue, a new “pro-competition regulatory regime” is needed so that users can benefit from new innovative services, rival business can compete on a level playing field and publishers can get better value.
The new regime could:
Enforce a code of conduct to ensure these platforms do not engage in exploitative or exclusionary practices
Order Google to open up click and query data to rival search engines to improve their algorithms
Order Facebook to increase interoperability with competing social media platforms
Restrict Google as the default search engine
Order Facebook to give users a choice over personalised ads
Introduce a “fairness-by-design” duty
Order separation of platforms where necessary
A View from M.i. Media
Promoting Competition is Important
Overall, we agree with the sentiment of this announcement. It has been known for many years that platforms such as Google and Facebook practically hold a monopoly over their respective channels. We value the need for choice in these advertising markets as overdependence on one platform leads to a lack of control, increased cost and too much power. With no viable alternatives and limited regulation, companies like Google and Facebook have the power to decide which advertisers can advertise and can ultimately determine the success of businesses.
This is a particularly poignant issue now, during the Facebook advertising boycott. Over 1,000 companies have signed up to the Stop Hate for Profit campaign, pulling their advertising spend from Facebook in July in protest of Facebook allowing "racist, violent and verifiably false content to run rampant on its platform". Whilst many companies can temporarily postpone their social media advertising spend in July and potentially look for alternatives, the options are limited.
There are alternative social media channels such as Twitter, Snapchat or TikTok, but other “alternatives” are either owned by Facebook (e.g. Instagram and Whatsapp) or simply do not have the same kind of user volume or intent. The fact remains that Facebook is a core media channel for many businesses and this is even recognised by Mark Zuckerberg, who has been quoted saying he expects “advertisers will be back on the platform soon enough”. This is harmful as it shows he understands that there are few alternatives for advertisers here and many don’t have a choice but to continue to spend on the platform, while Facebook can continue to operate as they want.
Innovation is one of the reasons the CMA suggests that competition is necessary. Google will claim that they do innovate, however their innovations are leading to an increased reliance on automation, machine learning and ultimately a lack of transparency. This, in turn, increases the advertiser’s reliance on the platform, limits their control over their account and solidifies Google’s position as the dominant force in this channel.
We believe that this is exactly what Point 2 in the CMA regime is targeting. However, it raises the questions on the “fairness” or even the feasibility of this. Why should Google give up their click and query data to actually help their competition? Especially, as we have already highlighted, this is so valuable and one of their main strengths? We would definitely expect a heavy pushback from Google if this is enforced.
We also question the vagueness in the terminology used in the regime. We have no doubt that this will be elaborated on as this develops, however “do not engage in exploitative or exclusionary practices” is rather vague and subjective. Without further defining these terms, we expect platforms may try find ways around this. However, on the other hand, should Google or Facebook not have a say in who can advertise on their platform? Or would this also be considered an "exclusionary practice"?
The report also claims that increased competition may make advertising costs cheaper, finding Bing CPCs are lower than Google. In our own experience we have seen varying results here, but we also sometimes find Bing to be the more efficient platform. However, despite being more efficient, the scale is just not there. One of the reasons the platform is cheaper could be it’s lack of popularity as it leads to fewer advertisers on Bing, meaning less competition and cheaper CPCs. However, we also must question the reasons why Bing is the smaller platform - it is a Microsoft product, it utilises the default search engine in Internet Explorer and Microsoft Edge, has access to large amounts of user data and presence across various markets. According to the CMA, this ticks all the same boxes as Google in terms of being an unfair competitor. So why is it so much less popular than Google? Perhaps the reason fewer people use Bing is that Google is simply the better product. By enforcing competition in this area, we also have to consider that this also means enforcing a poorer user experience.
If the CMA can’t force the sharing of data between competitors, there may be other ways to level the competitive field, such as the sharing of algorithm logic used in Bid strategies. This way, the data would remain unique to the platform, but the manipulation of this must be shared. This would push for more innovation and would mean that competitor platforms could become more efficient as a result.
One option to address the Google userbase issue, would be for the CMA to also enforce browser alternatives on Android and Apple devices which would also, by extension, affect default search engines. However, we also recognise that this is also in place on desktop devices, and users still choose to default back to Google products.
Addressing the userbase issue on Facebook is even trickier, by definition the power of a social platform is dictated by it's userbase. The only way for a competitor to level the playing field is by providing a better user experience. The only measure that could be put in place to limit Facebook could be preventing it from merging with more companies to acquire more data. However, we doubt that the CMA even has the power to do this.
Our question is whether this is “too little, too late”? These platforms are in such a position of power that it would be very difficult to regulate them so much that equal competition is possible. Even if the CMA was able to introduce these regulations and enforce them, it does not resolve the first barrier that they identified – userbase. Users are so familiar and comfortable with these platforms that it would be difficult for a competitor to gather enough momentum to make an impact. How many times have you found the default search engine set to Bing, only to search “Google”?
If Google and Facebook’s position of power is coming from this userbase, who in turn provide data that reinforces their position, then other competitor platforms must also focus on providing better user experiences to turn user and marketer attention away from Google and Facebook. We don’t doubt that measures need to be put in place to assist competitors so they can compete fairly, but perhaps just looking at this from a marketing point of view is reductionist and we must also consider the quality of competing platforms.