ONLINE VERSUS OFFLINE ADVERTISING - On the advertiser side, it is important to know whether a separate market has to be defined for, respectively, online and offline advertising and if so, whether a further distinction must be made between, for example search and non- search advertising. The European Commission has consistently held that online and offline advertising do not fall within the same relevant market.377 In its Google/DoubleClick merger decision, the Commission explained that online advertising has several characteristics that distinguish it from offline advertising. First, online advertising is capable of reaching a more targeted audience in a more effective way. On the internet, an advertiser can choose to display an advertisement to a particular group of users. In offline advertising, advertisers cannot target their audience as precisely as in online advertising by combining information available about the user’s interests and preferences. Second, the measurement of the effectiveness of online advertisements is more precise compared with the systems available in offline advertising. In online advertising, advertisers can check how many users have viewed or clicked on their ads which enables them to retarget advertisements if necessary. The third distinguishing factor is the pricing mechanism applied to online advertising. Whereas offline pricing is estimated on the basis of general criteria, online advertising is paid on the basis of the exact number of users that viewed or clicked on the ad. The traditional offline media do not allow for such a precise connection between the reach and cost of the ad.378
376 Chinese Supreme Court in (2013) C3FJ4, Qihoo/Tencent, 16 October 2014, (G)(2). 377
See Case IV/JV.1 – Telia/Telenor/Schibstedt, 27 May 1998; Case IV/M.1439 – Telia/Telenor, 13 October 1999; Case COMP/JV.48 – Vodafone/Vivendi/Canal Plus, 20 July 2000; Case No COMP/M.4731 – Google/
DoubleClick, 11 March 2008; Case No COMP/M.5727 – Microsoft/Yahoo! Search Business, 18 February 2010
and Case No COMP/M.7217 – Facebook/WhatsApp, 3 October 2014, par. 79. 378
101
FURTHER MARKET SEGMENTATION - In the merger cases Google/DoubleClick,
Microsoft/Yahoo and Facebook/WhatsApp, the Commission discussed whether potential
submarkets could be delineated within the broader online advertising market. A market for intermediation in online advertising was defined in Google/DoubleClick which separates ‘direct sales’ from ‘intermediated sales’ by publishers of web space to advertisers.379
In the context of direct sales, advertisers and publishers negotiate the sale of online advertising space directly. Intermediated sales, on the other hand, are sales which require the involvement of an advertising platform which acts as intermediary matching advertisers and publishers by acquiring a publisher’s web space through syndication agreements and filling this space by
379
Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 68.
Google/DoubleClick merger decision:
At the time of the proposed concentration, the two parties were engaged in the following relevant activities. Google operated an internet search engine, offered online advertising space on its own websites and provided intermediation services to publishers and advertisers for the sale of online advertising space on partner websites through its AdSense network. DoubleClick was mainly active in the sale of ad serving, management and reporting technology worldwide to website publishers, advertisers and advertising agencies.
The Commission’s market investigation pointed out that Google and DoubleClick were not exerting a significant competitive constraint on each other’s activities. Therefore, the merger did not seem to significantly impede effective competition with regard to the elimination of actual competition. While it could not be excluded that DoubleClick would, absent the merger, have developed into an effective competitor of Google in the market for online ad intermediation, it was rather likely in the Commission’s view that a sufficient number of other competitors would be left in the market. As a result, sufficient competitive pressure would remain after the merger. On this basis, the Commission concluded that the elimination of DoubleClick as a potential competitor would not have an adverse impact on competition in that market.
The Commission also analysed the potential effects of non-horizontal relationships between Google and DoubleClick. Concerns expressed by third parties involved foreclosure scenarios based on DoubleClick’s market position in ad serving, foreclosure scenarios based on Google’s market position in search advertising and online ad intermediation services, and foreclosure scenarios based on the
combination of DoubleClick’s and Google’s databases on customer online
behaviour. The Commission found that such types of foreclosure would be unlikely to occur. Even if such scenarios did occur, they would not result in a significant impediment to effective competition according to the Commission. With regard to the possible combination of data of Google and DoubleClick after the merger, the Commission stated that this would be very unlikely to bring more traffic to AdSense so as to squeeze out competitors and ultimately enable the merged entity to charge higher prices for its intermediation services.
Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 4-5, 192, 221-222, 278, 286-289, 329-332, 356-366.
102
searching for interested advertisers. In Microsoft/Yahoo, the Commission left the exact product market definition with regard to intermediation open as the transaction would not raise any serious doubts under any alternative market definition.380 Since online advertising intermediation results in the display of advertisements on third party web pages instead of in the search results of the search engine platform, it will not be considered here further.381 Within the market of online advertising, a distinction can be made according to the way advertisements are selected to appear on a user’s screen (search or non-search ads) and their visual appearance (text or display ads).382 Both correspond to some extent in the sense that search ads tend to be almost exclusively text ads, whereas non-search ads can be either text or display ads.383 In Google/DoubleClick, Microsoft/Yahoo and Facebook/WhatsApp, the
Commission did not have to decide whether separate relevant markets existed for respectively search and non-search advertising, since the transactions reviewed in the three cases would not raise serious doubts as to the compatibility with the internal market under any of these market segmentations.384
SEARCH VERSUS NON-SEARCH ADVERTISING IN GOOGLE/DOUBLECLICK - In
Google/DoubleClick, the Commission found that search and non-search advertising may exert
some degree of constraint on each other from the perspective of the advertiser. The essential difference between the two types of advertising for advertisers is the way of targeting. While for search ads the targeting is based on the exact intent of the user that it revealed by entering the search query, for non-search ads the targeting is based on more general criteria such as the context of the visited web page and the geographical location of the user. Although search and non-search ads thus have different appearance and targeting properties, the Commission argued that from the advertiser’s point of view they can be considered substitutable to a certain extent on the ground that the differences of technical nature and aims are diminishing. In particular, the ability of non-search ads to target relevant users is improving and the use of search ads for building brand awareness is increasing.385 However, from the publisher’s point of view the distinction between the two types of online advertising is more clear. When a publisher decides to allocate space on a web page to a non-search ad, it cannot replace this space by selling search ads, since the latter only appear on a new web page generated by the search query which does not form part of the publisher’s content inventory. For this reason, the Commission concluded that search and non-search ads have to be considered as
complementary in the perspective of the publisher.386 Although the Commission considered that search and non-search ads are substitutable on the demand side, supply side
interchangeability thus seems more questionable.
380 Case No COMP/M.5727 – Microsoft/Yahoo! Search Business, 18 February 2010, par. 83.
381 Only if direct and intermediated sales of online advertisements impose competitive pressure on each other should intermediation be taken into account in the competition analysis of search engines. See also footnote 349. 382 Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 48.
383 Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 14.
384 Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 56 and Case No COMP/M.5727 –
Microsoft/Yahoo! Search Business, 18 February 2010, par. 75. With regard to the online advertising
intermediation market defined in Google/DoubleClick, the Commission also left open whether this market could be subdivided according to whether the intermediation concerns search or non-search advertisements (Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 70-73).
