Google dominates the digital advertising industry and needs to be reined in, the Australian Competition and Consumer Commission (ACCC) has warned.

The ACCC handed down the findings of its digital advertising services inquiry today, setting its regulatory sights squarely on Google as the key powerbroker in the ad tech supply chain.

“Google has used its vertically integrated position to operate its ad tech services in a way that has, over time, led to a less competitive ad tech industry,” ACCC Chair Rod Sims said in a statement.

“This conduct has helped Google to establish and entrench its dominant position in the ad tech supply chain.”

Display advertisements – the kind you see when visiting a website or playing video content – were the key focus of the ACCC inquiry.

Specifically, it looked at how these ads are bought and paid for using automated digital technology.

The system typically sees online publishers – be they news sites, video hosting services, or mobile app developers – send a request to an ad server when users are active.

If the publisher has made a direct deal with an advertiser, the server delivers a relevant ad, otherwise the space goes to auction where multiple advertisers automatically bid against one another, vying for the attention of a user, based on who they are and what they are interested in.

Open display advertising is a major industry worth an estimated $2.8 billion in 2020 and takes place behind the scenes of nearly every corner of the commercial web.

Google is the main player in this advertising supply chain and was involved in 90 per cent of Australian digital advertising space traded this way last year, according to the ACCC report.

“Google’s activities across the supply chain also mean that, in a single transaction, Google can act on behalf of both the advertiser (the buyer) and the publisher (the seller) and operate the ad exchange connecting these two parties,” Sims said.

“As the interests of these parties do not align, this creates conflicts of interest for Google which can harm both advertisers and publishers.”

More transparency

The report made six recommendations, two of which call for Google to provide more transparency around how its data collection and server mechanisms function.

The ACCC also wants more specific powers to help it regulate the ad tech industry and would like to see industry develop standards around fees and service verification.

The ACCC said it is concerned a lack of competition, facilitated by Google’s dominance, has led to higher fees for advertising transactions, which could have the cascading effects of poor quality online content and consumers paying more for advertised goods.

Sims said the competition watchdog was also “considering specific allegations against Google under existing competition laws” and wanted to create a more competitive ad tech environment.

“Many of the concerns we identified in the ad tech supply chain are similar to concerns in other digital platform markets, such as online search, social media and app marketplaces,” he said.

“These markets are also dominated by one or two key providers, which benefit from vertical integration, leading to significant competition concerns. In many cases these are compounded by a lack of transparency.”

The ACCC has taken on the task of looking at how technology giants like Google and Facebook control online spaces and marketplaces in recent years.

Its landmark digital platforms inquiry led to the controversial News Media Bargaining Code which passed into law earlier this year, giving traditional news outlets the ability to bargain with Google and Facebook for their use of news content.

Update: a Google spokesperson responded to Information Age's request for comment, saying the company's ad tech services "are delivering benefits for businesses and consumers – helping publishers fund their content, enabling small businesses to reach customers and grow, and protecting people online from bad ad practices".