Drastic changes are on the cards for India’s advertising sector if the Digital Competition Bill, currently undergoing public consultation till 15 May 2024, becomes a law. The proposed legislation aims to regulate how large digital enterprises conduct business, targeting practices such as self-preferencing allied products and services and the use of customers’ personal data without their knowledge. But in doing so, the DCB risks upending India’s thriving Rs 576 billion digital advertising industry.

A fundamental flaw of the DCB is that it conflates advertisers, publishers, and third-party ad solution providers as a single entity under the umbrella term ‘advertising services’. This broad categorisation overlooks the distinct nature of these services, leading to the oversimplification of a very complex digital advertising ecosystem. For instance, the DCB fails to differentiate online search and display advertising despite their disparate nature. Search advertising appears as text ads in search engine results, while display advertising includes ads that appear on apps and websites, often relying on more sophisticated tools compared to search advertising. 

Recognising this, antitrust authorities in France and the United States take a nuanced approach when delineating search and display and advertising segments, acknowledging factors such as reach and capabilities.

Moreover, the DCB may throttle targeted advertising due to prescriptive requirements for user consent for data usage, hampering its effectiveness. Millions of enterprises of all sizes rely on user data to sell goods and services that now fall within the scope of the DCB, which may throttle this ecosystem and hamper the effectiveness of advertising. Businesses will need to obtain explicit user consent before they process their data to personalise and target ads. 

This obligation may partially venture into the personal data jurisdiction, which is already regulated under the Digital Personal Data Protection Act 2023 (DPDP Act). In the absence of any reference to the DPDP Act, the DCB fails to clearly establish the manner in which this consent must be obtained. This lack of alignment and the resulting ambiguity may complicate compliance efforts by businesses. 

Weighing down new businesses

Many emerging Indian businesses are actively developing their own advertising services to compete with established industry giants such as Meta, Google, and Amazon. Innovative new media and social media ventures are developing ad solutions to enhance resilience and self-sufficiency by building their own tailored offerings. These ventures may be focused on developing internal capabilities or creating entirely new business verticals focused on ad solutions.  

But the DCB’s broad scope extends beyond businesses whose core function is advertising encompassing players developing ad solutions as an ancillary service too. While the Bill may intend to rein in advertising giants, it risks weighing down new businesses with regulatory hurdles.

Finally, digital ads offer a compelling value proposition for micro, small and medium enterprises (MSMEs) in India that often run on tight budgets. MSMEs spend as little as Rs 20,000 annually to reach their target audiences efficiently. Restrictions on certain types of data usage without user consent will hamper publishers’ ability to accurately value their ad inventory and advertisers’ marketing of their products effectively. While DCB intends to foster a fairer market environment, it might unintentionally reinforce the position of large enterprises with larger user bases, potentially stifling opportunities for MSMEs to grow.

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Way forward 

The Indian digital ads market is likely to grow by 15 per cent to Rs 842 billion by 2025. But this represents just a fraction of the potential of the digital economy. 

Interference with the advertising ecosystem could undermine the overall digital economy. Ours is an emerging market where average revenues per user are relatively low compared to developed markets. Take video streaming apps for instance — most offer multiple options for viewing, including ad-led, subscription, and hybrid packages because of consumers’ varied price sensitivity. India was also the first country in the world where premium services like Netflix began to offer cheaper subscription plans for mobile users.  

Digital advertising serves as a vital tool for businesses of all sizes to reach their target audiences cheaply. Rather than restricting them, policymakers ought to focus on the development of transparency standards that help both publishers and advertisers see how ads perform.  

The display ad market could also benefit from greater standardisation because publishers often struggle to gauge the value of their ad space, while advertisers may face fewer difficulties in ad placement decisions for display ads. Interactive Advertising Bureau (IAB), a US-based research-driven standards-setting body, developed the Open Measurement standards that enable the accurate and consistent measurement of digital ad performance to help publishers. Our local counterpart, Bureau of Indian Standards, may similarly lead the way in developing standards specific to India’s market dynamics.   

Digitalisation is meant to level the playing field between large corporations and small businesses, and ad services contribute to this endeavour. Big businesses have big advertising budgets, but smaller or newer companies need sophisticated ad services to compete with the help of curated ad campaigns. Popular global apps, for instance, already have access to troves of user data and are able to deliver hyper-targeted ads. Policymakers must reconsider these sweeping rules that will stymie smaller entities, innovation in the ads market, and digitalisation’s whole promise.

The authors work at Koan Advisory Group, a technology policy consulting firm. Disclosure: Koan Advisory serves as the secretariat for the MPAI. Views are personal.

This article is part of ThePrint-Koan Advisory series that analyses emerging policies, laws and regulations in India’s technology sector. Read all the articles here.

(Edited by Humra Laeeq)