Don’t Try to Regulate Google Ads

Senator Mike Lee of Utah is poised to enact legislation banning Google and other tech giants from building and operating digital ad exchanges that own tools to help buyers and sellers of ads. online. Not only is this bad policy, but it is also based on the false premise that the advertising market is similar to the stock market.

Behind the proposed legislation is the argument, made by some legal scholars, that Google manipulates the advertising market in ways similar to insider trading or pre-managing the stock market. If the New York Stock Exchange cannot both operate the stock exchange and participate in it, it is argued that Google should not be allowed to do the same in its advertising exchange.

But ads aren’t stocks, and their inclusion leads lawmakers astray.

Back in the 1990s, buyers and sellers of online ad space used direct sales teams to negotiate deals, the same way they did for television commercials or billboards. That process is expensive and inefficient, with a lot of space going unsold or at sky-high sales prices. Google and others have revolutionized the marketplace by developing exchanges that hold real-time auctions for all available ad space.

This process has brought countless benefits to both the seller and the buyer of the ad. Online advertising has flourished and prices have dropped. This means more revenue for all types of websites, as well as increased ability to effectively reach customers for manufacturers.

As the online advertising business boomed in the 2000s, the companies operating the exchange began to provide tools for buyers and sellers. If you run a small website, fully integrated advertising agencies like Google will help you sell ad space. If you’re offering a product, they’ll help you optimize your advertising budget.

If Google offers a bad deal, advertisers or publishers can choose from a variety of full-service advertising agencies run by familiar names like Amazon.,

Facebook,

Microsoft and Verizon.

In effect, the marketplace allows buyers and sellers to compete in many different auctions simultaneously.

Even the French competition authorities admit that the online advertising market is highly competitive. However, some critics have warned of a conflict of interest, such as a company like Google that operates an exchange and advises buyers and sellers on that exchange. (Google also participates in these markets as an ad buyer and seller.) But there is nothing unusual or special regarding a company operating a fully integrated marketplace, as long as there is competition.

For example, art auction houses provide tools for buyers and sellers and even bid in the auctions they hold. These roles could theoretically create a conflict of interest, but the threat of competition would ensure that competitors have an incentive to maintain a reputation for fair dealing, pricing and good service. If Sotheby’s fails to do so, buyers and sellers will look to Christie’s, and vice versa.

Furthermore, the analogy with securities regulation is inconsistent. The stock market is strictly regulated because of its distinct characteristics. Conventional investors saving for retirement can be vulnerable to scams. Since stock prices are the future, bubbles occur and can cause widespread economic damage when they burst. Regulation helps ensure accurate stock prices, which in turn determine the allocation of capital across the economy.

None of these concerns are present in the advertising market. Google may be similar to the New York Stock Exchange in that both use servers to process transactions, but there is one key difference. An auction for an advertisement takes place over a separate period and the winner is determined last. In the stock market, the fastest trade has an advantage. In the advertising market, everyone who submits a bid has an equal chance.

Another important difference is that a company like Google is interested in maximizing fairness for its advertising business in a way that doesn’t exist on the stock market. Google makes most of its profits from search, where it operates as a publisher that sells ads, not from running exchange ads or providing tools for buyers and sellers. The search business depends on an open Internet, rather than the walled gardens of social networking apps. Search businesses, in turn, rely on fast-loading websites with user-friendly experiences. As a result, Google has every incentive to create advertising experiences that deliver value to buyers, sellers, and Internet users.

This focus on providing value to the end user is the insight of the Chicago antitrust school, which conservatives like Senator Lee have used to seek economic insight. By making an inappropriate analogy with the stock market, Senator Lee’s bill sends us back to a less productive era.

Mr. Henderson is a law professor at the University of Chicago.

Wonderland: When progressives start using phrases like mismanagement and gender abuse, it’s hoped they aren’t shocked that some people think they’re being hyped up. silent. Image: Getty Images / Bettman Composite: Mark Kelly

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https://www.wsj.com/articles/dont-try-to-regulate-google-ads-legislation-online-advertisements-regulation-websites-money-11652732802 Don’t Try to Regulate Google Ads

Alley Einstein

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