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May 13, 2022

Adtech: Regulatory trends

Advertising technology (Adtech) vendors have been forced to rethink their strategies due to the emergence of legislations such as the EU’s General Data Protection Regulation (GDPR). They must adopt privacy-first approaches and ensure that user data is not shared among partners.

Listed below are the key regulatory trends impacting the adtech theme, as identified by GlobalData.

Data privacy and adtech

Lawmakers, particularly in the EU, are taking greater action to curtail the power of Big Tech in advertising. The EU hopes to toughen the restrictions on personal data use for ad targeting through the Digital Markets Act (DMA). Members of the European Parliament voted in favour of amendments to the draft legislation to further scrutinise digital monopolies, like Meta and Google, for ad targeting. These have included stricter consent requirements for targeted advertising using personal data and the prohibition of processing personal data of minors for commercial purposes. The legislation, likely to come into force in 2024, will also target the use of personal data for political ads on social media.

Similarly, in the US, the California Consumer Privacy Act (CCPA) has directed publishers to allow consumers to opt-out of the ‘sale’ of personal information, including information gathered via cookies. It is also enforcing the Global Privacy Control (GPC). This browser setting allows users to notify advertisers if they want their personal information to be sold or shared. Publishers such as The New York Times and Washington Post have endorsed the GPC, but it has not been widely adopted yet. With more states enforcing CCPA-style regulations, adtech companies will increasingly be forced to seek users’ consent for targeted ads based on personal data.

Meanwhile, Big Tech companies such as Apple and Google are frequently updating privacy features on their services, following greater regulatory scrutiny. Advertisers will seek first-party data based on direct interaction with users and reduce dependence on third-party data.

Misinformation

Publishers like Google, Meta, Twitter, and Amazon have forged pure ad business models to collect, sell, and use personal data. Their so-called microtargeting practices use algorithms designed to improve the customer experience and more importantly generate profits. An investigation by Channel 4 News found that Donald Trump’s 2016 election campaign sought to deter 3.5 million black Americans in swing states from voting by deliberately targeting them with negative Hillary Clinton ads on Facebook. The European Commission is forcing Meta and Google to publish details on how they target voters with paid-for messaging or face fines.

The EU’s proposed regulation is likely to set an important precedent on regulating political ads, which is particularly problematic due to repercussions for freedom of speech. Ahead of the 2020 presidential election in the US, the likes of Facebook and Google stopped political ads from appearing, although that ban only lasted a couple of months. Countries worldwide will look to Brussels to tackle ad targeting as a serious aspect of misinformation during elections, including foreign governments using political advertising to sow dissent and distrust among local electorates. Regulators could decide to crack down on tech platforms’ ability to profile specific demographics. Should that happen, the advertising sector would lose a critical tool in its ad targeting campaigns.

This is an edited extract from the Advertising Tech (Adtech) – Thematic Research report produced by GlobalData Thematic Research.