Opinion | Google Is Dominating This Hidden Market With No Rules - The New York Times
Last month, Gary Gensler, chairman of the Securities and Exchange Commission, asked Congress to consider the idea of regulating cryptocurrency exchanges the way the federal government has long regulated stock exchanges. While his comments drew fresh attention to the unregulated markets for cryptocurrency, they reminded me of another long unregulated exchange marketplace: the market for digital advertising.
Each time you click on a website or an app, in the milliseconds it takes for it to load, the empty ad space on the page is auctioned off through specialized trading venues called ad exchanges. Alphabet Inc., which owns Google, operates the largest of these venues. It works “just like a stock exchange,” as Google explains, complete with brokers mediating transactions between sellers and buyers. Today, the billions of daily transactions on advertising exchanges owned by tech companies rival the number of trades happening on Wall Street.
To protect the public and promote fair competition in stock market transactions, Congress created the Securities and Exchange Commission and vested the agency with the power to issue rules and manage conflicts of interest between the exchanges, brokers and other industry players.
These problems took root more than a decade ago when Google made a bid for DoubleClick, the popular service that helps websites sell ad space. Federal regulators approved the purchase. But they did so without requiring that Google separate the DoubleClick division helping publishers sell on exchanges from the division helping advertisers buy ad space, or from the division operating an exchange, which Google later dubbed AdX.
Could Google operate an exchange while acting in the best interests of both the websites and advertisers — in other words, both the seller and the buyer — all at once?
An increasing share of advertising dollars is also winding up in the hands of Google properties. In 2007, about 35 percent of the ad revenue that Google made came from selling space on sites across the internet, sites which trust the company to be an honest broker. But the share going to Google sites has increased almost every year since. In 2020, Google booked about $146 billion in ad revenue; more than 84 percent of that amount went toward space on Google properties like search and YouTube. One possible result: Consumers see more ads on YouTube and more paywalls online.
The consequence of all this: Websites, apps and advertisers providing consumers with everything from news, games and consumer goods make less money selling ads and have to fork over more money to exchanges and other intermediaries.