With the election only days away, we invited Peter Kosmala, Senior Vice President of Government Relations for the 4A’s, based in Washington, D.C. to share his insights on how the election can impact the ads you see online and why it is important to the industry.
The results of this election could strongly affect the advertising and media industries, changing how billions of dollars are spent while forcing structural upheaval at ad agencies, publishers and major technology companies.
Key areas ripe for attention are tax policy, employee pay and data privacy.
Tax Policy: Will Advertising Lose Its Status?
Today, advertising is tax free for marketers, who can deduct the costs in full. A change could prompt them to move significant budgets out of paid media.
The issue has been brewing for years, with powerful Republicans proposing elimination of deductions to compensate for tax rate reductions that would cost the government billions of dollars.
Rep. Dave Camp (R-Mich.), who chaired House Ways and Means Committee, in 2014 said removing the advertising deduction would raise additional billions in tax revenues. This money would be raised to off-set losses incurred by Congress if they decide to reduce the marginal rates for corporations, thus representing a revenue to government and effectively a tax to advertisers, making advertising more expensive to buy.
Congressional Democrats and Hillary Clinton have cited pharmaceutical industry business practices, in particular the heavy spending on direct-to-consumer (DTC) pharma advertising, which some have said they might target the $4 billion pharma spends on advertising per year. This is due to the suspicion that this has somehow contributed to skyrocketing prescription drug prices. These lawmakers want to suppress spending by making the category less deductible as an expense with the aim to avoid any product price inflation.
The Argument: Protected as free speech, advertising has a unique role as an economic stimulus by creating awareness and differentiation of goods and services.
Media companies, advertising agencies and technology companies that rely on revenues from advertising are huge engines of our economy and employ millions of people. News and information that’s crucial to our democracy, as well as entertainment, search engines, social networks and communication platforms could all take big hits. Commercial free speech is an issue only if it come under threat by the Supreme Court. The presumption is that an administration could appoint SCOTUS Justices who are less sympathetic to this historic protection, but would still need the cases to be brought forward to even introduce a challenge.
Data and Privacy
Data security and privacy are often hot topics in Washington.
The Federal Communications Commission recently passed rules to limit how internet service providers can use or sell data they collect on customers. The Federal Trade Commission and White House have separately published principles on what they consider best practices for handling consumer data.
Previous Congresses have floated bills that could have drastically affected gathering and sharing of even anonymized consumer information.
The Argument: Since 2009, consumers have exercised preferences in the advertising uses of their Web viewing data via the Digital Advertising Alliance’s “AdChoices” program. This industry effort offers information and controls directly to consumers.
Many people want to make their own nuanced choices of how to receive messages and media, and preserve the convenience of storing logins and preferences on their devices.
Technology moves faster than legislators, who typically take years to craft rules that can strip billions of dollars in ad revenue from the economy.
The 4A’s was grounded as a national association to represent U.S. advertising agencies. Today, they provide counsel to members on everything from new business to succession planning to media transparency. To learn more on the 4A’s, visit their site, here!
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Peter Kosmala is Senior Vice President of Government Relations for the 4A’s, based in Washington, D.C.