ACCC: Google and Facebook are “unavoidable business partners”
Unsurprisingly, the consumer watchdog found that Google and Facebook wield substantial market power in these areas. Google handles 94 per cent of online searches in Australia, and Facebook and Instagram, which is owned by Facebook, have by a significant margin the largest audience in Australia of any social platform.
This translates to market dominance in online search advertising and display advertising, respectively. According to the report, 96 per cent of search ads are purchased through Google and displayed on its own search site. Meanwhile, Facebook and Instagram together account for approximately 46 per cent of Australian display advertising revenue. No other website or application has a market share of more than 5 per cent.
While it is not illegal for businesses to out-compete their rivals using superior skills and efficiency, the ACCC noted that firms with substantial market power could still damage the competitive process by restricting their rivals’ ability to compete, rather than offering a more attractive product.
In the case of Google and Facebook, for instance, businesses and consumers may simply put up with issues like the lack of transparency around advertising effectiveness and use of personal data because there are no good alternatives.
As the ACCC wrote in its report, the “widespread and frequent use of Google and Facebook means that these platforms occupy a key position for businesses looking to reach Australian consumers… Google and Facebook are critical and, in many cases, unavoidable business partners.”
Jonno Rodd, head of marketing at online homewares retailer Hunting for George, echoed this sentiment.
“They’re tools, and we’re going to keep using them as long as they have value,” he told IR.
Indeed, the NSW Business Chamber submitted a response to the ACCC, which is included in the report, saying that Google and Facebook have largely had a positive impact on businesses that advertise on the platforms.
According to the NSW Business Chamber’s survey of its members, 71 per cent had utilised digital platforms to advertise and indicated digital advertising had positively affected their business, with 62 per cent of respondents indicating digital advertising had increased customers, 43 per cent indicating it had increased sales and 34 per cent indicating it helped reduce costs.
But according to the ACCC report, several key stakeholders have complained about ad verification and ad fraud on Google and Facebook, since the digital platform providers measure the performance of their own products and restrict independent parties from verifying these measurements.
The report noted that Google and Facebook have rejected claims that their advertisements are not verifiable. But while some companies such as Nielsen do offer third-party verification, they rely on data provided by Google and Facebook to do so.
The report also noted that consumers have raised concerns about the extent and range of information collected by these platforms, which could include online browsing behaviour across the internet, IP addresses, device specifications and location and movement data. Google and Facebook use this data to build detailed segmented user profiles, which advertisers use to target their campaigns.
According to Rodd, these profiles are what makes digital advertising on Google and Facebook so powerful, but he acknowledged that it presents a “grey area” for retailers, when it comes to the privacy of their customers.
The ACCC has provided a set of preliminary recommendations to address its concerns and identified areas for further analysis. It is now seeking feedback from stakeholders by February 15, 2019 before it issues a final report.