Ad Industry Fear of Google Briefly Confirmed as GDPR Starts

(Bloomberg) -- For months before European data-privacy laws came into effect, Google’s rivals fretted that the search giant was poised to benefit at their expense. On the first day operating under the new rules, that concern was briefly warranted.

Europe’s General Data Protection Regulation requires companies to gain consumer consent for data they collect and use, including the cookies that track where people go online and enable billions of dollars in targeted ads.

Alphabet Inc.’s Google captured a larger share of European digital ad spending on May 25 after sowing doubt among some marketers about other providers.

Last week, Google told clients of its ad-bidding service to be cautious about some of the third-party companies that offer marketing tools or track users online. Google noted that it couldn’t verify all companies in the complex digital advertising market had got user consent. The new law includes steep fines for violations, so the industry is treading carefully.

One result of that early on: More ad money flowed through Google. The company runs the largest machinery behind automated and targeted online advertising, software called DoubleClick Bid Manager or DBM. It has spent more than a year preparing for GDPR, updating more than 12 million contracts and alerting its own users. Marketers and ad agencies can use DBM to purchase ads with Google or with smaller firms, like AppNexus Inc. and Rubicon Project Inc.

Two days before the law went into effect, European advertisers sent about half of their marketing money through DBM to Google, according to AppNexus. On Friday, day 1 for GDPR, about 95 percent went to Google.

That dramatic shift reversed after the weekend. By Tuesday, an AppNexus spokesman said that ad spending had returned to the pattern seen before GDPR. Google verified on Tuesday that AppNexus has taken the right steps to comply with the new rules, the spokesman also noted. That likely calmed advertisers’ concerns.

Rubicon said it was recovering from "short-term disruption" in European sales, sending the company’s shares up 2.2 percent to $2.35 on Tuesday.

AppNexus, along with some media groups, have criticized Google for placing the onus of obtaining consumer consent on publishers and other website providers -- and waiting too long to draft its policies.

"Google has a ton of leverage. They’ve been kind of ridiculous about how they approached it," AppNexus Chief Executive Officer Brian O’Kelley said in a recent interview.

“The GDPR is a big change for everyone. Over the last year, we’ve engaged with over 10,000 of our publishers, advertisers and agencies across nearly 60 countries through events, workshops and conversations around the changes we’re making to be compliant with the GDPR," a Google spokeswoman said. "We will continue to open our doors to our publisher partners to engage in these discussions on GDPR compliance.”

Some in the industry have worried for months that GDPR would inadvertently help Google and Facebook Inc. box out rivals further. The two control more than three-quarters of digital advertising and have the cash to pay lawyers for compliance steps and handle any fines. Smaller ad firms, which provide alternative services for marketers to target ads, have less financial muscle.

Last week, Google sent out a video internally congratulating thousands of staff who worked on GDPR preparations. Advertising chief Sridhar Ramaswamy and general counsel Kent Walker featured in the clip. One of the main messages: GDPR is the type of complex problem that Google excels at by having experts in different disciplines collaborating.

The law could provide convenient cover for Google and Facebook to hide more of its measurement data from others in the industry, Harry Kargman, chief executive officer of ad firm Kargo, said before GDPR kicked in. With their massive audiences, most advertisers will have no choice but to continue using Google and Facebook, he added.

Some publishers stopped running automated digital ads altogether when GDPR began on Friday, industry news website Digiday reported. Some ad exchanges, which automatically match buyers and sellers of marketing slots, saw demand from Europe drop as much as 40 percent, according to Digiday. "Anybody who feels good about it is either a monopoly or a liar," O’Kelley said.

The Google spokeswoman said the company has worked with ad exchange partners "to develop an interim solution to minimize disruption." The internet giant is integrating its ad systems with an industry framework that will standardize how to get the right consent from European consumers, she added.

Google attempted to calm publishers on Thursday. Bonita Stewart, a Google vice president, wrote that the company would have an option for publishers to use its services to deliver personalized, and more lucrative, ads to people by June, according an email obtained by Bloomberg News.

Still, several media groups found Google’s offering inadequate. A trio of publishing organizations sent a blistering statement on Friday morning about GDPR.

"Google is effectively putting a gun against publishers’ heads," the statement said. "This is a flagrant abuse of their dominant position."

To contact the reporter on this story: Mark Bergen in San Francisco at mbergen10@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Alistair Barr, Andrew Pollack

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