Unregulated Advertising Markets
Lets get started with a fact survey’s:
Approximately 86% of Ads in United States are sold in real time via RTB.
The largest sellers of Ads space operates leading trading venues, as well as leading intermediaries. They shares trading information and speed with its owned intermediaries along with steering buying and selling orders to its exchanges and websites hence abusing their access to inside information.
Let’s consider the case of Google to understand:
When we try to bid using Google Ads, this tool steers that advertiser towards “which” Ad space to buy. Moreover, google does not disclose to them the price that the Ad space actually cleared for.
Looking at the financials:
Google’s Ads revenue — 64% of it went to Google properties.
In 2020, it has increased to 85%
In practicality, advertiser sets a budget and defines its bid parameters (ex: bid ceiling) and Google Ads will bid on and buy Ad space, including those trading on Google’s exchange in an automated fashion. Hence, Google is acting as both, the agent and the counterparty to the advertiser.
Whereas, big advertisers uses an enterprise software called as DSP.
Advertisers use all these tools to get access to Ad exchanges where Ads are sold in RTB fashion. Whereas, the sellers use an “Ad server” to sell their inventory.
These Ad servers are like inventory management software along with the hold of sensitive information regarding publisher’s campaigns, advertisers and pricing. Ad server is also a link between publisher’s inventory and real time trading venues, routing Ad space to exchanges in real time.
In RTB, access to information about what is trading on exchange is critical to those competing to buy on the same venue.
- The bid request that exchange send to buying tools contain important information used to decide whether and how much to bid for an ad.
- When exchange sends out a bid request, it sets the time each buying tool has to respond with a bid, usually in between 100 to 160 milliseconds the exchange closes the auction.
Given the above two factors of bias, the exchanges can distort competition between the advertisers. Nevertheless, trading intermediaries can also distort competition between exchanges by the way that they route buy and sell orders to exchanges, here, the Ad server determines whether to route that space only into exchange A, B and C on equal terms and whether to do so at the same time.
Now, a company that operates an intermediary, especially with significant market share can manipulate the trades. Moreover, the companies who trades on behalf of third parties and themselves are also having access to inside information.
Online Advertising, despite also trading on electronic trading venues at high speeds and facing the same competition issues, benefits from no parallel code of conduct.
A useful read:
Digging more into Google:
By 2013, Google’s exchange overtook the competition to become the largest trading venue for Ad space and its DSP DV360 (Acquisition of Invite Media) rose to become the most used in the market.
This happened because of the information advantage Google have when buying and selling Ads, which traces its origin to the Ad server software company called DoubleClick.
Vivek Gupta: https://www.linkedin.com/in/vivekg-/
Check out my legal space here: https://easylaw.quora.com
