The Corner Newsletter: November 3, 2022
Welcome to The Corner. In this issue, we use the Kroger-Albertsons merger to investigate the changing nature of online advertising, as powerful retailers move into the business of selling ads that target their own customers. And we call on the government to block or regulate Elon Musk’s seizure of Twitter.
How the new rules of online advertising helped to drive the Kroger-Albertsons Merger
Karina Montoya
The proposed merger of grocery giants Kroger and Albertsons, if approved, is likely to result in higher food prices for many Americans, more food deserts, and other well-documented harms to American society. But a less discussed matter is how a major shift in digital advertising may be helping to drive consolidation, with powerful retailers fast emerging as some of the biggest players in so-called retail media.
Under this model, chain stores and dominant online sellers exploit their control over key marketplaces to sell ads that target their own customers. Such retailers use their first-hand access to shopper data — also called first-party data — to sell ad spots on channels they directly own, and to sell shoppers’ profiles to manufacturers and other companies for use in advertising on other online sites and platforms. Amazon is one of the pioneers of this model, first moving into advertising in 2016 and earning $1.4 billion in its first year. This year, Amazon is on pace to make at least $37 billion in ad revenues. In all, retail media makes up 11% of total ad spending this year.
One reason for the rise of such ad systems is profit margins of 70 to 90 percent, which far exceed the 20-percent margins normally seen in the grocery sector, according to Boston Consulting Group. In this context, the Kroger-Albertsons deal would be the first big merger driven by the promise of making more money from digital ads. The new corporation would not only harness the power of their proprietary ad tech tools, but also the data coming from nearly 5,000 stores serving 85 million households. As one analyst told the Wall Street Journal, “It’s about building a retail media juggernaut.”
Under this model, corporations like Walmart or Target offer ad spaces tied to searches on their own websites. The retailers also allow advertisers to access their first-party data through demand-side platforms, which manage all audiences a brand wants to reach, and through sell-side platforms, which keep inventories of all possible places where brands can run ads online.
Kroger, for instance, set up Kroger Precision Marketing in 2018 to offer such services. Through it, the supermarket chain sells ad spots on its web properties, such as search engines, cash back pages, or email marketing. Additionally, Kroger sells audiences’ data to demand-side platforms through its Kroger Private Marketplace. To work with sell-side platforms, Kroger also launched an alliance with Magnite to channel shopper data for ads on TV streaming services. Albertsons began to offer such services last year when it launched Albertsons Media Collective.
Retail media is often portrayed by marketers as “an alternative” to the traditional services offered by the main two ad tech incumbents, Google and Facebook. And indeed, much of the new business is more or less a direct result of new data privacy laws in Europe and the U.S. designed to curtail an ad business model based on pervasive user tracking across the web. One result is that Apple last year started blocking third-party tracking technology on apps, and that Google will soon block its ad competitors’ ability to track users on the Chrome browser. Both actions increase the value of the first-party data collected by retailers like Kroger and Albertsons.
Open Markets Leads Efforts to Block or Restructure Elon Musk’s Takeover of Twitter
OMI reporter Luke Goldstein on Thursday published an article in the Washington Monthly highlighting the dangerous impact of Elon Musk’s ownership of both the Starlink broadband satellite system and the communications platform Twitter. He wrote: “If federal regulators had done their job, we would never have gotten to the point where one fickle titan has so much unfettered power. Since 2018, for example, the Federal Communications Commission has routinely approved Musk’s requests to build a constellation of satellites with little oversight … If that oversight weren’t lax enough, Musk has benefited from enormous federal subsidies.”
Also, last Thursday Open Markets issued a statement calling on law enforcers to block and/or closely regulate Musk’s takeover of Twitter. Open Markets wrote: “One way law enforcers can move swiftly to block Musk’s takeover of Twitter is to focus on his existing ownership of Starlink. As its use in Ukraine demonstrates, Starlink has become one the most important communications platforms in the world.”
Decision Blocking PRH Takeover of Simon & Schuster Is Latest OMI Victory in Fight to Protect Freedom of the Press
The Open Markets Institute issued a statement declaring that “antitrust enforcement is back” after a federal judge blocked the takeover by Bertelsmann corporation (which owns Penguin Random House) of Simon & Schuster. OMI had warned the merger could threaten free speech in a letter sent last year to the Justice Department. The success builds on Open Markets’ more than decade-long effort to protect authors and journalists from concentration of power by middleman platforms, publishers, and printers. This includes the first article warning about the political effects of Amazon’s concentration of power over publishers, in Harper’s in February 2012. And it includes pioneering the case that led to the DOJ successfully blocking a merger of the number one and number two printers of books and magazines, in 2019.
