UK Competition Authority Must Investigate Digital Ad Market, says Government Commissioned Review


The UK’s Competition and Markets Authority (CMA) is to investigate the digital ad market to ensure there is fair competition, according to the final report of the Cairncross review which was commissioned by UK Prime Minister Theresa May. The review has been investigating the sustainability of the production and distribution of high-quality journalism in the UK. In its final report the review recommended that there should be increased regulatory oversight of online platforms’ distribution of news.

The review drew on the findings of several specially commissioned studies for its final report, which highlighted the difficulties facing premium news publishers.

The Online Advertising in the UK report by Plum Consulting found that out of every £1 spent of programmatic, an average of £0.62 goes to the publisher, although in some cases it can be as low as £0.43. The report also estimated that 54 percent of all UK online ad revenues in 2017 went to Facebook and Google.

A separate study from Mediatique meanwhile charted the decline of print advertising revenues, which fell by over 65 percent between 2007-2017. In the same period, the number of full-time frontline journalists in the UK dropped from 23,000 to 17,000, a number which is still falling.

Consequently, the Cairncross review called for the Competition and Markets Authority to carry out a market study of the digital ad industry. The review recognised that compared to print advertising, the digital ad market is “hugely complicated: not only are there more intermediaries, but it is hard for advertisers and publishers to see the actions (and the margins) of other players”. It also said that Facebook and Google’s domination of the market “could be restricting competition, and stifling innovation”.

“By looking more closely at the position of different players, their roles, costs and profitability, the CMA will be able to identify how efficiently the online advertising market is working, and what, if anything, should be done about it,” the report said.

Secondly, the review recommended greater government oversight of digital companies like Facebook and Google. It said that new codes of conduct must be established to rebalance the relationship between online platforms (naming Google, Facebook and Apple specifically) and the publishers which increasingly depend on them for traffic. These codes of conduct would be overseen by a regulator, and might include pledges not to index too much publisher content without permission, to help publishers understand algorithms which determine how content is ranked, and to give transparency on shares of digital ad revenues.

The report rejected the option however to force digital platforms to pay news publishers for any content that appears on their news feeds, saying it would be hard to determine the value of this exchange, and that a government-set pricing structure might benefit some publishers whilst harming others.

Thirdly, the review called for regulatory oversight of the efforts of online platforms to improve their users’ news experience. The final report acknowledged the progress made by the likes of Facebook and Google to filter out fake news and help users identify the reliability and trustworthiness of different sources. But the Cairncross review wants to make these efforts mandatory not optional, and believes the platforms must be held accountable by a regulator to make sure their efforts actually have an impact. If it becomes clear that the changes they’ve made have not had a measurable impact on the reach of high quality news, the review said that stricter measures may be imposed.

There were a number of other recommendations given, around government funding of high quality journalism, but the above three will have the biggest implications for the digital ad industry. Less than one week after Germany’s own competition authority called on Facebook to reform its data collecting practices, it now looks highly likely that the big tech companies will face more regulatory scrutiny in the UK too. The UK’s secretary of state for digital, culture, media and sport Jeremy Wright said the government will take immediate action on some of the recommendations, while others will require further “careful consideration”.

“A healthy democracy needs high quality journalism to thrive and this report sets out the challenges to putting our news media on a stronger and more sustainable footing, in the face of changing technology and rising disinformation,” he said.

 


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