Advertising in a Digital Market

Consumers get to search the internet and connect with friends- seemingly for free. The actual cost is surveillance that has concentrated the powers of influence and persuasion in the hands of large companies.  So, the House Judiciary Committee has opened an investigation into competition in digital markets, while the Department of Justice and Federal Trade Commission have divided authority between themselves over Google, Amazon, Apple, and Facebook.

How Does Digital Advertising Operate?

Advertising campaigns used to be planned and managed by media buyers who would listen to the sellers needs and place advertisements in magazines and newspapers accordingly. Now, digital advertising has shifted the process to be more automated and data-driven. Data scientists, mathematicians, and computer programmers can use statistics, calculus, and linear algebra to optimize advertising campaigns, by micro-targeting users and constantly reviewing algorithms. Simply put, digital advertising uses Internet-based tools to research, manage, track, analyze and improve online advertising campaigns.

People are spending lots of time online. In fact, 64% of people say they have been influenced to buy something by watching a video online and 52% of buying decisions can be traced back to Facebook.

When you go to a website, in milliseconds, there are real-time collections running in the background that determine which advertisements to load on your page; currently almost all online ads are delivered in this way. Digital advertising targeting uses your IP address, your location, and the URL of the page you are on with the goal of placing ads most appropriate to your lifestyle. Collection of “cookies” or small text files, are a common tool for collecting the data needed to shape your advertising experience.

Is There Something Else Giving Facebook and Google an Advantage?

Yes, advertisers can gain an advantage when tracking can be spread across multiple platforms – like site to site, app to app, site to app, and vice versa, which is why and how Facebook and Google operate giving them extra information traditional publishers do not have. In short, if a company that sells online advertisements knows what their readers are viewing on other sites, then they can target the users based on that information when the user returns to their own site.

The advertising industry has changed, and large companies in Silicon Valley have found their competitive advantage with the average American citizen spending at least an hour of their dayon social media.


Should There be Investigation From an Antitrust Perspective?

Google and Facebook allow consumers to connect with their friends, find information, share photos, and get directions. In each of those product markets, Google and Facebook have high, persistent market shares. Perhaps an issue to investigate would be if these large technology companies are cutting out their competitors.

While both Google and Facebook have dominant positions in search and social networking, both make much of their revenues from selling advertising. In fact, Google makes 86% and Facebook 99% from advertising sales. Understanding the mechanics of these markets is likely the key to enforcing existing antitrust laws.[/vc_column_text][/vc_column][/vc_row]

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.
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