Australia’s competition watchdog says Google has a monopoly on online advertising, but how does it work?


In the pre-digital world, advertising was widely distributed through print media, radio and television.

Today, digital advertising has moved beyond these channels, invading our desktops and laptops, smartphones, tablets, and a variety of other internet-connected devices. And perhaps the biggest player in the online advertising space is Google.

Australia’s competition watchdog, the Australian Competition and Consumer Commission (ACCC), says Google now dominates the country’s online advertising, so it needs to be brought under full control.

The ACCC maintains that over the past decade, Google’s advertising technology has developed to the point of being anti-competitive.

The lion’s share

In a report released on Tuesday, the ACCC said Google had come to dominate the market with a huge data advantage. The tech giant collects vast amounts of information about people who use Google Search, YouTube, Gmail, Google Calendar, Google Docs, Google Contacts, Google Sites, Google Meet, Google Chat, Cloud Search and more.

Google bought YouTube in 2006 for $ 1.65 billion.

The Watchdog estimates that 80-90% of all online ad impressions for Australia went through at least one Google service in 2020. An “ad impression” is created when an ad is posted on an application or a web page. It’s the benchmark by which advertisers know how many times an ad has been viewed.

In light of this estimate, it’s fair to say that Google takes the lion’s share of Australia’s digital advertising industry, which reached AU $ 9.5 billion last year.

The ACCC recommended a new industry code to make the end-to-end advertising process more transparent. It also wants to impose rules on how user data is collected for digital advertising purposes and how service charges are calculated.

The full list of recommendations is aimed at limiting Google’s potentially monopoly power in the digital advertising market.

What does Google say?

In response, Google said the ACCC failed to properly account for other online advertising channels available to Australian advertisers, such as Facebook, Twitter and Snapchat.

Google also pointed to a PwC report which estimated that three-quarters of the tech giant’s advertising customers in Australia were small and medium-sized enterprises (SMEs) – and that Google’s services contributed AU $ 2.4 billion each. year.

A Google spokesperson reaffirmed the company’s willingness to work with ACCC to create a “healthy advertising ecosystem,” according to The Guardian.

Google’s winning formula

It may be apocryphal that at the beginning of Google, when their only product was a revolutionary search engine, a business consultant asked the founders how they planned to make money. The answer was like, ‘we’re going to find something’. That something, it seems, was Google Ads.

Last year, Google Ads helped the market value of US company Alphabet (of which Google is a part) grow by more than $ 1,000 billion, joining Apple and Microsoft. It places ads in Google search results, as well as on mobile apps, web pages, and videos, and is the primary tool through which advertisers can reach customers through Google services.

Whenever someone uses Google Search or visits a website that hosts ads through Google Ads, an automated ad auction takes place behind the scenes. Advertisers bid on the maximum cost per click they are willing to pay for their ad.

Paying on a cost-per-click basis means that instead of paying for the ad space itself, the winning advertiser pays Google a set amount each time someone clicks on their ad.

Of course, not everyone who clicks on an ad will also make a purchase. It might only be one click in ten that turns into a sale, it depends on how hot or how cold the market is.

So, if the cost per click is 50 cents and the click-to-sell conversion rate is one in ten, the advertiser must sell their product for no less than $ 5 if they want to break even on their market. ad purchase. But how does this price compare to that of their competition? They must do their calculations carefully.

For an ad to be displayed in a prime position, the cost-per-click bid must be high enough, the ad must be of high quality, and must contain keywords that are directly related to the search.

Read more: ACCC ‘World First’: Australian Federal Court found Google misled users about personal location data

According to Google, ads can be targeted based on a number of factors, including audience “demographics” (certain locations, ages, genders, and device types) and selecting “like audiences”:

Expand your audience by targeting users whose interests are related to users on your remarketing lists. These users are not directly researching your products or services, but their related interests may lead them to engage with your ads.

The exact details of the process are obscure, however, as Google carefully monitors its methods.

What does the future look like?

As artificial intelligence (AI) increasingly enters people’s lives, the work of buying things may be delegated to AI assistants. That’s the vision of Peter Diamandis, one of Silicon Valley’s leaders best known as the founder of the tech nonprofit X Prize Foundation.

How would that work? Well, over time, your personal AI will know all about your daily habits, the products you use, how often you use them, the brands you like, where you go, who you meet – everything.

He will then make product suggestions based on these models. This is an extended version of what Google is already doing with its Google Assistant feature.

Google Assistant
The Google Assistant uses AI to tailor its offerings to the device owner.
antonbe / Pixabay

Amazon does this too, sending users “we notice you are reading this.” Other readers who have read who have also read … ”

The next step would be for the AI ​​to go ahead and buy the consumables they know you need, when you need them, and have them delivered to you – without your expressly asking. This means that you won’t run out of things that you didn’t realize were running out of resources.

But on the other hand, this potential future raises serious concerns about our privacy, our agency and our consumer behavior.

Read more: Google is conducting a vast, secret human experiment. You might be one of the guinea pigs

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