Adam Thierer, Senior Research Fellow at the Mercatus Center discusses his recent working paper with coauthor Brent Skorup, A History of Cronyism and Capture in the Information Technology Sector. Thierer takes a look at how cronyism has manifested itself in technology and media markets — whether it be in the form of regulatory favoritism or tax privileges. Which tech companies are the worst offenders? What are the consequences for consumers? And, how does cronyism affect entrepreneurship over the long term?
Related Links
- A History of Cronyism and Capture in the Information Technology Sector, Thierer
- Video: A History of Cronysim and Capture in the Information Technology Sector, Thierer
- Adam Thierer Biography, Mercatus Center
- Adam Thierer on Anti-Tech Grump Evgeny Morozov, Thierer
Gina Keating, author of Netflixed: The Epic Battle for America’s Eyeballs, discusses the startup of Netflix and their competition with Blockbuster.
Keating begins with the history of the company and their innovative improvements to the movie rental experience. She discusses their use of new technology and marketing strategies in DVD rental, which inspired Blockbuster to adapt to the changing market.
Keating goes on to describe Netflix’s transition to internet streaming and Blockbuster’s attempts to retain their market share.
Related Links
- Netflixed: The Epic Battle for America’s Eyeballs, Keating
- Gina Keating’s New Book about the Rise of Netflix, Babayan
- ‘Netflixed,’ Book by Gina Keating, Describes CEO Reed Hastings As a Nasty Boss’ Liedtke
My most recent Forbes column is entitled, “We All Hate Advertising, But We Can’t Live Without It.” It’s my attempt to briefly (a) defend the role advertising has traditionally played in sustaining news, entertainment, and online service, and (b) discuss some possible alternatives to advertising that could be tapped if advertising starts failing us a media cross-subsidy.
What got me thinking about this issue again was the controversy over satellite video operator DISH Network offering its customers a new “Auto Hop” capability for its Hopper whole-home HD DVR system. Auto Hop will give viewers the ability to automatically skip over commercials for most recorded prime time programs shown on ABC, CBS, FOX and NBC when viewed the day after airing. It makes the viewing experience feel like the ultimate free lunch. Alas, something still must pay the bills. As innovative as that technology is, we can be certain that it will not make content consumption cost-free. We’ll just pay the price in some other way. The same is true for online services since it’s never been easier to use technology to block ads.
So, what is going to pay the bills for content as ad-skipping becomes increasingly automated and effortless? Stated differently, what are the other possible methods of picking up the tab for content creation? Here’s a rough taxonomy: Continue reading →
I was astounded to see the misstatements and misapplication of math in a recent Atlantic blog post called “How Much Is Your Data Worth? Mmm, Somewhere Between Half a Cent and $1,200.”
For his back-of-envelope calculations about the value of personal data, Alexis Madrigal writes, “User profiles — slices of our digital selves — are sold in large chunks, i .e. at least 10,000 in a batch. On the high end, they go for $0.005 per profile, according to advertising-industry sources.”
The dollar value isn’t crazy—a CPM rate of about five cents is on the low end—but he has got the nature of the transaction precisely wrong. Advertisers place ads with content providers like Facebook, Google, and ad networks. The latter direct those ads to their visitors, trying to get ads to the people the advertiser wants to reach. They do not sell the information they use to guess at what interests consumers—consumers’ profiles, to whatever extent they exist.
If content providers sold data about their visitors to advertisers, this would undercut their own role in the advertising business. There wouldn’t be a second sale to make. And doing so would require a radical re-engineering of targeted advertising, which is largely cookie-based. The purchaser of the profile wouldn’t know how to find the subject of the profile in order to deliver an ad.
Madrigal repeats several times that “profiles” are “sold.” It’s a highly misleading characterization, creating the impression that dossiers of information about people are circulating the Internet on a strange black market. On the contrary, profiles are held—not sold—by content providers and advertising networks. There are privacy concerns enough with that business model. We don’t need it mis-described.
I probably would have let this pass. Madrigal isn’t the first to get the advertising business model wrong. (And he hasn’t repeated the error that I know of.) But then comes the bad math.
Writes Madrigal:
[L]et’s not forget the rest of the Internet advertising ecosystem either, which the Internet Advertising Bureau says supported $300 billion in economic activity last year. That’s more than $1,200 per Internet user and much of the online advertising industry’s success is predicated on the use of this kind of targeting data.
Personal information is one input into part of the online advertising. It makes no sense to assign all the value from the entire ecosystem to that one input. The auto industry is about a $400 billion industry, and there are about 250 million car tires sold in the U.S. each year. This does not mean that tires are worth over $2,000 each.
The idea, evidently, is to make the case that consumers are losing a lot in the advertising ecosystem today. That may or may not be true. I’d like to see it shown in the success of a company like Personal or others in the Personal Data Ecosystem, which could re-jigger the personal-data > free-content bargain. But I don’t think that misstating how advertising works and exploding the value of personal data is a good way to make the case for change.
On Forbes today, I look at the phenomenon of memes in the legal and economic context, using my now notorious “Best Buy” post as an example. Along the way, I talk antitrust, copyright, trademark, network effects, Robert Metcalfe and Ronald Coase.
It’s now been a month and a half since I wrote that electronics retailer Best Buy was going out of business…gradually. The post, a preview of an article and future book that I’ve been researching on-and-off for the last year, continues to have a life of its own.
Commentary about the post has appeared in online and offline publications, including The Financial Times, The Wall Street Journal, The New York Times, TechCrunch, Slashdot, MetaFilter, Reddit, The Huffington Post, The Motley Fool, and CNN. Some of these articles generated hundreds of user comments, in addition to those that appeared here at Forbes. Continue reading →

The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.