Another step in the hunt for digital awareness: preliminary report on the online advertising sector inquiry

New development

Technology and the internet have gained a significant role in our lives, and the advertising sector has adapted to the change from traditional to online platforms. Meanwhile, undertakings have switched to more consumer-oriented, accurate and targeted options to implement successful marketing strategies. On 7 April 2023, the Turkish Competition Authority (“ Authority “) published its preliminary report on its online advertising sector inquiry (“ Report “) (you may find the Authority’s announcement (in Turkish) with the link to the Report here ). The sector inquiry was initiated on 12 January 2021, in order to assess national and international developments in the online advertising sector, while identifying behavioral and structural competition law concerns with the search for possible solutions as policy changes and regulations. You may find our previous legal alert on the previous announcement here .

What do the developments mean?

The Report is another indicator of the Authority’s increased awareness of the digital markets, and its goal of adapting to global developments, especially in the EU, in a swift and accurate manner. Hence, the Authority is already on the hunt for digital awareness, with its recently published reports on Financial Technologies in the Payment Services Sector Inquiry, the E-Marketplace Platforms Sector Inquiry, investigations concerning digital markets, and revised merger control regime with the “technology undertakings” definition to not to lose sight of acquisitions in tech-focused markets. This most recent preliminary Report reveals the Authority’s main findings and also seeks the public’s opinion until 7 July 2023 regarding the findings, assessments, or policy recommendations of the Report.

Main findings of the Report

The Report provides the Authority’s insights on many segments within online advertising activities. Findings and recommendations from the Report are summarized below:

• Importance of the online advertising sector
  • The Authority underlined the fact that as of 2021, online advertising has become the most important form of advertising, having surpassed traditional advertising’s share in ad expenditures.
  • Advertisers can efficiently track the output of their marketing strategies with online tools in online channels.
  • Although the ads seen in different online channels such as online search engines, social media, and in-app ads are all considered “online advertising,” they form parts of separate types of advertising strategies with specific purposes.

• Dynamics and competitive structure of the online advertising sector
  • The Report provides that offline and online advertising are not interchangeable, and therefore constitute two separate markets.
  • The Report first segmented online advertising into three main sub-segments: (i) search-based advertising, (ii) visual advertising and (iii) listing advertising by assessing the interchangeability between the three. Then, it assessed the competitive structure within the sub-segments of these markets, such as mobile advertising, video advertising, social media advertising, advert advertising, etc.
  • Visual advertising was found to be the most important advertising segment with the highest expenditure share within the online advertising sector, and the Authority further delved into its sub-segments. For example, social media advertising’s importance within the overall visual advertising segment is also underlined, since it was found to provide the most amount of information on individuals’ preferences for targeted advertising purposes as users’ preferences, networks, etc.
  • Each of the important online advertising tools and algorithms are assessed within the Report, with explanations on questions such as what an “Ad Exchange” is or how advertising undertakings make use of “Supply Side Platform,” “Demand Side Platform” and “Data Management Platform” algorithms. Consequently, important digital platforms’ activities are monitored and explained.
  • “Data” is a quite important input for any of the segments within the online advertising sector. Targeted advertising activities and therefore related algorithms require a significant amount of data to provide accurate, efficient outputs, while a significant portion of users are unaware of the privacy-related risks. Therefore, there is a notable privacy concern within the sector. In this respect, the Authority underlines the importance of establishing an optimal balance between the benefits and harms of targeted advertising for social welfare.

• Important takeaways from the Report

The Report provided important takeaways, which are briefly described below:

• The conflict between the vertically integrated advertising technology providers’ own interests in their services and the interests of their clients — since these providers can both serve advertisers and publishers — can lead to competition law concerns.
• The Authority is constantly monitoring the tying, self-preferencing and leveraging related concerns, parallel to the other competition authorities’ stance globally.
• Transparency is described as a supply chain issue in advertising technology. The Authority provides that: (i) advertisers and publishers may not have sufficient information on the supply chain, and therefore may be unaware of the difference between the advertisers’ payment and publishers’ earnings; (ii) the complexity of biddings/auctions in the advertising technology supply chain makes advertisers and publishers dependent on advertising technology providers’ strategies regarding inventories; and (iii) there are concerns about whether advertising technology providers prevent independent parties from measuring the performance of their services. The Authority aims to regulate these concerns with its upcoming legislative changes in Law No. 4054 On the Protection of Competition.
• Digital platforms are inevitable commercial partners of news publishers due to the important role they play in news content delivery to readers. According to the Report, this situation may lead news publishers to unconditionally accept every term offered by these digital platforms and lose their fundamental income model, i.e., advertisement-based income.
• Data is a critical source for accurate, targeted advertising strategies. Therefore, undertakings shall not obstruct third-party service providers’ access to users’ data to restrict competition.

Conclusion

Once again, the Report demonstrates the importance the Authority gives to digital platforms and its aim of aligning with the EU approach. The final conclusions of the Authority are still subject to changes, considering that the Report is still in its preliminary stage, and demonstrate fundamental issues to which the Authority clearly seeks solutions. From now on, digital platforms’ strategies in the online advertising sector shall emphasize compliance even more.