WTF is the Digital Markets Law?

Attempts to regulate the digital marketplace are a bit like alien life: it’s probably possible, but no one has actually seen it. The European Union’s Digital Markets Law (DMA) could settle the matter once and for all.

Which means that it is unlike any previous attempt to bring order to the market. While those attempts focused on symptoms of market imbalance, such as the General Data Protection Regulation’s attempt to give people back control over their personal data, the DMA focuses, or at least tries to, on the cause of this imbalance: the platforms. As encouraging as the WFD sounds, much will depend on the details: how specific the law is and how willing legislators are to enforce it in the spirit in which it is intended. Only time will tell.

So what are marketers to do now? At present, there is very little they can do. The DMA won’t arrive until October, and a draft won’t be ready before the end of the month. That said, it’s worth digging deeper into what’s been shared, given that European lawmakers hope to ratify the law before the end of the year.

WTF is the DMA?

In a nutshell, it is the ultimate set of pros and cons for companies operating in the digital marketplace across the European Union. Like the General Data Protection Regulation, these rules try to limit the market power of large online platforms that it calls “gatekeepers”.

However, unlike the GDPR, the DMA will not regulate the market broadly and will disproportionately affect small and medium-sized businesses, at least that is the plan. Instead, the DMA targets tech giants with market caps of €75. billion ($82.3 billion). For context: Facebook’s market cap is around $636 billion, and Google’s value is $1.9 trillion.

This approach is clear in the DMA’s plan to force the largest and most influential technology companies to allow their users to use other applications and services on their platforms. So someone with an Apple device could go somewhere other than the App Store, where developers pay a fee to the manufacturer, to download an app. With that, the competition between independent developer apps and Apple apps is really competitive. New entrants and underdogs will be able to make much more significant gains and play on a theoretically more level playing field with the tech giants.

This is fairy tale stuff for any company that doesn’t make tens of billions of dollars a quarter from digital technology. advertising. For years, the growth of these smaller companies has been hampered by how easy it has been for the larger ones to combine and cross-use user data from disparate parts of their business to sell targeted ads.

That is not allowed under the DMA.

Or, to put it another way, a gatekeeper’s ability to use location data to determine a person’s religion based on where they go to worship could be curtailed, a bitter pill for any tech giant CEO to swallow.

“It’s a progression,” said Farhad Divecha, CEO of digital marketing agency AccuraCast. “It appears to be much broader-based regulation in terms of the specific impact on tech giants than we’ve seen so far.”

Is there one part of the legislation that will be more important than others for the advertising industry?

It’s more about the sum of its parts, but some parts are more important than others. Take the fact that the DMA limits interoperability; Tech companies will no longer be able to share data between services without the express consent of the consumer. For example, Meta could have data sharing restrictions between Facebook and WhatsApp or Instagram.

No more using legitimate interests as a legal basis for intrusive profiling of people online.

Perhaps the most significant part of the DMA is the part that seeks to regulate discriminatory and “self-preferred” search rankings, data sharing, and portability. Essentially, it would block gatekeepers from using non-public data for both business users and end users. It is loosely worded (for now), and the DMA has hinted that it may assess the provisions of the article on a case-by-case basis. In a nutshell, this is the DMA’s attempt to prevent so-called gatekeepers from collecting data that other organizations cannot access.

It means advertisers don’t have to accept selective, and sometimes inaccurate, numbers from platforms based solely on their word. They can access more marketing and performance data about their customers and campaigns.

Is the reference to discriminatory and “self-preferred” search rankings bad news for Google and Amazon?

Could be. When the DMA relates to “self-preference,” it’s creating rules that prevent gatekeepers from giving their products preference in search rankings, said Tara Dezao, director of ad tech and martech product marketing at software company Pega. . For example, if someone searches for a digital assistant on Amazon, Dezao said the tech giant would be prohibited from treating Alexa’s product preferentially or differently from, say, Google Home or Apple HomePod in search results.

Should platforms be scared?

The DMA fines will have caught the attention of some CEOs of big tech companies. It would impose fines of 10% of global revenue and 20% for repeat offenders, a far cry from the cuts of up to 4% of global annual revenue that can be applied under the GDPR.

So is the DMA great for anyone not facing an antitrust lawsuit?

It’s too early to say for real certainty. After all, time and again regulation has been an enabler of big tech dominance, not an inhibitor of it. On the one hand, it is already clear how the DMA could bring back to life the competition in digital media that has been eliminated by consolidation. On the other hand, the DMA could do more harm than good.

Let’s say an iPhone owner starts downloading apps from alternative app stores; doing so could expose the device to greater risk of fraud, malware, and other issues that Apple’s walled-garden approach has been able to prohibit.

Similarly, the DMA promises tighter privacy controls for individuals by ensuring that platforms must obtain explicit permission from someone to use and/or combine their personal data for targeted advertising. That sounds great, but the other side of the coin could be an endless parade of opt-ins. “We are all tired of accepting cookies on every website we visit, this will only get worse and affect more touchpoints. We will choose again and again,” said Dezao de Pega..

‘Sigh’ – It’s hope that kills you.

In fact, it is. History shows us how these things go. Ever since Microsoft killed Netscape by bundling Internet Explorer with Windows, regulators have realized they need to use antitrust and competition laws to rein in big tech companies. The problem is that regulators cannot be seen to be stifling innovation, so they cannot act too quickly. At the time they act, the tech company is making so much money that it has hired a team of very expensive lobbyists to work in Brussels and Washington, DC, to limit the effect of any legislative changes or enforcement actions. At this stage, the technology company is also a publicly traded company with responsibilities to its shareholders to increase revenue.

“The tech giants have plenty of incentives and the wherewithal to find loopholes that allow them to do the bare minimum to comply, but not enough to effect change,” AccuraCast’s Divecha said.

In fact, there is a chance that the DMA will stifle competition, not encourage it. If platforms are encouraged to open up to smaller businesses, there is a chance that they will be incentivized to ensure those businesses survive at all costs. This dependency is the new monopoly opportunity of the future, and it is a larger-scale one because it intertwines the fate of the smaller companies with the fate of the platforms. Life after AMD may look like life before.

What does this mean for advertisers?

For starters, DMA could be a headache for any marketer that doesn’t have a diversified media plan or data strategies beyond the larger platforms.

They will have to learn to deal with more silos, further complicating an already complex job.

Of course, there are plenty of marketers already trying to address this issue given how fragmented tracking and profiling people at scale is becoming without third-party data, which in most cases is contained in third-party cookies. third parties. However, the DMA raises those stakes.

However, it’s not all doom and gloom for marketers. Marketers of specific apps, products, and services that have historically been constrained by the closed ecosystems employed by the larger platforms (think smaller messaging services, apps that compete with Google’s productivity suite, and platforms smaller ads) will have more parity with them.

The growth of their businesses will depend more on the strength of marketing than on the whims of the platforms.

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