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Google, Facebook defend ad models as calls for regulation grow in UK

Alphabet Inc.'s Google Inc. and Facebook Inc. defended their digital advertising businesses in the U.K. amid calls for a level playing field from a regulatory perspective between online platforms and more traditional forms of media.

Pressed by the U.K. Parliament's House of Lords Communications Committee on the scores of industry intermediaries and hidden costs in programmatic advertising, the unprecedented surge in ad fraud, its questionable metrics and poor viewability plaguing the market, executives at the two California-based giants argued Dec. 19 in favor of programmatic's speed and efficiency.

"I think it is fair to say there is a murkiness, opaqueness around the digital supply chain in some areas," Ed Couchman, director of agency partnerships at Facebook, told officials.

That said, he argued Facebook was on "solid ground," noting that around 99.6% of all ads on the platform are seen by human beings.

Although programmatic advertising has been largely hailed for providing speed and efficiency, scrutiny of its shortcomings, particularly rampant fraud, is at an all-time high. Illegitimate traffic, generated by clicks from bots and other automated software, is expected to cost brands an estimated $16.4 billion globally this year, a joint study by fraud detection firm Adloox, WPP Plc-backed The&Partnership and its media arm m/SIX revealed.

Despite this, Adam Cohen, Google's head of economic policy for Europe, the Middle East and Africa, insisted the current model is not broken, adding that the tremendous growth of online and digital advertising reflected "a market that's functioning very well."

The executives also suggested programmatic's ability to measure the performance of ads in granular detail had ultimately outweighed concerns.

"The unique selling point of programmatic advertising is that essentially it is using technology to automate the digital advertising purchase process in real time, at scale [and] in a very open, transparent way," argued Michael Todd, Google's head of advertising industry relations.

As a result, he noted that publishers such as the New York Times Co. recently set up all of its ad formats to transact programmatically while News Corp. rolled out a global programmatic advertising exchange this summer.

Their comments follow a string of complaints over fake news and extremist content on social media and online platforms, which pushed British media watchdog Ofcom into affirming it is primed to regulate internet companies.

Questioned about whether Google and Facebook should be regulated in the same manner as traditional media, Simon Milner, Facebook's policy director for the U.K., the Middle East and Africa, said it would be wrong to regulate and penalize Facebook for content that violates its own global community standards.

"We are not accountable in the traditional way such as the BBC or ITV but ... we are not waiting for legislators and regulators to find this perfect form of regulation that can work well for a platform like ours to address the areas of concern," he said.

Addressing anti-trust concerns, the tech companies insisted that the market was far from a duopoly, despite their dominance.

Between them, the two California-based giants captured 20% of global ad spend across all media in 2016, up from 11% in 2012, according to media agency Zenith. Having fast emerged as the industry gatekeepers, Google and Facebook accounted for 64% of all growth in ad spending between 2012 and 2016, the firm said.

"There are a lot of enormous players in this space," Cohen argued.

He added that his company competes with Amazon.com Inc., Snap Inc., Adobe and Oracle in the adtech space, News Corp. following the launch of its online programmatic ad exchange and large media agencies such as WPP Plc and Publicis Groupe SA.