Washington Post columnist Ezra Klein had a terrific column yesterday (Human Knowledge, Brought to You By…) on one of my favorite subjects: how advertising is the great subsidizer of the press, media, content, and online services. Klein correctly notes that “our informational commons, or what we think of as our informational commons, is, for the most part, built atop a latticework of advertising platforms. In that way,” he continues, “it’s possible that no single industry — not newspapers nor search engines nor anything else — has done as much to advance the storehouse of accessible human knowledge in the 20th century as advertisers. They didn’t do it because they are philanthropists, and they didn’t do it because they love information. But they did it nevertheless.”
Quite right. As I noted in my recent Charleston Law Review article on “Advertising, Commercial Speech & First Amendment Parity,” media economists have found that advertising has traditionally provided about 70% to 80% of support for newspapers and magazines, and advertising / underwriting has entirely paid for broadcast TV and radio media. And it goes without saying that advertising has been an essential growth engine for online sites and services. How is it that we’re not required to pay per search, or pay for most online news services, or shell out $19.95 a month for LinkedIn, Facebook, or other social media services? The answer, of course, is advertising. Thus, Klein notes, while “we see  advertising as a distraction… without the advertising, the information wouldn’t exist. So the history of information, in the United States at least, is the history of platforms that could support advertising.”
And the sustaining power of advertising for new media continues to grow. As I noted in my law review article:
Advertising is proving increasingly to be the only media industry business model with any real staying power for many commercial media and information-producing sectors. Pay-per-view mechanisms, micropayments, and even subscription-based business models are all languishing. Consequently, the overall health of modern media marketplace and the digital economy—and the aggregate amount of information and speech that can be produced or supported by those sectors—is fundamentally tied up with the question of whether policymakers allow the advertising marketplace to evolve in an efficient, dynamic fashion. In this sense, it is not hyperbole to say that an attack on advertising is tantamount to an attack on media itself.
In this sense, I would have liked to seen Klein connect the dots between recent privacy-related legislative and regulatory proposals and the long-term health of online communities and services. As several of us here at the TLF have noted too many times to mention, there is no free lunch. What powers the “free” Internet are data collection and advertising. In essence, the relationship between consumers and online content and service providers isn’t governed by any formal contract, but rather by an unwritten quid pro quo: tolerate some ads or we’ll be forced to charge you for service. Most consumers gladly take that deal—even if many of them gripe about annoying or intrusive ads, at times.
If new privacy regulations break this quid pro quo, there will be consequences. Namely, there will likely be costs in the form of prices for sites and services that relied on more targeted forms of advertising. Of course, we can hope and pray that older, more “spammy” forms of advertising (think big banner ads and pop-ups) can fill the gap and continue to sustain the online ecosystem, but it’s a big gamble. Thus, I wish Klein would have pointed out that online advertising is currently under attack in both the legislative and regulatory arena and that, if new privacy mandates are put on the books, then (a) consumers should not be surprised if they have to pay more, and/or (b) we shouldn’t be surprised to get less of those media and communications platforms and services in the future.
Regardless, kudos to Ezra Klein for being willing to so eloquently defend advertising’s essential role as the great sustainer of media and information in America. Please do read his entire essay. Truly outstanding.
- Adam Thierer, “op-ed: “Privacy Regulation and the ‘Free’ Internet”
- Adam Thierer, Berin Szoka, and W. Kenneth Ferree, Comments of the Progress & Freedom Foundation in the Matter of the Federal Communications Commission’s Examination of the Future of Media and Information Needs of Communities In a Digital Age, The Progress & Freedom Foundation, May 5, 2010, 28-38.
- Adam Thierer, Public Interest Comment on Protecting Consumer Privacy in an Era of Rapid Change (Arlington, VA: Mercatus Center at George Mason University, February 18, 2011).
- Berin Szoka & Adam Thierer, Online Advertising & User Privacy: Principles to Guide the Debate, Progress & Freedom Foundation, Progress Snapshot 4.19, Sept. 2008.
- Berin Szoka & Adam Thierer, Targeted Online Advertising: What’s the Harm & Where Are We Heading? Progress & Freedom Foundation, Progress on Point 16.2, June 2009.