Legal Risks Could Shut Google’s Ad Tech Business In The Long Run, Says Tech CEO

Mountain View, California, USA - March 29, 2018: Google sign on the building at Google's headquarters in Silicon Valley . Google is an American technology company in Internet-related services and products.

The CEO of a media technology company has suggested Google may choose to discontinue its ad tech business in the long term, as privacy controls continue to pose a legal risk for the multi-billion-dollar company.

Polar CEO Kunal Gupta released his report on the state of digital media overnight, running through all things GDPR, Facebook, Google and others.

Among his insights, Gupta said the search engine giant’s $US7bn ad tech business “may not be worth the legal risk”.

He pointed out that while the business made up of DV360, Google Ad Manager and Exchange still has a 30 per cent margin, this is relatively low compared with the O&O business’s (search, YouTube, mail, maps) 87 per cent margin.

“Google may get out of the ad tech business long-term,” Gupta said.

“Regulatory and antitrust claims are heightening due to the role their Ad Tech stack plays in the wider industry.

“Google+ was shut down due to a data breach – not because it was not successful (it was still kept
around until it proved to be a liability). The Ad Tech business may have the same fate.”

This certainly will not be the case for search advertising, however, which has continued to grow despite some analysts predicting it to slow down.

According to IPG Mediabrands, Search as a whole has grown 17 and 20 per cent, with Facebook recently entering the market too.

Gupta also suggested Google’s current financial focus on Cloud Computing could be an indication it is moving away from ads to some extent.

In Google CEO Sundar Pichai’s latest earnings call he used the term “cloud” 30 times, compared to saying “ads” or “advertising” just 17 times.

What regulatory changes could mean

Despite predicting a potential shift in focus from the search engine company, both Google and Facebook are well placed to continue their success in digital media, according to the report.

In particular, recent legislative changes, such as the introduction of GDPR, look set to benefit these larger businesses in the long-term.

What is being labelled by some as the ‘death of the cookie’ means third-party data is difficult to acquire, while first-party data also presents challenges in itself.

Google and Facebook’s ‘deterministic data’ – users that are logged in to the site – gives these platforms a unique advantage, according to Gupta.

“We may look back in a few years and ask ourselves the question, ‘did Google and Facebook invent GDPR and CCPA?’. They clearly have the most to benefit,” he said.

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