No one likes being stalked around the Internet by adverts. It\u2019s the uneasy joke you can\u2019t enjoy laughing at. Yet vast people-profiling ad businesses have made pots of money off of an unregulated Internet by putting surveillance at their core.<\/p>\n
But what if creepy ads don\u2019t work as claimed? What if all the filthy lucre that\u2019s currently being sunk into the coffers of ad tech giants \u2014 and far less visible but no less privacy-trampling data brokers \u2014 is literally being sunk, and could both be more honestly and far better spent?<\/p>\n
Case in point: This week Digiday<\/a> reported that the New York Times<\/em> managed to grow its ad revenue after it cut off ad exchanges in Europe. The newspaper did this in order to comply with the region\u2019s updated privacy framework, GDPR<\/a>, which includes a regime of supersized maximum fines.<\/p>\n The newspaper business decided it simply didn\u2019t want to take the risk, so first blocked all open-exchange ad buying on its European pages and then nixed behavioral targeting. The result? A significant uptick in ad revenue, according to Digiday\u2019s report.<\/p>\n \u201cNYT International focused on contextual and geographical targeting for programmatic guaranteed and private marketplace deals and has not seen ad revenues drop as a result, according to\u00a0Jean-Christophe Demarta, SVP for global advertising at New York Times International,\u201d it writes.<\/p>\n \u201cCurrently, all the ads running on European pages are direct-sold.\u00a0Although the publisher doesn\u2019t break out exact revenues for Europe, Demarta said that digital advertising revenue has increased significantly since last May and that has continued into early 2019.\u201d<\/p>\n It also quotes Demarta summing up the learnings:\u00a0\u201cThe desirability of a brand may be stronger than the targeting capabilities. We have not been impacted from a revenue standpoint, and, on the contrary, our digital advertising business continues to grow nicely.\u201d<\/p>\n So while (of course) not every publisher is the NYT, publishers that have or can build brand cachet, and pull in a community of engaged readers, must and should pause for thought \u2014 and ask who is the real winner from the notion that digitally served ads must creep on consumers to work?<\/p>\n The NYT\u2019s experience puts fresh taint on long-running efforts by tech giants like Facebook to press publishers to give up more control and ownership of their audiences by serving and even producing content directly for the third party platforms. (Pivot to video anyone?)<\/p>\n Such efforts benefit platforms because they get to make media businesses dance to their tune. But the self-serving nature of pulling publishers away from their own distribution channels (and content convictions) looks to have an even more bass string to its bow \u2014 as a cynical means of weakening the link between publishers and their audiences, thereby risking making them falsely reliant on adtech intermediaries squatting in the middle of the value chain.<\/p>\n There are other signs behavioural advertising might be a gigantically self-serving con too.<\/p>\n Look at non-tracking search engine DuckDuckGo, for instance, which has been making a profit by serving keyword-based ads and not profiling users since 2014<\/a>, all the while continuing to grow usage \u2014 and doing so in a market that\u2019s dominated by search giant Google.<\/p>\n DDG recently took in $10M in VC funding<\/a> from a pension fund that believes there\u2019s an inflection point in the online privacy story. These investors are also displaying strong conviction in the soundness of the underlying (non-creepy) ad business, again despite the overbearing presence of Google.<\/p>\n Meanwhile, Internet users continue to express widespread fear and loathing of the ad tech industry\u2019s bandwidth- and data-sucking practices by running into the arms of ad blockers. Figures for usage of ad blocking tools step up each year, with between a quarter and a third of U.S. connected device users\u2019 estimated to be blocking ads as of 2018 (rates are higher among younger users).<\/p>\n Ad blocking firm Eyeo, maker of the popular AdBlock Plus product, has achieved such a position of leverage that it gets Google et al to pay it to have their ads whitelisted by default \u2014 under its self-styled \u2018acceptable ads\u2019 program. (Though no one will say how much they\u2019re paying to circumvent default ad blocks.)