WTH, there's ANOTHER iceberg for digital media?

I’m Alan Chapell. I’ve been working at the intersection of privacy, competition, advertising, and music for decades, and I’m now a regulatory analyst writing for The Monopoly Report. I’m hosting another ASK ME ANYTHING standup session this Friday, Sept. 19, at 11:30 a.m. EDT.

The latest Monopoly Report podcast!

 This week, I welcome Tobias Judin, head of the international department at Norway’s Data Protection Regulator, the Datatilsynet (and representative at the European Data Protection Board). Toby and I talk about trust, (mis)aligned incentives, and consent in the European ads marketplace. We go deep on the challenges around pay or consent models for digital media in advance of the EDPB’s planned guidance on “PAY or OK” for the larger publishing industry. Will pay or consent save the publishing industry - or become another drag on data protection law?

How many icebergs can one industry withstand?

On Sept. 2, a class-action settlement was announced against Google in the Northern District of California in which the company agreed to provide hundreds of millions of U.S. consumers with a programmatic kill switch called an “RTB Control.” When enacted, the RTB Control will prevent Google’s auction from passing any pseudonymous UIDs downstream — effectively killing the auction.

If you thought DSPs were less likely to bid without a transaction ID, just wait until you see what happens to their interest when a percentage of bids don’t contain any pseudonymous UIDs.

What’s one more gambit amongst friends?

This article does a great job summarizing the terms of the Google settlement. My only quibble would be the reference to the settlement as a “gamble.”

Google doesn’t gamble. It doesn’t need to.

I’m not one to sound an alarm bell unnecessarily, but I also tend to operate under a few assumptions around here when it comes to Google:

1. Google always wins.

2. Google doesn’t typically agree to do something if it doesn’t want to.

3. There’s almost always a loophole.

With that in mind, I thought it might be worth thinking through the implications of this settlement. TL;DR: I’m of the mind that this has the potential to inflict more than a paper cut on the other participants within programmatic.

Is the RTB Control a big deal?

My first instinct was that this settlement isn’t such a big deal. I’ve run the settlement past a number of smart folks in the ads space. I even took a poll (you can still vote here). I’d say the general consensus is “meh.”

Here’s the case for all this not having much impact at all:

1. It’s opt-out: The RTB Control doesn’t get enacted automatically. Rather, users will have to visit a web page to turn the thing on. Who has time for such things? Historically, defaults rule. So if it’s defaulted to being off, there’s usually not much to worry about. Even if you use the stats provided by the plaintiffs, you’ll probably see 8% of the class actually enact the RTB Control. To be clear: It ain’t nothing, but it also isn’t necessarily world ending.

2. It’ll only hurt Google: A friend commented that the main effect of the RTB Control would be to “move market share to other ad exchanges.” I think that’s a valid perspective, but I also find it hard to believe that Google would enter into settlement that restricts its business practices when it probably could have just written a check.

3. Loopholes, Jedi mind tricks: Maybe Google won’t enable the RTB Control except for users who can demonstrate (e.g., by providing their drivers license) that they are part of the affected class. Whether real or implied, there are all kinds of ways to work around (and maybe even circumvent) these types of rules. Google is as good at playing this game as anyone. Just when you think Google might really be in trouble, it finds a trap door that nobody else sees. The bottom line is this: Google would just as soon not run the exchange if it were really planning on being subject to these rules.

And that, my friends, is the problem.

Here’s how this could be a huge deal

There are also a bunch of reasons why the RTB Control could potentially cause huge issues for programmatic down the road. None of the below will happen overnight, but each are certainly within the realm of possibility.

1. Copycat rule-making: Lawmakers and regulators have a tendency to copy each other’s ideas. For example, I continue to see portions of the GDPR pasted into privacy laws around the world. Once policymakers notice that Google has crafted an RTB kill switch, it won’t be very long before that kill switch gets pasted into someone’s law so that everyone has to live with these fun rules. Chances are, it’ll be done in a ham-fisted way that creates all kinds of unintended consequences.

2. If it becomes opt-in down the road: What’s worse, when the RTB Control goes live and regulators view it as some shiny new Do Not Track kind of tool… well, someone is going change the default requirements and want to make it opt-in. If that happens, then everything changes. Who could possibly do something like that? Well, the European Union certainly loves a good consent ruleset, and it has been playing around with the idea of streamlining consents for some time. Also, I wouldn’t rule out Google deciding to turn this on by default; there’s nothing like throwing one last grenade as it looks to exit the open web completely.

3. If Google is looking to push a % of inventory into the Privacy Sandbox: Remember back when Google made a dubious claim that competitive pressures were forcing it to deprecate third-party cookies in Chrome so that we’d all spend a percentage of our resources trying to work with their poorly conceived ad platform? Yeah, that was fun. My question: Does this settlement open the door to a meaningful amount of RTB traffic in AdX being pushed back into the Sandbox? Remember: The Sandbox tools operate without sharing UIDs. Seems more likely that the supply goes through other exchanges than the Sandbox. But again - I wouldn’t rule out Google coming up with a clever way to push at least some of it through Sandbox tools.

4. If Google is looking to deprecate its network business: I alluded to this in point No. 2 above, but the biggest risk materializes in the event Google looks to exit the network business entirely. In that light, Google’s recent comment (i.e., “the open web is fast declining”) comes off as a shot across the bow. The RTB Control is precisely the type of tool that Google could use to create havoc while it appeals a ruling from Judge Brinkema that it divest AdX.

I should note that this is only a proposed settlement. Google has apparently accepted it, but Judge Yvonne Gonzalez Rogers has not yet agreed. And the judge won’t even hear oral arguments on the settlement until next year. The terms could certainly change. And who knows? Google might not even be the owner of AdX by the time this settlement is finalized.

What do you think? Does the above seem plausible, or like science fiction? I’m clearly in the former camp. If you haven’t already, share your thoughts here or in the comments below.

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