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How Much is a Bad Blog Post Worth?

by on March 21, 2012 · 0 comments

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.

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Beyond Privacy Policies to Policy Prescription: The New Unfairness Doctrine at the FTC

by on January 12, 2010 · 7 comments

Last year there was discussion of a possible return of the FCC’s “Fairness Doctrine” that used to apply to broadcasters. This year, we should all be aware of the FTC’s stepped-up rhetoric toward an “Unfairness Doctrine” for privacy–an increased effort toward enforcing the “unfair” part of Section 5 of the FTC Act, which prohibits unfair or deceptive practices.

Historically, the approach of the FTC toward privacy has been one of notice and consent and to hold companies to the word of their privacy policies — if companies say one thing and then do another, the FTC goes after them for being deceptive. This is the “deceptive” part of the FTC’s power to enforce the law against unfair or deceptive commercial practices.

For privacy, we really haven’t seen the “unfair” part being enforced. But if public comments from high-ranking officials is any indicator (and it is), that’s about to change.

A recent New York Times article summarizes its interview with FTC Chairman Jon Leibowitz and David Vladeck, chief of the FTC’s Bureau of Consumer Protection. It’s another insight into how aggressive the commission wants to be toward privacy.

Advise-and-consent “depended on the fiction that people were meaningfully giving consent,” Mr. Vladeck said. “The literature is clear” that few people read privacy policies, he said.

But even if people did read privacy policies, Vladeck still doesn’t think it is fair that people give consent to data practices, often in exchange for free services: Continue reading →

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Lawsuits and Enforcement, not Legislation: Balancing Social Media and Consumer Protection

by on December 1, 2009 · 7 comments

What are the consumer protection issues of online social media sites and what’s the right regulatory balance? That was the focus of today’s Northern Virginia Technology Council (NVTC) event called “Social Media and Consumer Protection: Finding a Balance.” The breakfast event featured Tim Sparapani of Facebook, Pablo Chavez of Google, and Ari Schwartz of the Center for Democracy and Technology (CDT).

But the event wasn’t about consumer protection (in the traditional sense), it was about privacy. Privacy online is today’s issue du jour, whether it is marketing to children or collecting and sharing data for targeted ads. The FTC has devoted a series of roundtable discussions toward privacy, with the first one beginning Dec. 7.

Privacy’s getting so hyped-up that I believe it to be the next “online safety” sort of issue where isolated and particularized incidents become sensationalized in the media and among regulators, creating counterproductive techno-panics that other commentators have described. This shift is apparent as many policymakers and advocacy groups become increasingly hostile toward targeted online advertising.

But are social media and privacy at odds such that there needs to be a “balance”–whatever that entails? While this question was never explicitly asked, it is clear that Ari Schwartz would say yes because he asserts that consumers don’t know what information is being collected and that users need help to gain control over their own data. Continue reading →

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Internet Advertising Picking-up — Just Won’t be Display Ads

by on October 22, 2009 · 7 comments

Two recent trends evidence the importance of targeted Internet advertising–more money going toward Internet ads, and fewer people that click on display banner ads.

First, the good news is that Internet advertising is rebounding (or at least seeing a reversal in the the decline of ad $). Tough economic times has decreased ad dollars among all marketing mediums. But online ads will be the first to see new demand from marketers. And some online companies are weathering the bad economy just fine. Google’s ad revenue rose 7 percent in the third quarter.

Compare with McClatchy (the U.S.’s 3rd largest newspaper company), where according to the AP article print advertising plunged 32 percent in the third quarter, but its online ad sales increased 3 percent.

So ad dollars are increasing. Where will money be spent? On targeted ads.

comScore released a study earlier this month that showed most people don’t click on display advertisements. As someone who never does either, I don’t find this surprising. According to comScore:

“The act of clicking on a display ad is experiencing rapid attrition in the current digital marketplace,” said Linda Anderson, comScore VP of marketing solutions and author of the study. “Today, marketers who attempt to optimize their advertising campaigns solely around the click are assigning no value to the 84 percent of Internet users who don’t click on an ad.”

This is huge. Online companies rely on advertisements to pay the bills and will need to better target ads to their users if they want to stay in business.

If we want to see the next generation of online content and services, then we need to stay vigilant to convince members of Congress (Boucher) and the FTC not to impose more restrictions on interest-based advertising, such as opt-in requirements.

