Stop digital ad market practices from eroding ‘quality of information’

There is an urgent need to improve the health of the digital advertising market, which has been increasingly dominated by giant information technology companies. An effective framework should be put in place to correct market distortions.

The government’s Digital Market Competition Council has compiled its final report on online advertising. The government brought a new law into force in February calling for giant IT companies engaging in online shopping and other businesses to be more transparent about their transactions.

In the final report, the council proposed adding digital advertising as a target of the new law.

The final report indicated a policy of requiring these firms to report the status of their operations to the central government on a regular basis and urging them to increase the transparency of their transactions, including how they set advertising fees. The government intends to consider concrete measures for that purpose and put rules on the issue in place as early as next spring.

The domestic digital advertising market soared to about ¥2.2 trillion last year, accounting for nearly 40% of all advertising due to its rapid growth. As a result, there has been growing criticism over the lack of transparency in transactions. It is only natural for the government to increase its surveillance.

Giant IT companies, such as U.S. powerhouses Google LLC and Facebook Inc., provide users with free services like search and social media.

In return, they collect vast amounts of users’ personal information, such as preferences and hobbies, and harvest huge profits from other companies by distributing “targeted advertising” based on the information.

Advertising revenue increases the more consumers are interested and the more clicks the ads get. The system sometimes creates a situation in which websites dealing with provocative topics and fake news with false content can be more profitable than those featuring reliable news.

It is reasonable that the report first expressed strong concern about the degradation of “quality of information,” and then pointed out that advertisers should select media organizations that provide quality information and develop methods to distribute ads.

Another problem is the complicated structure in which it is difficult for advertisers to know when and where their ads are posted. A company’s image would be damaged if its ads were placed on a website that is spreading false information.

In March, the advertising industry, giant IT firms and others set up a new organization to check the actual status of content distribution. IT companies, which have already become important infrastructure for people’s lives, need to be aware of the importance of their responsibility and work with the advertising industry to make efforts to create healthy markets.

The report also called for explanations for users about the handling of personal information. Under the new law, the government intends to ask IT firms to disclose the scope, methods and status of management in terms of data collection, and to clearly state that users can refuse to have their personal information used for advertising purposes.

Many people find targeted ads annoying. Giant IT companies must be fully accountable to obtain the understanding of users.

— The original Japanese article appeared in The Yomiuri Shimbun on April 28, 2021.