385 Case No COMP/M.4731 – Google/ DoubleClick, 11 March 2008, par. 50-53. 386
103
SEARCH VERSUS NON-SEARCH ADVERTISING IN MICROSOFT/YAHOO -In Microsoft/Yahoo,
Microsoft argued that search advertising is a separate product market, because the format and pricing of search ads is different, it is purchased by advertisers for different purposes than non-search advertising and search advertising is sold through an auction system which is not the case for other types of online advertising. The results from the market investigation were mixed in the sense that not all respondents confirmed the arguments submitted by Microsoft as reasons for making a distinction between search and non-search ads. A number of
responses even highlighted a degree of convergence between the two types of online
advertising.387 Since the transactions in both Google/DoubleClick and Microsoft/Yahoo would not raise serious doubts as to the compatibility with the internal market under any further market segmentation, the Commission could leave the exact product market definition open. SEARCH VERSUS NON-SEARCH ADVERTISING IN FACEBOOK/WHATSAPP - The Commission left
the scope of the relevant market open for the same reason in its Facebook/WhatsApp decision. However, the Commission did make clear that the market investigation supported to a large extent the existence of a sub-segmentation of the online advertising market between search and non-search advertising. The majority of the advertisers who took part in the market investigation considered that search and non-search advertisements are not substitutable because they serve different purposes. While search ads mainly serve to generate direct user traffic to a merchant’s website, non-search ads are primarily used to build brand awareness.388 Since the Commission left open whether a further sub-segmentation between online search and online non-search advertising was appropriate in the Google/DoubleClick,
Microsoft/Yahoo and Facebook/WhatsApp mergers, future cases have to point out whether
separate markets are to be defined for search and non-search advertising. If it is found that both types of online advertising fall within the same relevant market, Google and to a lesser extent Amazon, as providers of search advertising space (in this context Amazon’s e- commerce platform can be regarded as a vertical search engine competing with Google for attracting advertisers interested in displaying ads in or alongside search results), and
Facebook, as provider of non-search related advertising space, would be competing with each other which would reduce each of their market power.389 From the public statements made in press releases in the context of the Google case, it seems that the Commission is taking the view that online search advertising constitutes a relevant market of its own. For example, in a 2013 press release the Commission stated: ‘Google also has a very strong position in the
market for online search advertising’.390 The definition of separate relevant markets for
387 Case No COMP/M.5727 – Microsoft/Yahoo! Search Business, 18 February 2010, par. 63-74. 388 Case No COMP/M.7217 – Facebook/WhatsApp, 3 October 2014, par. 76.
389
F.THÉPOT, "Market Power in Online Search and Social Networking: A Matter of Two-Sided Markets", World
Competition 2013, vol. 36, no. 2, (195), p. 214.
390 Press Release European Commission, ‘Antitrust: Commission seeks feedback on commitments offered by Google to address competition concerns’, 25 April 2013, IP/13/371, available at http://europa.eu/rapid/press- release_IP-13-371_en.htm.
104
search and non-search online advertisements is in line with the approach taken by competition authorities in other jurisdictions.391
ONLINE ADVERTISING SECTOR INQUIRY OF THE AUTORITÉ DE LA CONCURRENCE -In its sector
inquiry into the online advertising industry in 2010, the Autorité de la concurrence concluded that search advertising constitutes a separate relevant market on which it found Google to be dominant. The substitutability between search and non-search ads was considered to be relatively limited mainly because of the more precise targeting possibilities of search
advertising.392 In the Navx case, the Autorité de la concurrence had already stated that online search-based advertising is likely to constitute a separate relevant market within the broader sector of online advertising.393 Both in the Navx case and in the sector inquiry, the Autorité de la concurrence refers to the US Google/DoubleClick merger decision in which the Federal Trade Commission defined separate relevant markets for search and non-search advertising by arguing that ‘advertising space sold by search engines is not a substitute for space sold
directly or indirectly by publishers of vice versa’ because ‘the evidence shows that the sale of search advertising does not operate as a significant constraint on the prices or quality of other online advertising’.394 In the view of the Autorité de la concurrence, Facebook may improve its ability to target advertisements by relying on user profile data in the future, but at the time of the sector inquiry the targeting of profiles of social network users could not be regarded as an alternative to search-based ads. The reason given for this was that
advertisements on Facebook do not satisfy active queries of users but are rather used for branding campaigns based on ‘likes’ by users.395
SEPARATE MARKET FOR SOCIAL NETWORK ADVERTISING?- Although leaving open whether
potential sub-segmentations of the relevant market for online advertising can constitute relevant markets in their own right, the Commission examined in Facebook/WhatsApp whether a separate relevant product market should be defined for the provision of online non- search advertising services on social networking sites. This would mean that within a
potential relevant market for online non-search advertising a further segmentation is made between online non-search advertising on social networking sites and online non-search advertising on other websites or platforms. The results of the market investigation were mixed in this regard. While a number of respondents considered that other forms of non-search
391 T.H
OPPNER, "Defining Markets for Multi-Sided Platforms: The Case of Search Engines", World Competition 2015, vol. 38, no. 3, (349), p. 361 even argues that a potential market for online search advertising should be divided further in a relevant market for horizontal and a relevant market for vertical search advertising. 392
Autorité de la Concurrence, Avis n° 10-A-29 du 14 décembre 2010 sur le fonctionnement concurrentiel de la publicité en ligne, par. 137-194 (with regard to market definition) and 224-269 (with regard to Google’s dominance).