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Privacy Polls v. Real-World Trade-Offs

by on October 8, 2009 · 18 comments

Progress Snapshot 5.10 from The Progress & Freedom Foundation

A recent telephone poll conducted by professors at Berkeley and the University of Pennsylvania concluded, “Contrary to what many marketers claim, most adult Americans (66%) do not want marketers to tailor advertisements to their interest.” The study’s authors claim that their poll is the “the first nationally representative telephone (wireline and cell phone) survey to explore Americans’ opinions about behavioral targeting by marketers.” They also assert that the poll indicates that “if Americans could vote on behavioral targeting today, they would shut it down.” Advocates of regulating online data collection have trumpeted this poll as evidence consumers demand legislation to protect their privacy. “This research gives the F.T.C. and Congress a political green light to go ahead and enact effective, but reasonable, rules and policies,” declared Jeff Chester, a leading critic of online advertising.

But what is most surprising about this poll is not that 66% of users said they do not want tailored online ads, but that 34% of users said they did! The key, initial question of “whether or not you want the websites you visit to show you ads that are tailored to your interests,” presents no trade-off. The fact that anyusers said “yes” indicates that many users paused to do the rough mental math about the unarticulated trade-off between the benefits of receiving tailored ads and the costs of that tailoring.

The methodology of opinion polls necessarily affects respondents’ mental calculations, rendering polls not just easily manipulated, but inherently unreliable as indicators of real preferences. Every poll reflects the bias of its authors to some degree by the way questions are worded, the order in which they are asked, the sample surveyed, etc. The easiest way to bias the results of a poll is to omit any mention of the trade-offs at issue. This poll simply buried the issue of trade-offs in a heavily loaded follow-up question: After telling respondents that marketers “often use technologies to follow the websites you visit and the content you look at in order to better customize ads,” the interviewer asked whether the respondent would allow advertisers to “follow [them] online in an anonymous way in exchange for free content.” Only 10% of users said they would allow this voluntary exchange.

What does this tell us about whether, and how, government should further regulate online advertising? Precious little: Not only does this poll overstate the costs of targeted advertising, understate its benefits, and ignore the tools available to users to address their privacy concerns but, like any opinion poll, this one tells us more about the psychology of decision-making under the artificial uncertainty of polls than about the choices users would actually make in the real world. Continue reading →

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Online Advertising: Privacy Zealot-Elitists v. Real Consumer Advocates

by on August 25, 2009 · 34 comments

Mediapost has published an interview I gave to Omar Tawakol, founder of the BlueKai registry entitled “User Empowerment, Not Regulation, Is The Answer to Privacy Concerns About Targeted Ads” in which I summarize the arguments Adam Thierer and I have been making since our “Principles to Guide the Debate” piece last September.

We argue for user empowerment over restrictive defaults (like “opt-in”) for data use and collection because, as the Supreme Court held in 2000: “Technology expands the capacity to choose; and it denies the potential of this revolution if we assume the Government is best positioned to make these choices for us.” We promote tools that let users make their own decisions about privacy, not only because those decisions are fundamentally subjective, but because regulatory mandates could stifle the development of online content and commerce.

I also note the parallels between speech controls and privacy regulation, and call for a consistent, principled approach to both:

Since 1997, the Supreme Court has struck down multiple legislative attempts to censor online and offline content [especially the CDA] because there were “less restrictive alternatives” that would not so heavily burden free speech rights. In a 2000 cable-related decision, the Court held that “targeted blocking [by users] is less restrictive than banning, and the Government cannot ban speech if targeted blocking is a feasible and effective means of furthering its compelling interests.” Courts have struck down other federal and state speech controls because parents had the tools to filter their kids’ access to information online, in video games, etc., as described in my PFF colleague Adam Thierer’s ongoing catalog of these tools… Many who oppose industry self-regulation are not really “consumer advocates” because they don’t recognize that consumers have many, competing values. Those regulatory advocates are more interested in their preferred one-size-fits-all mandates than in empowering users to determine their own privacy preferences. Like advocates of censorship, privacy zealots assert great dangers to which citizens are supposedly oblivious but which urgently require government intervention-dismissing arguments to the contrary as either uninformed or irresponsible.

The comments on the interview are equally worth reading.  Jeff Chester, who has made a career out of attacking advertising, quickly posted a comment dismissing, but ignoring, my arguments about consumer welfare as corporate propaganda—just as he did with his comment on the post Adam and I wrote in June about congressional hearings on the issue featuring Chester (and Scott Cleland, the right-wing “Bizarro Chester“).  I’ve had it with Chester’s ad hominem attacks on the motives of those who disagree with him, as I explained in my reply to Chester: Continue reading →

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New Self-Regulatory Principles for Online Behavioral Advertising

by on July 2, 2009 · 5 comments

The leading trade associations in the online advertising industry have just released their new self-regulatory principles—the first comprehensive self-regulatory principles industry has produced, which track closely with the suggested guidelines released by the FTC in February.

