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

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

The Competition and Transparency in Digital Advertising Act would prevent companies with ad revenues exceeding $20 billion from taking part in more than one stage of the advertising chain. As recently explained in Congress, Google currently acts on behalf of both market suppliers and purchasers, as well as presiding over the auction process.

The new bill also contains conditions affecting smaller market players with ad revenues in excess of $5 billion, broadly designed to increase transparency around pricing.

The digital advertising business

Although the online advertising business 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.

Digital ads served up by the pair account for the vast majority of their respective revenues. In fiscal 2021, for example, digital advertising made up roughly 80% of Alphabet income, totaling $210 billion.

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

Earlier this year, Google and Facebook were even accused of striking a secret deal designed to squeeze competitors out of the market and consolidate their own positions. Nicknamed Jedi Blue, the arrangement is now under investigation in the UK and EU, as well as the US.

The latest proposal can be seen as an extension of these efforts to limit the potential for Google and Facebook to dictate the terms of the advertising market.

As reported by the Wall Street Journal, the proposal has been endorsed by senators from both sides of the aisle, including the likes of Ted Cruz and Amy Klobuchar.

Google, for its part, claims the bill would damage the quality of experience for web users, a common refrain whenever the company has come under fire from regulators and privacy advocates.

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

“Breaking those tools would hurt publishers and advertisers, lower ad quality and create new privacy risks. And, at a time of heightened inflation, it would handicap small businesses looking for easy and effective ways to grow online.”

In a further statement, the company said this is “the wrong bill, at the wrong time, aimed at the wong target” and sought to place the blame for the adverse effects of digital advertising on “low-quality data brokers”.

TechRadar Pro has asked Meta for a response to the proposal. 

Via The Verge

Joel Khalili
News and Features Editor

Joel Khalili is the News and Features Editor at TechRadar Pro, covering cybersecurity, data privacy, cloud, AI, blockchain, internet infrastructure, 5G, data storage and computing. He's responsible for curating our news content, as well as commissioning and producing features on the technologies that are transforming the way the world does business.