DSA and DMA: What digital advertisers should know about the EU’s attempt to regulate the internet

Lawmakers from the EU are taking on Big Tech in an epic wrestling match to define the rules of engagement for… the Internet, really. Bring the popcorn and ready yourself with our take on some of the most interesting things you as an advertiser should look out for.

At the end of 2020 the European Commission presented two proposals for a new set of rules for the digital market that will replace the eCommerce Directive from 2000 and potentially revolutionise and reshape the industry. Needless to say, a lot has happened in the past 20 years. Back in 2000 Google was nowhere near as big as now and Facebook didn’t even exist. Today these online platforms are almost synonymous with the Internet, making a new set of rules essential and sparking a discussion about what their roles and responsibilities should be.

The proposed legal framework consists of two parts, the Digital Markets Act and the Digital Services Act. Together they aim to create a ‘fair’ and transparent digital market for both online platforms and the companies that use those platforms for advertisement of their products and services. In addition, they also aim to ensure safety and fundamental rights for users online. That is a mission which is hard to condemn, but how are they approaching this massive task and how is it going to affect the digital market?

We have dissected the more than 200 pages of legal documents and gathered, in our opinion, some of the most interesting points from an advertiser’s perspective to look out for as the European Parliament, the Member States and lobbyists across the continent start discussing the proposal.

Digital Markets Act:

In general, this part of the new legal framework aims to set up a unique set of rules for the biggest tech companies – or gatekeepers as they are referred to in the proposal.

1. Good news for small businesses

If you are a business owner who relies on services and platforms provided by one of the GAFA, the Big Four (or 5 if you include Microsoft), the new rules should mostly be good news for you.

a) The EU seeks to enable businesses to get access to more information on how their products or services are performing when selling via third party platforms (think Amazon and Google Shopping).

b) If you offer your products or services via an app and currently find yourself competing against e.g. Google and Apple in their own app stores, there’s plenty of good news for you to get excited about: no more unfair ranking of gatekeepers’ own services and products. Same goes for pre-installed apps on your phone. The EU also wants gatekeeper hardware companies (e.g. smartphones) to be obliged to ensure free choice for end users, when it comes to software applications and services by removing artificial technical barriers that prevent a user from switching to a different service or app. Enough(!), says the EU.

2. More transparency for advertisers

The EU wants to force gatekeepers to make advertising more transparent for users and businesses alike. One of the articles in the Digital Markets Act proposes that gatekeepers shall provide greater transparency to advertisers and publishers alike. Information such as the price paid by the advertiser and the amount paid to the publisher for the publishing of an ad and for the advertising services that the gatekeeper provides shall be made available.

However, this price transparency will not in itself give the advertisers more opportunities and power. The effect of this initiative will more likely be determined by consumer preferences and the potential emergence of new platforms that can compete with the gatekeepers to provide consumers with alternatives. In plain English: Advertisers will advertise where their users are, regardless of the potential shortcomings or lack of transparency of said platform. So to establish a real alternative to advertisers, users would need a compelling alternative to e.g. Instagram to move over. Until then, advertisers are still left with no choice but to buy ad space on the gatekeepers’ platforms.

If you are interested in learning more about the EU’s not-so-hidden agenda to establish EU based competitors to the established tech leaders (all outside of the EU), check out this short interview with Macron.

Digital Services Act

Still with us? Good! Next up, the Digital Services Act.

The Digital Services Act is the second half of the proposal and is probably best described as the EU rulebook for online intermediary services, which is pretty much every type of online platforms or services you can think of e.g. social media platforms, cloud services and collaborative economy platforms. So this is an attempt to introduce a greater level of scrutiny and monitoring of the conversations that take place online.

1. Increased online advertising transparency

One of the articles we are most interested in is about how online platforms must ensure that the users are provided with “meaningful information” on why they are seeing a particular ad, who paid for the ad and that it is in fact… an ad. To be clear, users can already access this information on e.g. Facebook and Google, so it will be interesting to see if the EU will demand the platforms to be even more visible about it or maybe showcase even more information.

We know from the GDPR that transparency does not automatically mean more empowered users and consumers. It does mean more cookie banners, more information and slightly less spam mail, but you would still need to set aside a day per week if you wanted to actually understand which permissions you are giving which services that you may choose to use on a day to day basis. We still think there is a lot to be done to communicate in a meaningful way, so it will be interesting to see whether that is something that can be regulated. There’s a fine line between useful information and information overload.

2. Online content moderation

The Digital Services Act includes provisions to counter illegal content online, both through proactive response from online platforms and content flagging by users. Creating a safer Internet and a safer advertising space is beneficial for all parties, yet the risks of censorship can’t be dismissed. There is a chance that online platforms might apply a “better safe than sorry”-approach out of fear of not being compliant, e.g. by removing content that was not actually illegal, not to mention the potential consequences of having private companies act as censors. Nor should the risk of compromising the very appeal of platforms that exist solely thanks to user generated content. We go to YouTube, to “Broadcast” ourselves and experience others doing the same, influencers, celebrities, politicians and production studios alike – often in real time, as major events unfold. More scrutiny and censorship means a more reactive approach to content moderation. For advertisers, this holds great promise in terms of ensuring a safer brand environment, but there is also a real risk of users moving elsewhere, if they feel the process of getting content uploaded and approved becomes too tedious.

3. The big online platforms shall keep your ad-data for one year

The proposal suggests that “very large platforms” shall keep a repository of information (e.g. content, when ad was displayed, number of recipients of the service reached) on ads served for 1 year AND make it publicly available.

The Commission’s goal is to “facilitate supervision and research into emerging risks brought about by the distribution of advertising online, for example in relation to illegal advertisements or manipulative techniques and disinformation with a real and foreseeable negative impact on public health, public security, civil discourse, political participation and equality”. This would enable supervision and independent research to be conducted in the advertising industry, which could help to reach and maintain a safer advertising space for all actors involved.

Conclusion

Despite this ambitious agenda aiming as far as to set a world standard, the epic wrestling match between the EU and Big Tech is far from over. The proposals will likely see significant changes and it may take years before they are actually adopted. You’ll need to keep an eye out for updates impacting advertisers but one thing seems certain: the advertising landscape as we know it today may very well change. For the better, we think.

Read more to learn about how you can employ Precis services to prepare for upcoming regulations and changes in the industry.