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Date Published: 29/07/2021
ARCHIVED - Facebook and Google control 70 per cent of the digital advertising market in Spain
A study prepared by the CNMC warns about the lack of transparency in internet advertising
The National Commission of Markets and Competition (CNMC) has conducted a study for the first time in Spain on the huge business of internet advertising and the results show that Google and Facebook overwhelmingly dominate the sector. The study estimated that the US companies accounted for around 70 per cent of the online advertising market in 2019, an industry worth more than €3.45 billion in Spain. In addition, researchers concluded that there is a definite lack of transparency regarding the usage of user data.
CNMC described the figures as “truly exceptional” given the fact that digital advertising barely existed 20 years ago and that there are still no relevant regulatory bodies. In Spain, 50 per cent of total digital advertising revenues went to Google in 2019, with 20 per cent going to Facebook.
The enormous size of the internet advertising sector in this country already exceeds that of all traditional media combined, with the internet giants benefiting from free articles from media outlets which they can then use to target their own advertising campaigns, completely without cost. Digital media companies generate traffic which Google then uses itself, while articles published on Facebook allow them to streamline their ads at no benefit to the media outlet.
Although the focus of the CNMC report was the revenue generated through the advertising medium and issues relating to consumer protection, the situation is also creating significant concern within the media sector itself, as it battles for survival in the midst of a worldwide pandemic, and changing consumer and advertising habits.
For most media outlets, trying to find a way of attracting sufficient revenue to fund their own survival and pay the high costs of actually producing the original content required by readers is challenging, when Facebook and Google are taking such a high percentage of the revenue generated.
Google generated ads. positioned on a media product generate negligible revenue; in the case of this product the revenue generated on a daily basis would only provide sufficient income to pay for the writing of a single article a day.
Readers are still reluctant to change to paid content formats, so financing a media product through paid subscriptions is challenging and many smaller and more localised products simply don´t have sufficient reader numbers or reader loyalty to risk trying to change from a free to a paid format.
At the same time, competing with Google and Facebook is impossible for many smaller media products and most lower traffic products are forced to rely on local advertising sales as it is difficult to attract the more lucrative advertising from larger companies as this is all being taken by Google and Facebook.
The uncertainty caused by the Covid pandemic has made the local market difficult, as many smaller businesses are reluctant to spend on advertising in such a difficult market so the smaller products are finding it even more challenging to attract sufficient revenue to survive. Added to this is the change in consumer shopping habits which is driving increasing numbers of consumers online....straight into the arms of Google, Facebook and platforms such as Amazon.
Google is by far the company with the highest turnover and the largest market share in the internet advertising business. The technology giant accumulated 90 per cent of the advertising revenue in Spain from search engine searches in 2019, which amounted to a staggering €1.35 billion. Facebook, on the other hand, completely dominated the web advertising market due to a huge volume of ads on its various social media platforms like Instagram.
CNMC explained that is difficult for other companies to compete with Google and Facebook given the enormous amount of user data they have accumulated over the past decade, allowing them to offer personalised and tailored advertising. However, other players such as Amazon, Microsoft and Apple are beginning to increase their marketing of online advertising.
Given all the data collected by the regulator, CNMC has called for increased supervision of the online advertising market, as well as formal regulations for digital platforms. In the future, it points out, consumers could be compensated for the use of their data, and have more privacy and choice in the kinds of ad campaigns they are subject to. But not at the moment.
"Data can become a barrier to entry and growth in the sector," the report stated, warning that "whoever has the data, has the power" and given that most media depend on Google analytics to supply the data required by advertisers to sell advertising on their own pages and this data is in turn being harvested by Google to strengthen its own advertising sales, there is little doubt who is currently controlling the data and revenue stream.
Original conclusions and recommendations from the CNMC:
Report conclusions
- There is a remarkable concentration in the sector in Spain: Google absorbs
more than 50% of the total income and Facebook more than 20%, so together
they have more than 70% of the market.
- The trend towards concentration is explained especially by the role of data
accumulation, which is configured as a variable of competitiveness of these
companies that can act as a barrier to entry or growth of new companies that
want to enter the business.
- There are opacity and lack of transparency problems, which make it difficult
for advertisers and publishers to make decisions. Advertisers, especially small
ones, may not know where their ad has appeared. Publishers do not have full
information on which advertiser has appeared on certain visits to their website.
Both agents, advertisers and publishers, may be unaware of the cost of certain
intermediation services.
- Vertical and horizontal integration (their presence throughout the value
chain and in related services) of platforms (especially in the case of Google)
generates risks that they extend the market power of some services to others
(leveraging) or that they favour their own services (self-preferencing).
- Competition problems can end up reducing the positive impact of online
advertising on efficiency and on consumer welfare.
- There is a remarkable concentration in the sector in Spain: Google absorbs
more than 50% of the total income and Facebook more than 20%, so together
they have more than 70% of the market.
- The trend towards concentration is explained especially by the role of data
accumulation, which is configured as a variable of competitiveness of these
companies that can act as a barrier to entry or growth of new companies that
want to enter the business.
- There are opacity and lack of transparency problems, which make it difficult
for advertisers and publishers to make decisions. Advertisers, especially small
ones, may not know where their ad has appeared. Publishers do not have full
information on which advertiser has appeared on certain visits to their website.
Both agents, advertisers and publishers, may be unaware of the cost of certain
intermediation services.
- Vertical and horizontal integration (their presence throughout the value
chain and in related services) of platforms (especially in the case of Google)
generates risks that they extend the market power of some services to others
(leveraging) or that they favour their own services (self-preferencing).
- Competition problems can end up reducing the positive impact of online
advertising on efficiency and on consumer welfare.
CNMC recommendations
Based on this analysis, the CNMC undertakes a series of recommendations to
improve competition within the sector:
- Competition authorities must keep applying competition policy continuously and
decisively as the first line of defence in the online advertising market.
- The tools available to competition policy must be complemented with the
regulation on digital platforms as it is being addressed in the future European
regulations on digital markets (DMA, Digital Markets Act).
- The complex relationship between consumer protection and its privacy and the
promotion of competition in digital markets must be considered when defining the
role of the consumer and ensuring their maximum well-being.
- A multidisciplinary and cooperative approach is required between the institutions
involved due to the challenges associated with online advertising.
- There is a need to strengthen the capacities and means of the competition and
regulatory authorities.
Based on this analysis, the CNMC undertakes a series of recommendations to
improve competition within the sector:
- Competition authorities must keep applying competition policy continuously and
decisively as the first line of defence in the online advertising market.
- The tools available to competition policy must be complemented with the
regulation on digital platforms as it is being addressed in the future European
regulations on digital markets (DMA, Digital Markets Act).
- The complex relationship between consumer protection and its privacy and the
promotion of competition in digital markets must be considered when defining the
role of the consumer and ensuring their maximum well-being.
- A multidisciplinary and cooperative approach is required between the institutions
involved due to the challenges associated with online advertising.
- There is a need to strengthen the capacities and means of the competition and
regulatory authorities.
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