Sen. Elizabeth Warren, D-Mass., last week sent a letter to the agency that regulates commodity futures trading, arguing that it should extend its purview to online auctions for display advertising.
That way, the government could investigate Google’s role in the programmatic marketplace and possibly charge the company with manipulating ad prices.
While Google’s dominance
in the marketplace deserves scrutiny, Warren’s argument that display ads are commodities like bushels of corn or barrels of crude oil is flawed. Her understanding of the media marketplace
doesn’t fully consider how buyers and sellers do deals.
In her letter to Rostin Behnam, acting chairman of the Commodity Futures Trading Commission, Warren focuses on a secret Google
program called “Project Bernanke
.” The program, which was
described in an antitrust case against the company, allegedly gathered bidding data from Google’s AdX ad exchange and used the information to give its DV360 and Google Ads ad-buying systems an
advantage in online auctions for ad space.
Citing several laws that describe the mandate for the futures trading commission, Warren argues it has the authority to regulate goods and
services traded on exchanges. She also urges the commission to consider digital display ads as a tradable commodity, giving it jurisdiction to investigate Google.
with that argument is that display ads aren’t an interchangeable commodity whose value is solely based on price. When publishers sell ad space, they aren’t like farmers harvesting bushels
of corn that are all the same. Their audiences and content help to differentiate their ad inventories.
Publishers with premium content that’s appealing to high-value
audiences will command higher CPMs than a news aggregator whose content can be found anywhere else on the web. Advertisers want their brands to be associated with quality content that captures
people’s attention, whose supply is limited. All impressions are not created equal.
Another key difference between the marketplaces for digital display ads and
commodities futures is in their transparency. The prices of futures contracts are publicly available, though the identities of buyers and sellers are obscured.
In the digital
ad market, pricing information is jealously guarded by advertisers and publishers, though their identities are certainly evident when the ad appears. Any government agency that wants to probe
mispricing in the digital ad market is entering a thicket of confidentiality agreements.
Because of this secrecy, the digital ad market is more like private securities
exchanges called “dark pools” than the Chicago Mercantile Exchange for commodities futures. Many publishers sell their ad inventories through programmatic direct deals that don’t go
through real-time bidding (RTB) on open exchanges.
Private marketplaces (PMPs) also offer publishers a way to auction their premium inventories to an invited group of bidders. Amid this
complexity, it’s hard to see how display ads can be considered akin to commodity futures, as Warren suggests.