total cost of advertising in another113 and display ad serving tools account for only a small fraction of the total cost of advertising.
Advertisers would respond to a small but significant increase in the total cost of advertising through one channel by re-allocating expenditure to another one. However, since ad serving constitutes a small proportion of the total cost to the advertiser, small but significant changes in the price of stand-alone ad serving can only cause very small changes in the total cost of the unbundled channels relative to the total cost of another channel, such as the bundled one provided by Google. Such price changes are therefore very unlikely to precipitate much (if any) switching from one channel to another.
For publishers, ad serving represents a small proportion of the cost of using the unbundled solution (and it represents an even smaller fraction of the total cost of the ad for the advertiser). A large majority of respondents, being customers (advertisers and publishers) or competitors, confirms that the cost of ad serving represents a minor proportion of total advertising costs, typically only 2 to 5%114 (with the cost of the advertiser tool being higher than the cost of the publisher tool; however the amount an advertiser pays to use an advertiser-side serving tool is not relevant to a publisher’s decision in choosing its sales channel). Therefore a 5-10% price increase for stand-alone serving tools would lead to a very minor increase, 0.5% at most, of the total cost of the unbundled solution115. Such a small increase is unlikely to trigger a switch to the bundled Google AdSense solution. For similar reasons, following the merger, Google would not have the ability and/or the incentives to significantly raise prices for the bundled AdSense solution as DoubleClick did not previously constrain its pricing.
One complainant argued that the analysis of the cost structure should not be
done on the basis of the impact of the cost of the ad serving technology as a proportion of the overall cost incurred by an online advertiser, that is to say the value of the final product, but on the basis of the costs of using the intermediation channel, that is to say the value of the intermediation services. On the basis of an example illustrating the significance of ad serving costs in intermediation, the complainant claimed that the input provided by the ad
Publishers will compare the net profit realized when selling ad space through the various channels while advertisers will compare the total cost of placing an ad on an ad space (relative to the reach/targeting achieved).
This range covers percentages given by the majority of respondents to the Commission's market investigation. A few respondents indicated that the ad serving costs could be up to 10% of total advertising costs. As regards ad networks and ad exchanges, the market investigation has indicated that ad serving costs broadly account for about 10-15% of intermediation revenues.
Using an example provided by a complainant, suppose that a publisher paid 5 cents per thousand impressions in ad serving fees and generated USD 2 per thousand impressions on the sale of its ad space, netting USD 1.95. If ad serving fees increased by 10% to 5.5 cents, the publisher's net revenue would drop from USD 1.95 to USD 1.945, that is to say. a drop of 0.3%. Suppose an advertiser paid 7.5 cents per thousand impressions in ad serving fees and paid USD 2 per thousand impressions to the publisher for the purchase of the ad space, for a total cost of USD 2.075. If ad serving fees increased by 10% to 8.25 cents, the total cost would increase to USD 2.0825, that is to say an increase in price of 0.4%.