<\/p>\n So the creepy ad tech industry is not above paying other third parties for continued \u2014 and, at this point, doubly grubby (given the ad blocking context) \u2014 access to eyeballs. Does that sound even slightly<\/em> like a functional market?<\/p>\n In recent years expressions of disgust and displeasure have also been coming from the ad spending side too \u2014 triggered by brand-denting\u00a0scandals<\/a> attached to the hateful stuff algorithms have been serving shiny marketing messages alongside. You don\u2019t even have to be worried about what this stuff might be doing to democracy to be a concerned advertiser.<\/p>\n Fast moving consumer goods giants\u00a0Unilever<\/a> and Procter Gamble are two big spenders which have expressed concerns. The former threatened to pull ad spend if social network giants didn\u2019t clean up their act and prevent their platforms algorithmically accelerating hateful and divisive content.<\/p>\n While the latter has been actively reevaluating its marketing spending \u2014 taking a closer look at what digital actually does for it. And last March Adweek<\/a> reported it had slashed $200M from its digital ad budget yet had seen a boost in its reach of 10 per cent, reinvesting the money into areas with \u201c\u2018media reach\u2019 including television, audio and ecommerce\u201d.<\/p>\n The company\u2019s CMO, Marc Pritchard, declined to name which companies it had pulled ads from but in a speech at an industry conference he said it had reduced spending \u201cwith several big players\u201d by 20 per cent to 50 per cent, and still its ad business grew.<\/p>\n So chalk up another tale of reduced reliance on targeted ads yielding unexpected business uplift.<\/p>\n At the same time, academics are digging into the opaquely shrouded question of who really benefits from behavioral advertising. And perhaps getting closer to an answer.<\/p>\n Last fall, at an FTC hearing<\/a>\u00a0on the economics of big data and personal information, Carnegie Mellon University professor of IT\u00a0and public policy, Alessandro Acquisti, teased a piece of yet to be published research \u2014 working with a large U.S. publisher that provided the researchers with millions of transactions to study.<\/p>\n Acquisti said the research showed that behaviourally targeted advertising had increased the publisher\u2019s revenue but only marginally. At the same time they found that marketers were having to pay orders of magnitude more to buy these targeted ads, despite the minuscule additional revenue they generated for the publisher.<\/p>\n \u201cWhat we found was that, yes, advertising with cookies \u2014 so targeted advertising \u2014 did increase revenues \u2014 but by a tiny amount. Four per cent. In absolute terms the increase in revenues was $0.000008 per advertisment,\u201d Acquisti told the hearing. \u201cSimultaneously we were running a study, as merchants, buying ads with a different degree of targeting. And we found that for the merchants sometimes buying targeted ads over untargeted ads can be 500% times as expensive.\u201d<\/p>\n \u201cHow is it possible that for merchants the cost of targeting ads is so much higher whereas for publishers the return on increased revenues for targeted ads is just 4%,\u201d he wondered, posing a question that publishers should really be asking themselves \u2014 given, in this example, they\u2019re the ones doing the dirty work of snooping on (and selling out) their readers.<\/span><\/p>\n Acquisti also made the point that a lack of data protection creates economic winners and losers, arguing this is unavoidable \u2014 and thus qualifying the oft-parroted tech industry lobby line that privacy regulation is a bad idea because it would benefit an already dominant group of players. The rebuttal is that a lack of privacy rules also does that. And that\u2019s exactly where we are now.<\/p>\n \u201cThere is a sort of magical thinking happening when it comes to targeted advertising [that claims] everyone benefits from this,\u201d Acquisti continued. \u201cNow at first glance this seems plausible. The problem is that upon further inspection you find there is very little empirical validation of these claims\u2026 What I\u2019m saying is that we actually don\u2019t know very well to which these claims are true and false. And this is a pretty big problem because so many of these claims are accepted uncritically.