Where Data + Digital Meet, Competition Is Fierce
As the digital advertising industry has grown, tech platforms have paved the way for data portability—ensuring consumers have control over their information and eliminating possible data bottlenecks.
— There is robust competition in the digital advertising space as new entrants join the ranks of competitors.
— The leading tech services have taken on a leading initiative to promote data portability, giving users the ability to transfer their data to rivals.
— With data portability and multihoming, data is not a barrier to entry for new companies or their new products.
There is robust competition in the digital advertising space as new entrants join the ranks of competitors.
Ad tech expert David Doty notes that leading tech services are actually attracting more competitors in the space. “In addition [to competitors like Adobe, Hulu, Roku, Salesforce, Snapchat, Viacom, Vox Media/Concert and many more], there is a burgeoning marketplace in smaller, niche offerings and a healthy startup environment, frequently led by executives who’ve left successful careers at larger digital advertising players. The list of startups would include Beeswax, BounceX, Celtra, Open Slate, Sprinklr, Yieldbot… and that’s just scraping the surface. One primary driver of the new entrants in ad tech is the ongoing revolution and ever-growing market in streaming video. Despite some of the bearish predictions, the ad tech industry is doing just fine. Odd as it may seem to some, the success of Google and Facebook has actually attracted many others to compete in ad tech.”
Startups and legacy companies alike are introducing new ad tech for both in-house marketing and for external advertisers. “[R]ecent advancements in advertising technologies provide a wide range of ad offerings that are both effective and affordable. The ad tech market has exploded with new innovations for advertisers to buy and deliver ads to customers. In particular, companies are creating new platforms for advertisers to reach their audiences; platforms are rolling out new ad tools that better appeal to customers; startups are using traditional ad formats to complement their digital campaigns.”
Highly productive digital advertising drives down costs, notes Michael Mandel of the Progressive Policy Institute. “We calculate, based on several assumptions, that for every $3 that an advertiser spends on digital advertising, they would have to spend $5 on print advertising to get the same impact. In the economic sense, digital advertising is more productive than print advertising. The benefits of these lower prices flow directly to advertisers and consumers.”
The leading tech services have taken on a leading initiative to promote data portability, giving users the ability to transfer their data to rivals.
Companies including Google, Facebook, Microsoft, Mastodon, Solid, and Twitter are working together on the Data Transfer Project. The initiative, which has since added Apple as well as smaller tech companies including Mastodon and Solid to its list of backers, aims to radically reduce the barriers preventing consumers from being able to transfer their data across platforms. The project aims to give consumers greater control of their data and “can make it easier for them to choose among online service providers.”
As a result of the Data Transfer Project, Facebook released a new tool to enable its users to transfer their Facebook photos and videos directly to other services. The feature was recently rolled out in the U.S. and Canada, and will begin with transfer options to Google Photos. As Facebook wrote in a post, “we believe that if you share data with one service, you should be able to move it to another. That’s the principle of data portability, which gives people control and choice while also encouraging innovation.”
For more than a decade, Google has invested in data portability. The company formed the Data Liberation Front in 2007 which accomplishes a dual objective: 1) give people greater control of their information, and 2) push Google to develop great products “because we know [users] can pack up and leave at any time.” In 2011, Google launched Takeout, now called Download Your Data, which lets users directly download a copy of their data and “transfer their information directly to their Dropbox, Box, MS OneDrive, and Google Drive accounts.”
Data portability efforts are also taking hold among academic researchers. MIT’s project, “Solid,” aims to create “decentralized social applications” that will allow individuals to move their information wherever they choose and “avoid vendor lock-in by seamlessly switching the apps and personal data storage servers, without losing any data or social connections.”
With data portability and multihoming, data is not a barrier to entry for new companies or their new products.
Economists Anja Lambrecht and Catherine Tucker highlight that substitutes to data exist and that insight into consumer needs is critical for success. “There are many alternative sources of data available to firms, reflecting the extent to which customers leave multiple digital footprints on the internet. In order to extract value from big data, firms need to have the right managerial toolkit. The history of the digital economy offers many examples, like Airbnb, Uber and Tinder, where a simple insight into customer needs allowed entry into markets where incumbents already had access to big data. Therefore, to build sustainable competitive advantage in the new data-rich environment, rather than simply amassing big data, firms need to focus on developing both the tools and organizational competence to allow them to use big data to provide value to consumers in previously impossible ways.”
John Yun of Antonin Scalia Law School pointed out at a 2018 FTC hearing on competition that big data in and of itself does not represent a barrier to entry for nascent competitors. “Certainly data is important, and you need it, but there’s a real question of how much you need it. For example, the nascent competitive threat story: If you need big data to be competitive, why are we ever talking about nascent competitive threats? They would never be a threat, they’d never have big data. They’re all nascent, they’re small. How could they grow up to be competitive? I reject that, I think we all would reject that story, so I think we have to be consistent and reject the story that big data, in of itself, insulates big firms from competition.”
Economist David Evans argues the prevalence of multihoming, and switching, undermines the claim that data provides a substantial barrier to entry. “The prevalence of multihoming, and switching between platforms is inconsistent with the claim that data provides a substantial barrier to entry. Time and again new platforms arise, with no data at inception, and acquire consumers and obtain data over time. That doesn’t mean that data isn’t valuable. It does strongly suggest that lack of data doesn’t pose significant obstacles to online platforms that develop valuable products that consumers like.”