High-speed trades. Exchanges. Brokers. Auctions. Floors. Ceilings. This is the language of Wall Street – and has become the language of ad tech, an industry on the cusp of major change because of a new bill in Congress, the AMERICA Act.
But let me back up.
A hammer is about to fall
The famous financial center in Lower Manhattan is the stuff of legend. But thanks to films like “Boiler Room,” “The Big Short,” “Wall Street” and many others, the average American knows a bit about the inner workings of investing and more than a bit about the heroic highs and villainous lows of big finance.
Those lows are, more often than not, linked to the ways unscrupulous players bend (or break) SEC regulation. So, most people realize that common sense rules for the financial market have been around for nearly a century, put in place shortly after the stock market crash of 1929 spawned The Great Depression.
What most of the public does not know, unless it’s how they make their living, is that the language of Wall Street is also that of another marketplace where billions of trades are made every day: digital advertising.
However, with the exception of relatively recent privacy regulation in certain US states and abroad, this marketplace largely operates without rules from governments or industry.
Though that may be about to change.
Growing awareness
From social media to email, apps, streaming video and audio, and news and information of all kinds, advertising is an integral part of the digital ecosystem. Yet while advertising is woven into everyone’s digital lives, most people have only a vague idea of how it works.
In barely three decades, digital advertising quickly evolved into a high-speed marketplace in which myriad pricing, placement, targeting and auction levers are pulled in milliseconds, as we go about our digital and physical lives. This is a market trading more than $250 billion of advertising per year, executed almost entirely by machines, while fortunes are won and lost.
For those who read Michael Lewis’s book “Flash Boys,” which looks at the impact of algorithmically driven high-frequency trading on the investing market, some of these plot points will sound eerily familiar.
The difference, of course, is that while there may always be those who seek to game the system, investing and finance operate within a clear, rule-based structure. And there is a recourse system in place for those who believe they have been wronged.
From lawsuits to regulatory action
Until quite recently, the digital advertising marketplace has been allowed to develop largely untroubled by industry oversight or government regulators. As such, a single company – Google – has grown to either control or heavily influence the technology used to buy, sell and trade in upwards of 95% of the advertising on the internet.
In a landmark antitrust lawsuit filed in 2020, state attorneys general drew parallels between digital advertising and Wall Street. In January 2023, the United States Department of Justice Antitrust Division used the same analogy as it called for the breakup of the search giant’s ad tech business to address its alleged illegal abuses and conflicts of interest due to its monopolization of large swaths of the digital advertising market.
But it was Google’s own employee who first vividly illustrated the issue: “[T]he analogy would be if Goldman or Citibank owned the NYSE,” as these lawsuits quote a senior Google executive.
Current regulatory scrutiny has moved beyond lawsuits, however.
Brokers beware
This week, bipartisan legislation was introduced by Senator Mike Lee (R-UT), which would guide the market by eliminating conflicts of interest and increasing transparency among buyers and sellers to make this kind of abuse of market dominance a thing of the past.
This common sense legislation has the support of Amy Klobuchar (D-MN), Elizabeth Warren (D-MA), Ted Cruz (R-TX), Richard Blumenthal (D-CT) and Josh Hawley (R-MO), among others. When a group of lawmakers this ideologically diverse collectively endorses legislation, we should take notice.
Aptly dubbed the AMERICA Act, this legislation would reinforce the basic free market principles of competition and transparency without creating unnecessary regulatory friction. As any American can understand and support, it simply introduces plain language to require transparency, promote competition and reduce obvious conflicts of interest.
For brokers conducting more than $5 billion in trades per year, the AMERICA Act states that they must abide by some basic rules. In other words, if you’re a buy-side broker bidding on advertising, then you have a responsibility to your advertising clients to act in their best interests.
And if you’re a sell-side broker auctioning off advertising, then you have a similar responsibility to your media clients to secure the most revenue for them. This, in turn, helps keep prices down for consumers and protects their privacy in the process.
Plain language legislation
The AMERICA Act also addresses the kind of unfair market dominance that harms the health of the digital ad industry. If a broker transacts more than $20 billion per year of digital advertising, then they would simply be prohibited from operating on both sides of the market.
This legislation codifies what even Google’s own employees seem to realize: It is an obvious conflict of interest to be the largest broker on the buy side of the auctions, the largest broker on the sell side of auctions and have the largest volume of advertising and revenues in the auctions.
A healthy digital advertising marketplace is essential to a dynamic and vibrant digital landscape. The Department of Justice understand this. A bipartisan group of state attorneys general understand this. And now, given this plain language legislation, America understands it.
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
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