In a recent development, members of the United States Congress introduced a new bill targeting big tech companies on March 30, 2023. The ‘AMERICA Act’ aims to force these companies, including Google, Facebook, Amazon, and Apple, to divest portions of their advertising business units to protect competition. With potential repercussions for the advertising industry, this article will delve into the specifics of the bill, its effects on big tech, and the possible trickle-down effects on advertisers.
The ‘AMERICA Act’ Explained
What It Stands For
The ‘AMERICA Act’ bill stands for “Advertising Middlemen Endangering Rigorous Internet Competition Accountability Act.” It is a 22-page bill aimed at amending the Clayton Act, which prevents conflicts of interest and promotes competition in selling and purchasing digital advertising.
Who It Affects
The ‘AMERICA Act’ will impact companies that complete over $20 billion in digital ad transactions. The bill aims to protect digital advertising competition in two ways:
- If processing more than $20 billion (per year) in digital ad transactions, the bill prohibits the ability to own more than one part of the digital ad ecosystem, which means:
- Ad exchange owners cannot own supply-side platforms or demand-side platforms.
- Supply-side platform owners cannot also own a demand-side platform and vice versa.
- Buyers and sellers of digital advertising cannot own a demand- or supply-side platform (except to sell their advertising inventory).
- If processing more than $5 billion (per year) in digital ad transactions, the bill requires companies to abide by fundamental obligations to protect customers (advertisers) and competition. These obligations include:
- Acting in customers’ best interest, including making the best execution on ad bids.
- Providing transparency to customers so that they can clarify they are acting in their best interest.
- Erecting firewalls to prevent abuse and conflicts of interest if allowed to operate on both sides of the market.
- Providing fair access to all customers concerning performance and information related to transactions, exchange processes, and functionality.
Potential Impacts on Big Tech
If the ‘AMERICA Act’ passes, big ad platform conglomerates like Google and Facebook may be required to divest large portions of their advertising businesses that facilitate a significant share of ad revenue.
For instance, Google owns both a supply-side platform (Google Ads Manager) and a demand-side platform (Google Marketing Platform). The proposed bill would require Google to divest portions of the company, so it cannot have ownership in both SSP and DSP. Amazon and Apple might also face divestment of their advertising businesses.
Microsoft declined to comment on the proposed impact on big tech and individual advertisers.
The Trickle-Down Effect on Advertisers
The proposed changes could have both positive and negative effects on advertisers. A forced business divest could lead to additional opportunities for new ad platforms to emerge, potentially benefiting advertisers through diversified advertising reach and lower CPCs, resulting in greater marketing efficiency. Improved transparency reports from the companies are another potential positive impact of the bill.
However, Google’s previous statement regarding the antitrust lawsuit suggests that the broader advertising sector could be negatively impacted, “making it harder for Google to offer efficient advertising tools that benefit publishers, advertisers, and the wider U.S. economy.”
The disruption of years of AI and machine learning development could hurt advertising performance in the short, long-term, or both if divested, sold, or transferred to other entities.
The ongoing battle against big tech continues to intensify with the newly proposed ‘AMERICA Act’ legislation. The line between government involvement in public entities such as Google, Facebook, Amazon, and Apple is becoming increasingly blurred.
The timeline for the review and potential implementation of the ‘AMERICA Act’ remains uncertain, as proposed legislative bills can take weeks, months, or even years to be reviewed. The priority of this bill in Congress is currently unclear.
Nevertheless, the potential implications of the ‘AMERICA Act’ cannot be ignored. Advertisers should remain vigilant and be prepared for possible changes in the digital advertising landscape. The bill’s passage could lead to a more diverse and competitive market, but it may also result in short-term disruptions to advertising performance due to the divestment of key components of big tech’s advertising businesses.
As the situation evolves, it will be crucial for advertisers to stay informed about the ‘AMERICA Act’ and adapt to any changes that may arise from its implementation. This could involve exploring alternative advertising platforms, adjusting strategies to capitalize on new opportunities, and monitoring the performance of their advertising campaigns closely.
In conclusion, the ‘AMERICA Act’ represents a significant development in the ongoing struggle between big tech and government regulation. While the ultimate outcome and effects of the bill remain to be seen, advertisers should be prepared for potential changes in the digital advertising landscape and adjust their strategies accordingly. We will continue to provide updates as more information becomes available.