Recently, with the fast development of the technology and the extensive use of communication tools and the internet, marketing strategies have also experienced a significant change. Traditional marketing methods have been rapidly replaced by online advertising.
Online advertising, which is a form of advertising that utilizes various internet-based channels, as a marketing strategy used on digital platforms to increase trademark popularity, promote sales and create consumer loyalty by engaging with the target audiences of the products and services of the businesses, has become one of the marketing channels to which the most resources are dedicated in terms of advertising expenses due to the high growth rate in recent years and the shift away from traditional advertising channels by the businesses. Indeed, various types of advertisements such as search engine ads, social media ads, banner ads, video ads and content marketing have enabled companies to establish a presence on digital platforms with more effective, targeted and consumer-oriented presence on digital platforms.
These rapid growth and developments in the industry, like in other competition authorities worldwide, have been scrutinized in our country. In the light of these developments, on January 21, 2021, a sector inquiry was initiated by the Turkish Competition Authority (“Authority”) in order to understand the structure and funtioning of the sector, identify any structural and/or behavioral competition issues in the sector, assess the adequacy of existing competition law tools in establishing effective competition in this field, discuss possible new tools related to this area, and develop solutions to competition issues.
On 7 April 2023, the Authority published its Preliminary Report on the Online Advertising Sector ("Preliminary Report"), a detailed analysis of the online advertising sector, evaluating the relationship between online advertising and traditional advertising, analysing the market competition in the Republic of Türkiye, analysing the technologies used in online advertising, analysing data, which is the most important factor for competition in the sector, and evaluating the competitive concerns in terms of advertising technology services.
The important points of the Preliminary Report are summarised below, which contain important findings, assessments and recommendations regarding the complicated concept and types of online advertising, the operation of the sector, identification of concentration in the relevant markets, and structural or behavioural issues in the relevant markets in terms of competition law:
- The Authority stated that the share of online advertising in total advertising expenditures has been increasing every year and that it has become the most important type of advertising, and that the mobile advertising channel has recently constituted more than half of advertisers' expenditures in online advertising.
- It has been revealed that the fact online advertising provides businesses with the opportunity to communicate directly with their target audiences with certain characteristics and interests, the ability to track the effectiveness of advertisements and to optimize advertising strategies with clicking rate, as well as conversion rate and other analytical data, has a significant and determining effect on advertisers' preference for these channels.
- It has been evaluated that there is no replacement relationship between online advertising and offline advertising, and that these two types of advertising constitute different markets.
- Even though all the advertisements seen on different online channels such as search-based, display, mobile, video, social media and classifieds are referred to as online advertising, it has been stated that they constitute different parts of advertising strategies with common or differentiated purposes and from this perspective, the substitution relationship between the three main subheadings of online advertising, namely search-based advertising, display advertising, and classified advertising, has been evaluated, and it has been concluded that there is no substitution relationship among them.
- It has been determined that video advertising is the online advertising type with the highest expenditure share in the sector, and by examining the advertisement sub-types within the scope of video advertising; it has been emphasised that social media advertising, which offers a more effective marketing experience by enabling consumers to meet with advertisements personalised according to their interests and preferences, has a very important place in the category of video advertising.
- Within the scope of the market concentration analysis in the Preliminary Report, it is concluded that despite the existence of many players in the online video advertising sector, the sector has a concentrated structure under the economic units of Meta and Google, and that Meta has a significant market power among these companies.
- The technologies used in the submission of video advertising services, which constitute up to 70% of online advertising expenditures, as well as the extent of competition in these technologies in Turkey have been analysed; and it has been evaluated that a competitive failure which may occur in the supply of online advertising technology services, taking into account the critical role of the technologies used, may cause damage to sector players and consumers.
- Due to the lack of transparency in the algorithms of channels and the absence of an monitoring mechanism, it has been evaluated that the lack of control over the performance measurement and pricing processes of advertising technology services creates a transparency concern in terms of the services received from platforms, within the framework of the statements of sector players that reporting tools created within their own systems and made available to publishers and advertisers are accepted with mandatory trust.
- The effects of platforms with high market stregth operating as an ecosystem have been analysed, and it has been stated that they strengthen their position in the market by making higher investments than their competitors because of their ability to collect two critical inputs when compared to other platforms: consumer attention and consumer data.
- The Preliminary Report also includes the findings of other competition authorities regarding online advertising technology services, and it is observed that the findings are similar on the current situation in the Republic of Türkiye.
- Within the scope of the sector inquiry, it was evaluated that the data collected from users is one of the most important datas for the online advertising sector, and the concerns arising from targeted advertising were stated, and it was emphasised that the collected personal data should be limited, privacy policies should be shorter and more clear, and steps should be taken to reduce privacy issues.
- The Preliminary Report also includes some of the competitive concerns in terms of advertising technology services. It is assessed that larger platforms operating on a vertically integrated system by buying smaller companies along the advertisement technology chain may lead to conflicts of interest, players with significant advertisement technology services in the market are in a different position from other vertically integrated advertisement technology services providers, and their behaviours that have the potential to reduce competition such as linking and preference practices may lead to effects which may reduce the competitive power of the competitors in the market, and the inability to verify and measure advertisements by independent service providers may prevent the competitors from competing in the market.
The Authority will gather findings, determinations, and evaluations from the public regarding the Preliminary Report until July 7, 2023 and based on the input received from the public, the Authority will prepare its final report.
Considering the advancements in technologies such as artificial intelligence and data analytics, it is anticipated that online advertising will continue to grow and evolve, revolutionizing the marketing world and enabling businesses to interact with their target audience more effectively. These developments are undoubtedly subject to examination by both competition authorities and data protection authorities, and it is evident that they will require detailed regulations.
First published by Legalink European Newsletter in Jun 16, 2023.