A Blog by Jonathan Low


Jun 5, 2018

How Google Emerged As the Early Winner From the EU's New Data Privacy Law

Just as, in an earlier generation, the corporate mantra was that 'no one ever got fired for buying IBM,' so, in this era, the perception is that the very strengths which caused the EU to impose its new data privacy regs are actually reinforcing the advantages of the largest web giants the rules were designed to hobble.

The reason is that Google and Facebook have the resources to ensure compliance, a benefit most other competitors can not afford. Scale works for privacy as well as for piracy. JL

Nick Kostov and Sam Schechner report in the Wall Street Journal:

GDPR, the European Union’s new privacy law, is drawing advertising money toward Google’s online-ad services and away from competitors that are straining to show they’re complying.The reason: the Alphabet is gathering individuals’ consent for targeted advertising at far higher rates than competing online-ad services. The new law is reinforcing the strength of Google and Facebook.
GDPR, the European Union’s new privacy law, is drawing advertising money toward Google’s online-ad services and away from competitors that are straining to show they’re complying with the sweeping regulation.
The reason: the Alphabet Inc. GOOGL 1.59% ad giant is gathering individuals’ consent for targeted advertising at far higher rates than many competing online-ad services, early data show. That means the new law, the General Data Protection Regulation, is reinforcing—at least initially—the strength of the biggest online-ad players, led by Google and Facebook Inc.
Hundreds of companies along the chain of automated bidding and selling of digital ads—from ad buyers to websites that show ads—have been scrambling to comply with the law while continuing to target people based on the personal information such as web-browsing histories, offline purchases or demographic details.
Since the law went into effect, Google’s DoubleClick Bid Manager, or DBM, a major tool ad buyers use to purchase targeted online ads, has been directing some advertisers’ money toward Google’s own marketplace where digital-ad inventory can be bought and sold, and away from some smaller such ad exchanges and other vendors. That shift has hurt some smaller firms, where Google says it can’t verify whether people who see ads have given consent.
Google is applying a relatively strict interpretation of how and where the new law requires consent, both on its own platforms and those of other firms. The stringent interpretation helps Google avoid GDPR’s harsh penalties and pushes the company to buy more ad inventory from its own exchange, where it is sure to have user consent for targeted advertising.
Havas SA, one of the world’s largest buyers of ads, says it observed a low double-digit percentage increase in advertisers’ spending through DBM on Google’s own ad exchange on the first day the law went into effect, according to Hossein Houssaini, Havas’s global head of programmatic solutions.
On the selling side, companies that help publishers sell ad inventory have seen declines in bids coming through their platforms from Google. Paris-based Smart says it has seen a roughly 50% drop. Amsterdam-based Improve Digital says it has experienced a similar fall-off for ads that rely on third-party vendors.
“It’s still early, but we’ve seen an increase in volumes on Google’s platform and a decline overall,” said Luc Vignon of Regie 366, which sells advertising space for 12 groups of French regional newspapers and websites.
A Google spokesman says it has been working on interim solutions to “minimize disruption.” Google says it is showing nonpersonalized ads on websites that can’t prove they have users’ full consent and will deploy other workarounds until it fully joins a third-party system for websites to transmit consent, run by IAB Europe, an online-ad trade group.
Over the weekend, some bigger companies, including New York-based ad exchange AppNexus Inc. and French video-ad vendor Teads, said they have struck temporary deals assuring Google they have consent, so ad buyers could use DBM to purchase targeted ads from the companies again. The two companies said demand coming through their platforms from Google was almost back to normal this week after an initial disruption.
Brian O’Kelley, AppNexus chief executive, said he thinks Google’s conservatism on the issue of consent is justified. “If you’re big, you can’t take privacy risks,” Mr. O’Kelley said, citing the potential for enormous fines under GDPR. “I’m terrified because I have a real business to protect. So I’m not going to take privacy risks here.”
Google has been offering up about 15% fewer ads for bidding via its own ad exchange, but all of those ads have consent of end-users for targeting based on personal information, according to Dataxu Inc., a company that helps advertisers bid for ads.
By contrast, Dataxu says competing ad exchanges haven’t seen their ad volume fall significantly, but as of Wednesday two-thirds of their spots weren’t transmitting the consent Google says is necessary for targeting, Dataxu says. That means rival exchanges often can’t sell ads targeted with personal information, which often cost four or five times as much as traditional ads.
It’s a huge advantage for Google’s ad exchange if they maintain their very high consent rate and the others don’t improve,” said Bill Simmons, co-founder and chief technology officer for Dataxu, based in Boston.
Arndt Groth, president of mobile ad-exchange Smaato, said that with a smaller supply of targeted ads, their price is going up significantly. “It’s a pure supply-and-demand thing,” he said.
Facebook, the second-largest player in the digital-ad ecosystem, doesn’t play the same role as Google, which interfaces with many other ad-tech companies to place and measure ads across the internet. Instead Facebook mostly sells ads directly and places them through its own audience network. Facebook CEO Mark Zuckerberg last week indicated that his company has also had success gathering user consent for ad targeting under GDPR.
“The vast majority of people choose to opt in,” to see targeted ads on Facebook based on their use of other websites and app, Mr. Zuckerberg said at a tech conference in Paris.
Google and Facebook do face big legal risks from GDPR. Privacy activists filed lawsuits against the companies in recent days, over issues including how freely given users’ consent actually is.
Some online-ad companies say they have seen marketers shift ad money away from Google ad-buying tools to some smaller competitors that don’t demand explicit consent. That is possible because some publishers and companies, unlike Google, are relying on an alternate justification under GDPR called “legitimate interest,” which lets companies use personal information without asking for consent so long as they take other strict privacy measures.
Regulators have said, however, that relying on legitimate interest for online tracking for marketing purposes may not pass legal muster—and Google has avoided it.
“Others haven’t put as many restrictions on their buyers,” said Sebastiaan Moesman, chief executive at Improve Digital.


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