393
Autorité de la Concurrence, Décision n° 10-MC-01 du 30 juin 2010 relative à la demande de mesures conservatoires présentée par la société Navx, par. 124-130, French version available at
http://www.autoritedelaconcurrence.fr/pdf/avis/10mc01.pdf.
394 Statement of the Federal Trade Commission, Google/DoubleClick, FTC File No. 071-0170, 20 December 2007, p. 3, available at http://www.ftc.gov/system/files/documents/public_statements/418081/071220googledc- commstmt.pdf as referred to in Autorité de la Concurrence, Décision n° 10-MC-01 du 30 juin 2010 relative à la demande de mesures conservatoires présentée par la société Navx, par. 130 and Autorité de la Concurrence, Avis n° 10-A-29 du 14 décembre 2010 sur le fonctionnement concurrentiel de la publicité en ligne, par. 109.
395 Autorité de la Concurrence, Avis n° 10-A-29 du 14 décembre 2010 sur le fonctionnement concurrentiel de la publicité en ligne, par. 167-170.
105
advertising are not as effective as advertising on social networking websites, other
respondents took the view that many other advertising platforms offering non-search ads are equally well-placed to serve non-search needs.396 In a US private competition case against Myspace, the plaintiff alleged a relevant market for ‘advertising on Internet-based social networking sites’ arguing that there are no good substitutes because: ‘Such sites offer
advertisers the unique ability to tap into user-generated content and to establish “buzz” about their products through word of mouth as users comment upon and share the advertising with others, essentially integrating an advertiser's message into the rumor mill’.397 Since the Court for the Central District of California considered that there was no anticompetitive conduct and causal antitrust injury, it could leave open whether this market definition was adequate.
MOBILE VERSUS PC-BASED ADVERTISING - While leaving open whether the market for online
advertising should be segmented between mobile and PC-based advertising, such a potential sub-segmentation has been considered by the Commission in a number of merger cases. In
Microsoft/Yahoo, the Commission examined whether mobile search advertising should be
distinguished from PC-based search advertising. In that regard, the market investigation had revealed that a majority of the respondents did not consider mobile search advertising as a separate relevant market even though it presents some distinguishing technical and
commercial features in terms of the size of the ads and the appropriateness of location-based advertising.398 In the context of the setting up of a joint venture in the United Kingdom involving Telefónica, Vodafone and Everything Everywhere, the Commission assessed whether mobile online (search or non-search) advertising accessed on a mobile handset such as a smartphone and a tablet constitutes a product market separate from static online (search or non-search) advertising accessed through desktop or laptop computers. The Commission argued that these two types of online advertising currently present significant differences, which may diminish at some point in the future, but left open whether a distinction should be made.399 In Facebook/WhatsApp, the Commission noted that the results of the market
investigation as regards a possible segmentation between online advertising on PCs and mobile devices were mixed. While some respondents highlighted the differences between advertising on different platforms in terms of technical characteristics, user experience and ad profitability, other respondents submitted that they are essentially substitutable.400