New US bill could deliver a gut-punch to Google and Facebook

A coalition of US senators has proposed new legislation that would dismantle the digital advertising companies from Google and Facebook.

The Digital Advertising Competition and Transparency Act would prevent companies with more than $20 billion in advertising revenue from participating in more than one stage of the ad chain. Like recently explained to CongressGoogle is currently acting on behalf of marketplace vendors and buyers, and presiding over the auction process.

The new bill also contains conditions affecting smaller market players with advertising revenues over $5 billion, largely designed to increase pricing transparency.

The business of digital advertising

Although the online advertising industry is sprawling and complex, with many moving parts, the space is ultimately dominated by two players: Alphabet and Meta, the parent companies of Google and Facebook.

The digital ads the pair run make up the vast majority of their respective revenue. In fiscal year 2021, for example, digital advertising accounted for about 80% of Alphabet’s revenue, totaling $210 billion.

However, the duo’s stranglehold is now beginning to attract the attention of antitrust regulators on both sides of the Atlantic.

Earlier this year, Google and Facebook were even accused of having entered into a secret agreement intended to oust competitors from the market and consolidate their own positions. Dubbed Jedi Blue, the arrangement is currently under investigation in the UK and EU, as well as the US.

The latest proposal can be seen as an extension of those efforts to limit the ability of Google and Facebook to dictate ad market terms.

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As reported by The Wall Street Journal, the proposal was endorsed by senators on both sides of the aisle, including the likes of Ted Cruz and Amy Klobuchar.

Google, for its part, says the bill would harm the quality of the user experience, a common refrain whenever the company has come under fire from regulators and privacy defenders.

“Advertising tools from Google and many competitors help US websites and apps fund their content, help businesses grow, and help protect users from privacy risks and misleading ads,” said Julie Tarallo, spokesperson for Google.

“Breaking these tools would harm publishers and advertisers, reduce ad quality and create new privacy risks. And, in an age of increased inflation, it would handicap small businesses looking for simple and effective ways to grow online.

In a separate statement, the company said it was “the wrong bill, at the wrong time, aimed at the wong target” and sought to blame the negative effects of digital advertising on “data brokers bad quality”.

Tech Radar Pro asked Meta for a response to the proposal.

By the edge

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