In this post I hope to give you some perspective on big changes under way in how digital advertising works, what it will mean to your online privacy, and how it might affect your media business.
When both Republicans and Democrats in the U.S. Senate take an interest in digital advertising technology, you know we have reached a watershed moment. In April, six senators requested information from various companies involved in the business, and the Wall Street Journal began its story with a succint, eloquent description of how the technology works:
“When anyone loads a webpage, a digital-ad auction occurs in seconds to determine which personalized ads the person will see. During that auction, the user’s personal data—including location, browsing history and demographic details—may be sent to hundreds of companies bidding on the ad slots. The barriers to join these auctions are low, and any company participating in the auction can access user information without having to bid.”
The shoe ads that follow you
These services follow you, and your preferences, as you travel around on the web. The BBC’s Rory Cellan-Jones explains that this is why if “you ever hovered over a pair of shoes in an online store, but moved on without buying,” you might find those shoes advertised “everywhere you go on the internet.”
All of this automated bidding by hundreds of companies, incidentally, is what slows down the loading of web pages on your desktop or mobile device. We, the users, sometimes willingly give up our information by hitting the button that says “agree” in order to get access to a web page. But sometimes information about us is collected, shared, and sold by others without our knowledge and agreement.
Here is how the Journal explained it:
“The information gathered during the ad-auction process—known in the industry as ‘bidstream’ data—can be packaged by data brokers, which resell it to companies and governments. Even though all user information available through these auctions is anonymized, it is possible to identify specific individuals by cross-referencing it with other data. Political campaigns, for instance, have successfully paired location data with voter files to advertise to individuals who have attended certain rallies.”
The senators are worried that all of this information can be used to tamper with elections, enable illegal tracking of individuals without warrants, and give foreign actors access to information about our intelligence agencies.
We’re from Big Tech, here to protect you
After I wrote a blog post on the evils of this automated auction system earlier this year, a colleague told me that the entire ad-auction ecosystem was undergoing a major overhaul. I had no idea.
Google says it aims to protect user privacy by eliminating third-party cookies from its Chrome browser, the world’s most popular. These cookies are bits of code that allow platforms to track users’ internet behavior. Two other popular browsers, Mozilla’s Firefox and Apple’s Safari, had already phased out these cookies.
(Sara Morrison of Recode has more on Google’s changes, ad tracking, and privacy.)
At the same time, Apple is making a major change to its mobile operating system that gives users the option of blocking advertising intermediaries from tracking them around the web.
And as the Wall Street Journal’sThe Journal’s Joanna Stern reported, this will have a big negative effect on Facebook, which uses data from Apple to show clients that their ads are working. Chief Executive Mark Zuckerberg was not happy when he heard about it: “Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work.”
Other Facebook spokespeople have called Apple’s change “harmful to small businesses,” “anticompetitive” and “hypocritical.” Indeed, the Journal‘s Christopher Mims found many small business owners dependent on online sales who feel Apple’s changes will cause them to lose sales and incur greater costs.
Really deep
The truth is that Google and Facebook have an enormous strategic advantage with the quantity and uniqueness of the information on user behavior that they collect. They have used this advantage to destroy the advertising based business model of traditional media.
Even if internet users gain some privacy protection by these changes, Google and Apple appear to be tightening their grip on their portion of the ad business. All of the changes by the tech giants have touched off a flurry of activity among smaller digital advertising intermediaries to come up with alternative ways of delivering targeted ads to the right people at the right time to increase sales. These solutions are more costly than cookies.
If you want to learn more about privacy, digital ad technology, and what Facebook, Google, Amazon, and Apple are really up to, Ben Thompson has an excellent examination of the topic in his Stratechery website. It’s broad and deep. You might have to struggle, as I did, to keep from drowning.