Q&A: Researchers on the Role of Big Tech in the 2022 Midterms
Karina Montoya
This election cycle has made scholars and poll watchers focus on the impact of the "Big Lie" in the public discourse. Amplified on large social media networks, the unsubstantiated claim that President Joe Biden did not win legitimately win the 2020 elections thrives in a media environment mediated by Big Tech.
For its Clearly Speaking series, Open Markets Institute spoke to media scholar Shannon McGregor, assistant professor at the School of Journalism and Media at UNC Chapel Hill and a senior researcher with the Center for Information Technology and Public Life, to offer insights on disinformation, algorithmic adjustments, and the role of antitrust enforcement in reducing Big Tech's harms to our media environment.
Read our full interview here.
📝 WHAT WE'VE BEEN UP TO:
The Open Markets Institute put out a statement last month spearheaded by OMI legal director Sandeep Vaheesan on the Justice Department’s most recent action on concentrated power between corporations.
The New York Times last week quoted OMI executive director Barry Lynn discussing the lessons of the 1912 U.S. election - at the height of the age of Plutocracy - for today’s antitrust enforcers.
The New York Times also quoted Barry Lynn on the proposed merger between Penguin Random House and Simon & Schuster: “Once you’ve come in and said that this kind of consolidation and these kinds of actions are bad for authors and for readers, then you look over at Amazon and see a corporation that has 80 percent market share, there’s only one conclusion.”
Open Markets board member and Financial Times columnist Rana Foroohar in her weekly FT column quoted Barry Lynn’s comments on a panel on neoliberalism at a conference on the post-neoliberal world at Columbia Law School, held last month.
Common Dreams picked up Barry Lynn’s statement on a federal judge’s decision to block the merger between Penguin Random House and Simon & Schuster, which read in part: "This decision is an enormous win for America's book publishing business—especially readers, authors, and editors. This is also a huge win for America's system of antitrust law—designed to protect creators, workers, independent businesses, and consumers from consolidated power and control.”
Roll Call quoted Sandeep Vaheesan on Congress’s proposed right-to-repair bill that would address electronic waste as well as consumer frustration. He said, “By encouraging replacement over repair, manufacturers’ monopolization of aftermarkets contributes to environmental damage and resource depletion. Decreasing the average life cycle of a car by just a year can mean millions of more cars are sent to landfills and manufactured over a decade.”
Claire Kelloway was featured in an interview with KCBS saying the proposed merger between grocer giants Albertsons and Kroger would likely lead to higher food prices.
OMI fellow Nikki Usher published an op-ed in the Los Angeles Times on the misleading political ads flooding the airwaves. Poynter mentioned Usher’s book in an article about the decimation of local news outlets in smaller communities across America. Usher is an associate professor in communication studies at the University of San Diego.
🔊 ANTI-MONOPOLY RISING:
Facebook, under pressure from British antitrust regulators, has agreed to sell Giphy, which is considered a major defeat for the company. The Competition and Market Authority’s opposition to Facebook’s purchase of this online repository for video clips of pets, facial expressions, and other animated GIFs is an example of the serious stance that antitrust regulators are taking toward the biggest tech companies around the world. (NYT)
An Indian antitrust order forced Alphabet Inc. to pause a proprietary billing system that requires app developers to use it to sell digital goods from the Google Play Store. The Competition Commission of India ordered Google last week not to restrict app developers from using third-party billing or payment processing services in India and fined the company $113 million. (Reuters)
📈 VITAL STAT:
$4 billion
The value of the special dividend to be paid out to Albertsons’s private equity owners on Monday ahead of the grocer’s proposed merger with Krogers. The payout would sap Albertsons of its working capital, making it less competitive even before antitrust enforcers can review Krogers’ takeover. (Bloomberg)
📚 WHAT WE'RE READING:
“How Ticketmaster gets away with it.” (Popular Information, Judd Legum). The author explores how the merger of Live Nation Entertainment and Ticketmaster has driven up ticket prices to live concerts, sports, and other shows, and how this evident monopoly is reigniting calls from lawmakers and advocacy groups to break up its power.
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