\u201d<\/p>\n There\u2019s clearly far more research that needs to be done to robustly interrogate the effectiveness of targeted ads against platform claims and vs more vanilla types of advertising (i.e. which don\u2019t demand reams of personal data to function). But the fact that robust research hasn\u2019t been done is itself interesting.<\/p>\n Acquisti noted the difficulty of researching \u201copaque blackbox\u201d ad exchanges that aren\u2019t at all incentivized to be transparent about what\u2019s going on. Also pointing out that Facebook has sometimes admitted to having made mistakes that significantly\u00a0inflated its ad engagement metrics<\/a>.<\/p>\n His wider point is that much current research into the effectiveness of digital ads is problematically narrow and so is exactly missing a broader picture of how consumers might<\/em> engage with alternative types of less privacy-hostile marketing.<\/p>\n In a nutshell, then, the problem is the lack of transparency from ad platforms; and that lack serving the self same opaque giants.<\/p>\n But there\u2019s more. Critics of the current system point out it relies on mass scale exploitation of personal data to function, and many believe this simply won\u2019t fly under Europe\u2019s tough new GDPR framework.<\/p>\n They are applying legal pressure via a set of GDPR complaints, filed last fall, that challenge the legality of a fundamental piece of the (current) adtech industry\u2019s architecture: Real-time bidding (RTB); arguing the system is fundamentally incompatible with Europe\u2019s privacy rules.<\/p>\n We covered these complaints last\u00a0November<\/a>\u00a0but the basic argument is that bid requests essentially constitute systematic data breaches because personal data is broadcast widely to solicit potential ad buys and thereby poses an unacceptable security risk \u2014 rather than, as GDPR demands, people\u2019s data being handled in a way that \u201censures appropriate security\u201d.<\/p>\n To spell it out, the contention is the entire behavioral advertising business is illegal because it\u2019s leaking personal data at such vast and systematic scale it cannot possibly comply with EU data protection law.<\/p>\n Regulators are considering the argument, and courts may follow. But it\u2019s clear adtech systems that have operated in opaque darkness for years, without no worry of major compliance fines, no longer have the luxury of being able to take their architecture as a given.<\/p>\n Greater legal risk might be catalyst enough to encourage a market shift towards less intrusive targeting; ads that aren\u2019t targeted based on profiles of people synthesized from heaps of personal data but, much like DuckDuckGo\u2019s contextual ads, are only linked to a real-time interest and a generic location. No creepy personal dossiers necessary.<\/p>\n If\u00a0Acquisti\u2019s research is to be believed \u2014 and here\u2019s the kicker for Facebook et al \u2014 there\u2019s little reason to think such ads would be substantially less effective than the vampiric microtargeted variant that Facebook founder Mark Zuckerberg likes to describe as \u201crelevant\u201d.<\/p>\n The \u2018relevant ads\u2019 badge is of course a self-serving concept which Facebook uses to justify creeping on users while also pushing the notion that its people-tracking business inherently generates major extra value for advertisers. But does it really do that? Or are advertisers buying into another puffed up fake?<\/p>\n Facebook isn\u2019t providing access to internal data that could be used to quantify whether its targeted ads are really worth all the extra conjoined cost and risk. While the company\u2019s habit of buying masses of additional data on users, via brokers and other third party sources, makes for a rather strange qualification. Suggesting things aren\u2019t quite what you might imagine behind Zuckerberg\u2019s drawn curtain.<\/p>\n Behavioral ad giants are facing growing legal risk on another front. The adtech market has long been referred to as a duopoly, on account of the proportion of digital ad spending that gets sucked up by just two people-profiling giants: Google and Facebook (the pair accounted for 58% of the market in 2018, according to eMarketer data<\/a>) \u2014 and in Europe a number of competition regulators have been probing the duopoly.<\/p>\n Earlier this month the German Federal Cartel Office was\u00a0reported<\/a> to be on the brink of partially banning Facebook from harvesting personal data from third party providers (including but not limited to some other social services it owns). Though an official decision has yet to be handed down.<\/p>\n