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New US Senate bill might push Google to break up ad business

The bill would prohibit companies processing more than $20 billion in digital ad transactions annually from participating in more than one part of the digital advertising ecosystem

A bipartisan group of US senators have introduced a bill that, if it becomes a law, would require Google to divest its majority of ad-tech business. The bill “The Competition and Transparency in Digital Advertising Act” was introduced in order to bring regulation and transparency to the online ad business. 

As first reported by the Wall Street Journal, the bill would prohibit companies processing more than $20 billion in digital ad transactions annually from participating in more than one part of the digital advertising ecosystem.

According to the bill, if it is passed then no business with more than $20 billion in digital ad revenue can own a digital advertising exchange if it also owns a demand-side platform (DSP) or sell-side platform (SSP), or if it also sells digital advertising space. Such a business cannot also own both a demand-side platform and a supply-side platform. 

This development will have direct implications on Google’s ads business. In Q1, Alphabet reported $68.01 billion in revenue. Out of which, $54.66 billion was generated by advertising. 

Commenting on the development, in a statement, Google spokesperson Julie Tarallo McAlister said the proposed law would eventually hurt users. “Advertising tools from Google and many competitors help American websites and apps fund their content, help businesses grow, and help protect users from privacy risks and misleading ads.” 

McAlister further said, “Breaking those tools would hurt publishers and advertisers, lower ad quality, and create new privacy risks. And, at a time of heightened inflation, it would handicap small businesses looking for easy and effective ways to grow online.”

If the bill is implemented, then Meta would likely have to divest large portions of its ads operations as well. 

The bill has also proposed that companies that process at least $5 billion of ad transactions every year would be required to provide transparent pricing and act in their customers' best interests. 

The bill addressed charges made in a 2020 antitrust lawsuit against Google filed by more than a dozen state attorney generals, led by Texas Attorney General Ken Paxton. The suit claimed, “Google misled advertisers and publishers for years about the pricing and processes of its ad auctions.”

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