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The Ad-supported Business Model is Under Pressure

Why we should support and defend the ad-supported business model.

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By. Jacob

Edited: 2019-02-08 14:14

GDPR vs Ads.

The ad-supported business model is under pressure, which is understandable in light of recent social media data leaks and hacks. Not just with Facebook and Cambridge Analytica, but also Google+, and LinkedIn.

GDPR is not just about obtaining users consent before you run ads. It is a direct attack on the ad supported business model.

However, ads undeniably has had a overwhelmingly positive influence on society. They allow users to use services they could not otherwise afford, and they help companies and individuals reach people they would not otherwise be able to reach.

Social Media is not alone when it comes to leaking data. Governments and banks are sensitive to leaks and hacks as well. Security and privacy presents universal challenges, and those are not solved by focusing on a single business model or company.

I own stocks in both Facebook and Apple, and as an investor in both companies, I really do not care much about the business model used. Probably, Facebook would make more money if they also offered a subscription model, but it would do nothing in securing their platforms. As a user, I would also hate having to pay to use their services, when I know the ad supported model works so well.

Privacy and ads

The problem with ad-supported models, according to critics, is that large amounts of data is collected about users, which can (theoretically) be used to identify individual users. In reality, this is not necessarily true due to anonymization technology.

This does not mean that there are not any challenges, but I am confident these can be overcome with increasingly better technology and increased transparency around ad personalization. Users need to be able to trust companies, and one way this can happen, is with increased transparency. Facebook is doing a lot in this area

Apple's CEO, Tim Cook, has been very critical of ads, and this is while his own company is employing methods that are incredibly annoying to users and developers. Apple's App Store takes a hefty cut of 30 percent from app developers, while users are unable to install apps from other sources. This has created a hard lock-in for users, giving them no other choice than using Apple's own App Store.

Apple has long history of limiting users free choice like this, both when it comes to hardware compatibility, as well as installing apps on iOS. This is very strange, because the price of their products should call for more openness and compatibility with other hardware. To be fair, Google also takes a big cut with their Google Play Store – but at least Android is an open Platform.

In contrast to Apple's practices, I see nothing wrong with an ad-supported model. The problems with privacy are technical, and should be solved on a technical level. The right to use an ad supported business model is fundamental, and we should protect this right. Ads are not the problem.

In case of traditional ad delivery networks, what critics often fail to mention is the fact that it is possible to collect and use data for ad personalization, without connecting it with individual users. Probably because it would destroy their case. This is referred to as anonymization of data – see also How Google Anonymizes Data.

In defense of the ad supported business model

In response to a critical question about how Facebook makes their money, Mark Zuckerberg famously responded:

Senator, we run ads.

—Mark Zuckerberg

This is the business model – and it is an awesome model we should all be thankful for!

A major selling point for critics is often the large amounts of data tech companies have on users, perhaps failing to realize that this is often the very data enabling the "features" we all love. Without much of this, there would be no social media. Therefor, a subscription model would not really provide stronger privacy to users. Users would still behave human, communicating, liking pages and posts, and watching videos. Etc. All this generates data.

This data is still stored with social media companies, and as such, it will still be sensitive to leaks and abuse. Regardless of how money is made.

Manipulation of opinions via targeted ads and fake news is a separate issue, Facebook is probably among the companies that does the most to fight this. Read more here: What Is Facebook Doing to Address the Challenges It Faces?

If you create a tool for good, someone is very likely to also abuse it for evil. Fact of life.

Because of the above, Facebook might as well keep using data for the purpose of targeting ads.

Personalization vs Privacy

What is important to keep in mind here, is that Personalization and Privacy are not mutually exclusive. One does not rule out the other.

My educated guess is that Facebook will probably be able to deliver more relevant Ads than their competitor, Google, is capable of with AdSense. This is completely without the need to track users browsing (unlike AdSense), since users can be targeted through the data they willingly provide in their profiles directly.

When Facebook track users browsing, it happens because a website is using their "Pixel", or some type of widget. They can not track users of sites, unless these "plugins" are actually used on the pages they visit. It is the same for AdSense – code has to be present on the pages.

In many cases, at least for people in Europe, websites will ask for your consent before third party features are activated. This is required by the GDPR after all.

Even if Facebook was responsible for use of these "plugins", and not the website using them, It can still be argued users already consented to this type of tracking by creating a Facebook account or via settings on Facebook. The only problem seems to be, Facebook tracking users not logged in to their services – these users never consented to this type of tracking.

Depending on what information is recorded, and whether the data is anonymized, this is not necessarily a big problem. It is very difficult to argue the need for consent in cases where the data is anonymized.

What is needed, is a balance between privacy and personalization. Yet, certain people seems highly motivated to destroy the internet.

GDPR is not perfect

GDPR was largely a mistake when it comes to establishing a balance between users and businesses. It has placed an unfair burden on business owners, bloggers, and individual website owners. For example, even if you are just a blogger using AdSense on your website, you still need to obtain consent before loading the ads on your pages, even when you use non-personalized ads, because AdSense uses cookies.

What should be done instead? Either the consent dialog should be build-in to third party code, or browsers should have a standardized consent mechanism for popular widgets and advertising networks.

A universal way of obtaining consent can be integrated in browsers, and website owners provided with an API to communicate with the mechanism in the browser. A dedicated group could then be charged with maintaining a lists of trusted advertisers. This would be a very fair solution, still allowing us to use personalized advertising (with the users consent).

By default, the browser could be made to block trackers, and only when a website is using the API, prompt the user about consent. I am not sure this is the best way, but it is much better than the mess created by GDPR.

This would also ensure more transparency about data collection, since an advertiser not living up to a certain standard could easily be blocked.

Currently, we have all sorts of broken implementations. I do not blame website owners for failing to live up to the GDPR under current conditions.

Conclusion – We should fight back

I used to hate ads. Irrelevant ads, and spammy ads. There was a time when ads equaled annoying popups and pop-unders, not to mention those annoying auto-playing ads with sound. This is not the case today.

Ads are more relevant than ever, and rarely causing any disruption to my browsing. Sometimes I even click on ads!

While protection of privacy is important, we also have to recognize the value added by ad-supported services, such as Gmail, YouTube, Twitter, Facebook, and Instagram. We should be grateful to have these services as users. They are practically free to use. The value they add are often unmatched, even by paid alternatives.

Personalized advertising is not the enemy. De-anonymization is – and to some extend, the politicians and forces trying to limit our rights, by telling us how to run our businesses.

Both as users and website owners, we should therefor defend the use of targeted advertising. This is not just about Facebook and Google. It is about our personal rights. If Facebook and Google is prevented from making money on Ads, smaller website owners might also suffer.

Do not get me wrong on this. I do think there should be more transparency around personalized ads, as well as rules and consequences to breaking those rules. But sawing off the branch you are sitting on seems like a tremendously stupid thing to do.

We should fight back against such senseless anti data collection hysteria. Do not allow the bullies and the trolls to dominate the discussions. Data is important. It should be your right to collect it, and to use it for targeted advertising if you wish to do this.

Links

  1. About Facebook Ads - facebook.com
  2. Understanding how Google ads work - google.com

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