The CMA has published an update in its examination of online platforms and digital advertising, uncovering new detail about how the sector’s biggest names operate.
The work is part of the Competition and Markets Authority’s (CMA) wider digital strategy, which aims to co-ordinate the authority’s approach to tackling the new challenges of the rapidly developing digital economy. The CMA will now consult on the contents of today’s update ahead of publishing its final report next year.
In July 2019, the CMA set out to find out more about how major online platforms like Google and Facebook operate. Whilst the services these firms provide appear to be free, consumers pay for them indirectly through providing their attention and personal data, which platforms use to sell digital advertising. In the UK, people spend an average of 3 hours and 15 minutes online each day. More than a third of that time is spent on sites owned by either Google (including YouTube) or Facebook (including Instagram and WhatsApp). As a result, the digital advertising sector has grown massively and is now worth around £13 billion – much larger than any other form of advertising.
The CMA’s interim report has found that:
- Last year, Google accounted for more than 90% of all revenues earned from search advertising in the UK, with revenues of around £6 billion
- In the same year, Facebook accounted for almost half of all display advertising revenues in the UK, reaching more than £2 billion
‘Big’ is not necessarily ‘bad’ and these platforms have brought very innovative and valuable products and services to the market. But the CMA is concerned that their position may have become entrenched with negative consequences for the people and businesses who use these services every day.
A lack of real competition to Google and Facebook could mean people are already missing out on the next great new idea from a potential rival. It could also be resulting in a lack of proper choice for consumers and higher prices for advertisers that can mean cost rises for goods and services such as flights, electronics and insurance bought online. The market position of Google and Facebook may potentially be undermining the ability of newspapers and other publishers to produce valuable content as their share of revenues is squeezed by large platforms.
Through its market study, the CMA has used its statutory information gathering powers to build a better understanding of this complex market, the drivers behind the positions of Google and Facebook and the competition issues this might present. It has also been able to build a better picture of how these large platforms collect and use personal data to assess whether people have the right amount of control over their own information. All of this will help the CMA identify steps that could open up competition and contribute to the discussion about whether and how best to regulate this sector.
Each year, about 15% of queries on Google have never been searched for before. Other search engines like Bing will not have the same access to these queries, putting Google in a powerful position of being able to better train its algorithms and provide more accurate search results than its rivals.
The CMA has also found that the default settings people are faced with online have a profound effect on choice and the shape of competition. Last year in the UK, Google was willing to pay around £1 billion – 16% of all its search revenues – where it was the default search engine on mobile devices such as Apple phones.
Personal data collection also plays an important role in driving Google and Facebook’s powerful market position by allowing them to target their advertisements more effectively than others. Both for privacy and competition reasons, it is essential that people feel in control of their data. At the moment, the CMA is concerned that this is not always the case.
For example, social media platforms such as Facebook do not allow consumers to opt out of personalised advertising: rather, people are presented with a take-it-or-leave it offer, forcing them to share considerable amounts of personal data as a condition for using the service. And it is difficult to access privacy settings on these platforms, which are often only visible after navigating through multiple menus.
While there are examples of better practice, with search engines such as Google giving consumers better control, overall, we have found that consumer engagement with privacy settings and controls is low and, that, as a result, most consumers follow the default settings set by platforms – which may result in them giving up more data than they would like.
The CMA is also concerned about a lack of transparency in the way that business on these platforms works. Publishers, such as newspapers, who rely on Google and Facebook for about 40% of their traffic, have expressed concerns about unexplained dramatic changes in the number people visiting their websites due to changes in Google’s search and Facebook’s news algorithms. Different sorts of transparency concerns are particularly acute in the market for display adverts, where advertisers and publishers participate in a ‘black box’ process of real-time bidding but have limited ability to verify the effectiveness of their adverts.
