The absolute need for competition in digital advertising

If there’s one thing I’ve obsessed over in recent years, with the digital advertising industry, it’s the absolute need for competition. Perhaps I’m biased because I run a small business and by our very nature we have to be competitive so it’s on my mind on a daily basis. We have to find ways which add value to our clients so that they want to use us ahead of some of our globally scaled competitors who have greater advantages in terms of financing and client access.

Small business is also something I am passionate about. I like to source services and products from local providers in my daily life, however, I am definitely not anti-corporate/capitalist. Perhaps I’m in that annoying ‘centrist’ class of people, but regardless, I feel this context is important, because the competition debate in digital advertising goes far higher than some of the technicalities, it boils down to a monopolist versus competitive view on the world and where that lands in the digital advertising industry.

Making the case for monopolies

According to WARC, Google accounts for 44% of online advertising revenues and Facebook account for 18%.  

Monopoly is a strong word in business. The antitrust laws (or competition laws in Europe) prohibit businesses from becoming a monopoly and leveraging their power to defeat competition. There isn’t a de facto market share % which equates to monopoly, although some suggest 25% as being sufficient. Those who reach monopoly status can oftentimes be broken up, face massive penalties for unfair conduct and in the worst cases some people involved are sentenced to prison.

It’s easy to buy into monopolies as an advertiser, agency or supplier. On the surface their product seems unrivalled owing to the amount of money invested into it (side note – often taken from other revenue streams within a larger business, this is often questioned as anti-competitive) and in our industry there aren’t many who think about the philosophical view of the world, most are tasked with driving short-term results. It can be hard to balance the two.

Creating a monopoly within new and relatively unregulated industries isn’t illegal per se (‘per se’ is important here…) and because there aren’t restrictions to do so, then companies are free to do what they want. Many people have the mantra of ‘they’ve created a successful company, why they should be penalised?’. However, if we look at some of the cases in recent times in the digital advertising industry of the goliaths shuttering 3rd party measurement providers, disabling data management platforms and closing off supply access to third party platforms… we can see they are certainly leveraging their power without giving too much care to what happens to other companies (and in all of these instances they have competing products).

Competition is better

The flip side is operating a business where majority market share is secondary. Business owners don’t look at their market share or shareholder profitability so much, they look at product and value. There are circa 5.7million small businesses in the UK with 1.3million of them employing others – imagine that on a lumascape! The lumascape is used to highlight the different sectors of the industry and to show how many companies operate within them. It’s often used to highlight the seemingly unnecessary complexity of the ad tech industry with the belief that consolidation is essential and that many of these companies can’t survive on their own. It preys on the mindset of those who want a simple life with a one size-fits-all ad tech company – a monopoly.

When I think about competition in digital advertising, I think about ideas coming from anywhere and allowing the people with those ideas to create companies that add genuine value for advertisers. Some of those I have met recently:

·        Ad-lib – a brilliant creative management platform

·        Avocet – genuinely innovating in the demand side platform space

·        Beeswax – providing customizable ad tech on a true SaaS basis

·        Fenestra – trying to solve transparency issues through the application of blockchain

·        Illuma – approaching contextual targeting in a smart way

·        Ozone – an initiative between news publishers to control the way their ad space is sold

·        Scibids – bringing data science to media buying

N.b – the author is not involved with any of the aforementioned companies

Governments ironically have some excellent schemes for start-up founders, but undoubtedly if you were to look at the digital advertising industry as an opportunity to build a business it’s going to be tough to compete with those who are so large and have unlimited financial and people resources, such as Facebook and Google. You might also need to work with them as a ‘partner’ and as mentioned earlier, this is a risk as they may just shut you off at the drop of a hat. I know people would argue and say there are huge opportunities to start a business in digital advertising… and there are, but I believe them to be fewer and fewer as each year passes.

I’m really not the kind of person who instantly buys into products, but there’s so much cynicsm in the industry that smart products often don’t even make it into the building of major buyers. Time poor, sold the monopolist dream and too busy delivering short-term results. Admittedly, there are also lots of non-value adding companies with some poor business models out there which don’t help, but that’s the case in any industry (look at some of the crap products on supermarket shelves..) – it’s the responsibility of buyers to evaluate these fairly.

Clearly the monopoly and competitive approach have many areas which overlap. For example, monopolies don’t not innovate and small business don’t exclusively have the best services in market, but generally a person is aligned to one or the other based on their core beliefs. As you start to move up into decision maker territory in our industry, this becomes even more obvious.

What might happen?

I LOVE the payment services directive in the UK. Big banks have always bothered me ever since I was fleeced by Natwest as a student. We are seeing major disruption in banking. Monzo, Revolut and Atom are three services which are providing customer facing solutions and better/more transparent fees for their solutions. The directive enforces distribution of user information from the big banks (think of this with Facebook and Google in mind) and will allow fin-tech companies to use Blockchain, AI, CyberSecurity and other relatively open-sourced options to create better customer solutions for savings, expenses, travel and spending. The consumer wins.

If you consider the maturity of the advertising industry, despite advertising as a practice being around for centuries, digital advertising is relatively nascent. Legislation is slowly making it’s way to the industry, and looking at where other mature industries (such as finance) have gotten to is important. There are important insights that can be derived from them that can shape the digital advertising industries future and there’s a constant evolution that’s needed, we’ll never be finished.

We don’t, as an industry, want to be stuck with so much legislation that we become slow to innovate but we need some. The power has gone too far.

I think this debate goes deeper than features and functions of digital technologies that deliver short-term results and we can of course expect two sides to this debate to play out which come from deep-rooted principles, but, my personal belief is the industry must bring in regulation that levels the playing field. We must allow for competition in digital advertising, otherwise we’ll have far less innovation, prices managed by the major providers - not the market, and integration into their core technologies impossible because of conflicting revenue streams with the competition.

The industry is growing up, so should the companies who operate in it.