The CMA’s study of the market has found that UK expenditure on digital advertising was around £14bn in 2019, equivalent to about £500 per household. About 80% of this is earned by two companies: Google and Facebook.

 Google enjoys a more than 90% share of the £7.3 billion search advertising market in the UK, while Facebook has a share of over 50% of the £5.5 billion display advertising market.

 Google’s revenue per search has more than doubled since 2011, while Facebook’s average revenue per user has increased from less than £5 in 2011 to over £50 in 2019.

CMA concludes that while the services provided by Facebook and Google are highly valued by consumers and help many small businesses to reach new customers, they have concerns about market dominance, including:

 Their large user base is a source of market power – it means that Facebook is a “must-have” network for users to remain in contact with each other, and enables Google to train its search algorithms in ways that other search engines cannot.

 Each has unmatchable access to user data, allowing them to target advertisements to individual consumers and tailor the services they provide. Specifically, the CMA is concerned that the inability of smaller platforms and publishers to access user data creates a significant barrier to entry.

 Both platforms use default settings to nudge people into using their services and giving up their data – for example Google paid around £1.2bn in 2019 to be the default search provider on mobile devices and browsers in the UK, while Facebook requires people to accept personalised advertising as a condition for using their service.

 Their presence across many different markets, partially acquired through many acquisitions over the years, also makes it harder for rivals to compete. The CMA cited a number of concerns, particularly from publishers, about the extent of vertical integration that has taken place in the open display market. While vertical integration can allow intermediaries to realise technical efficiencies, it can also give rise to conflicts of interest and allow companies with market power at one stage of the value chain to use it to undermine competition at other stages.

The report notes concerns relating to online platforms funded by digital advertising which can lead to wider social, political and cultural harm through the decline of authoritative and reliable news media, the resultant spread of ‘fake news’ and the decline of the local press which is often a significant force in sustaining communities. For online newspapers and other content providers, traffic from online platforms and revenue from digital advertising represents a vital part of their business. Problems in the search, social media or digital advertising sectors can dramatically affect their advertising revenues and reduce their ability to invest in news and other online content, to the detriment of those who value such content and to broader society. Publishers highlighted a wide range of other concerns, including restrictions on their ability to control their own content and data, to manage traffic to their websites and to target advertising; addressing these could make a vital contribution to the sustainability of news media in the country.

On the matter of the sustainability of high quality journalism, the report notes that publishers, including national and regional newspapers, have expressed a number of specific concerns to us about how this imbalance of bargaining power can manifest itself. One concern they have heard is that Google and Facebook are effectively able to ‘free-ride’ on publishers’ content to draw in consumers and catch their attention, then monetising by serving those consumers adverts. This has the effect of reducing the incentive of publishers to invest in producing quality content in the future.

PPA cited these issues when responding to the interim report published in February 2020. We welcome the CMA’s market study and findings in this latest report and recognise the need for a new regulatory framework to create a competitive level playing field and ensure fair value to publishers. We therefore intend to respond to the final report, calling on the government to act swiftly to implement these recommendations, highlighting that it could take years to set up a pro-competition regulatory regime and code of conduct for online platforms. PPA also intends to encourage the CMA to consider a full market investigation into the anticompetitive practises of Google and Facebook, which they expressly do not rule out in this market study report.

Other key takeaways from the report:

It proposes a new pro-competition regulatory regime so that users can continue to benefit from innovative new services; rival businesses can compete on a level playing field and publishers do not find their revenues unduly squeezed.

Under the objective of trust and transparency, the code could be used to investigate concerns around sudden algorithmic changes that have a material effect on traffic to newspapers and other content providers, and seek to ensure that adequate forewarning of material changes is given in advance. More broadly, the code could be used to investigate concerns around the relationship between search and web browsers and ensure that Google is not redirecting customers to its other services in a misleading manner

Within this a ‘Digital Markets Unit’ should:

 enforce a code of conduct to ensure that platforms with a position of market power, like Google and Facebook, do not engage in exploitative or exclusionary practices, or practices likely to reduce trust and transparency, and to impose fines if necessary.

 order Google to open up its click and query data to rival search engines to allow them to improve their algorithms so they can properly compete. This would be designed in a way that does not involve the transfer of personal data to avoid privacy concerns.

 order Facebook to increase its interoperability with competing social media platforms. Platforms would need to secure consumer consent for the use of any of their data.

 restrict Google’s ability to secure its place as the default search engine on mobile devices and browsers in order to introduce more choice for users.

 order Facebook to give consumers a choice over whether to receive personalised advertising.

 introduce a “fairness-by-design” duty on the platforms to ensure that they are making it as easy as possible for users to make meaningful choices.

 order the separation of platforms where necessary to ensure healthy competition.

The report concludes that weak competition in digital advertising increases the prices of goods and services across the economy and undermines the ability of newspapers and others to produce valuable content, to the detriment of broader society.

The CMA, working with the ICO and Ofcom, is also formally launching a Digital Markets Taskforce. Alongside this, they are inviting businesses who sell their products/services on online marketplaces to complete a questionnaire about their experiences of using such platforms. There is a separate questionnaire for businesses supplying services via Apps. The deadline for responses to both is 31st July.

The Taskforce will build on the conclusions of the market study, as well as looking more widely across all platforms to consider the functions, processes and powers which may be needed to promote competition. It will advise Government on how a new regulatory regime for digital markets should be designed. To inform its work, the CMA is publishing a call for information, and writing to a number of platforms, seeking views and information.

The Taskforce is required to give its advice to government by the end of 2020. PPA will work on a draft response to the Call for Information, which needs to be submitted by 31 July 2020.

PPA spokesperson said: “We welcome the CMA’s market study and this report. They have acknowledged many of the concerns of PPA and our members about the lack of transparency and competition in the digital advertising market, and dominance of two platforms. While we are still digesting the details of the 437 report, it is clear the CMA recognise the need for a new regulatory framework to create a competitive level playing field and ensure fair value to publishers. We support this core recommendation and urge the government to work swiftly to help restore balance in the marketplace.”