Google's mortal enemy does it a US$95bil favour: opinion

  • TECH
  • Sunday, 22 Jul 2018

NEW YORK, NY - MARCH 05: Google's New York office is shown in lower Manhattan on March 5, 2018 in New York City. Published reports say that the tech giant is close to a reaching a $2.4 billion deal to buy the landmark Chelsea Market building. The building, a block-long former Nabisco factory that is named after its ground-floor gourmet food mall, sits directly across from Google's current New York City headquarters in the Meatpacking District. If the sale goes through, it would be one of the most expensive real estate transactions for a single building in New York City history. Spencer Platt/Getty Images/AFP == FOR NEWSPAPERS, INTERNET, TELCOS & TELEVISION USE ONLY ==

As far as Alphabet Inc’s Google is concerned, the EU taketh away but it giveth too. 

The first part of that was made clear last week when Brussels antitrust cops whacked the search giant with a €4.3bil (RM20.39bil) fine over its bundling of apps on the Android mobile operating system – a decision that might restrict the company’s access to the mobile browsing data that is its lifeblood. 

Yet Google has reason to offer thanks to bureaucrats elsewhere within the EU, namely the ones who came up with the idea for Europe’s General Data Protection Regulation. While that legislation was created to give consumers better control over how tech companies use their data, it may at the same time have strengthened Google and Facebook’s iron grip on the digital advertising market. 

As I’ve written before, the new rules might make it easier for the Silicon Valley duo to cut out advertising agency middlemen and women and pitch directly to the consumer brand owners. 

The suspicion that Google and Facebook might do well from GDPR was reinforced by Publicis SA, the biggest ad agency after WPP Plc. It said July 19 that second-quarter earnings suffered a €10mil (RM47.43mil) hit because of the new rules. Indeed, the media website Digiday has estimated that overall spending on programmatic ads – digital advertisements that use browsing history to target web users – fell by as much as 40% in Europe in the immediate aftermath of GDPR’s May 25 roll-out. 

Publicis doesn’t expect its own shortfall to be repeated, but it was telling nonetheless that a senior executive Steve King believes that Google and Facebook’s ad revenue probably increased over the same period. 

That might be because, when it comes to the value chain for digital ads, the two companies can do pretty much all of the important stuff in buying and selling space. They both own: 

An ad exchange (Google’s DoubleClick and Facebook’s Exchange), where advertisers’ algorithms bid against each other in real time to show an ad to a web user who matches their target demographic; An ad network, which connects the exchange to the websites and apps that display the ads; And the all-important user data that enables the targeting of ads at the right person. 

Since both companies have used their vast resources over the past two years to make sure everything they do is GDPR-compliant, the consumer brand-owners have probably felt more confident just working with them rather than companies who are active in just one part of the chain. AppNexus, a digital advertising supplier, estimates that about half of European marketing dollars went through DoubleClick before GDPR. On May 25, that surged past 95%, before declining again. 

None of this is to suggest that GDPR means that Google and Facebook now have a lock on all aspects of the digital ad business. Publicis says it doesn’t expect any further detrimental impact from the new rules, and ad agencies will continue to act as a gateway between the brand-owners and the digital places where their ads are displayed. But, make no mistake, the Silicon Valley companies want that business too and GDPR appears to have strengthened their hand in trying to create a one-stop shop for advertisers. 

So while that Android fine was a big one, it’s worth remembering that Google and Facebook got US$135bil (RM549.21bil) of ad sales revenue last year – Google’s was US$95.4bil (RM388.11bil). Any extra edge will be very lucrative indeed. — Bloomberg 

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

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Google; Facebook; GDPR


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