I commend the industry for setting a new standard in transparency, consumer control and data security. These Principles do much to empower Americans to make their own decisions about privacy, but I fear that many critics of so-called “targeted advertising” will never be satisfied, no matter how high industry raises the bar.

These critics have insisted that ordinary users can’t be trusted to make the “right decisions” about privacy and have insisted on imposing restrictive default “opt-in” rules for the online data collection that makes online advertising valuable to websites that rely on ad revenue.  Such pre-emptive privacy regulation would stunt the growth of revenue for the “Free” online content and services we’ve all come to take for granted.  During a time of economic recession, and as traditional media like newspapers struggle to make the transition from print to the Internet, it’s more important than ever that policymakers allow self-regulation to evolve.  Only by doing so can we expect continued innovation and creativity online. We must all remember:  There is no free lunch!

I’ll lead a panel discussion on July 10 on Capitol Hill about “Regulating Online Advertising: What Will it Mean for Consumers, Culture & Journalism?”  Please RSVP here.

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Facebook v. Google v. the Techno-Aquarians

by on June 27, 2009 · 16 comments

Fred Vogelstein’s essay in Wired, “Great Wall of Facebook: The Social Network’s Plan to Dominate the Internet — and Keep Google Out” describes the intensifying clash between Google and Facebook—a clash that focuses on the ability to target advertising:

Like typical trash-talking youngsters, Facebook sources argue that their competition is old and out of touch. “Google is not representative of the future of technology in any way,” one Facebook veteran says. “Facebook is an advanced communications network enabling myriad communication forms. It almost doesn’t make sense to compare them.”

Apart from noting that Facebook directs users to Microsoft’s Bing as its default search engine for the Internet at large, the most interesting part of the article is Facebook’s “4-Step Plan for Online Domination”:

1. Build critical mass. In the eight months ending in April, Facebook has doubled in size to 200 million members, who contribute 4 billion pieces of info, 850 million photos, and 8 million videos every month. The result: a second Internet, one that includes users’ most personal data and resides entirely on Facebook’s servers. 2. Redefine search. Facebook thinks its members will turn to their friends—rather than Google’s algorithms—to navigate the Web. It already drives an eyebrow-raising amount of traffic to outside sites, and that will only increase once Facebook Search allows users to easily explore one another’s feeds. 3. Colonize the Web. Thanks to a pair of new initiatives—dubbed Facebook Connect and Open Stream—users don’t have to log in to Facebook to communicate with their friends. Now they can access their network from any of 10,000 partner sites or apps, contributing even more valuable data to Facebook’s servers every time they do it. 4. Sell targeted ads, everywhere. Facebook hopes to one day sell advertising across all of its partner sites and apps, not just on its own site. The company will be able to draw on the immense volume of personal data it owns to create extremely targeted messages. The challenge: not freaking out its users in the process.

Facebook can’t keep losing money forever.  Indeed, investors are willing to keep sinking money into Facebook during Phases 1-3 because they think it will pay off in Phase 4—when Facebook really threatens to be a fGoogle-killer.  But rather the fact that investors are willing to subsidize the creation of a wonderful platform now used by 200 million people (one fifth of all Internet users worldwide), or that Facebook might finally provide a counter-weight to the fearsome Google, the People for the Ethical Treatment of Data (PETD) are appalled.  One commenter on the Wired story put it best: Continue reading →

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There is No Free Lunch! No Advertising, No Media

by on June 25, 2009 · 633 comments

Adam Thierer and I have been trying to drive home a simple message in the ongoing debate about targeted online advertising and privacy:  “There is no Free Lunch!”  We don’t have a lot of friends in this debate, since nearly everyone else seems to assume that online content and services will just continue to fall like manna from heaven if politicians strangle advertising online.  So I was particularly heartened to read the following from Shelly Palmer:

This is the most serious question facing content producers today. Content costs money to produce. Third-party advertising/sponsor support is one model, promoting your own products is another, subscription is a third. At the end of the day, there are only three ways it works: I pay, you pay or someone else pays. Unfortunately, there is no business model called “no one pays.” In the case of MediaBytes, the model is “I pay.” It works for me as stated above. But, apparently, a fairly large number of people in my audience are uninterested in seeing even relevant product offerings. Is advertising over? If so, what’s next?

Amen! Shelly hosts a daily Internet talk show on technology and media called MediaBytes.  He  recently tried inserting a short ad at the beginning of the show to cover the significant costs of production:

The show is produced every business day and requires a research staff, a writer (me), an editor, an encoding/distribution manager and an affiliate relations staff. The reason for the production overview is that, this particular two-minutes may look like a talking head combined with some graphics and clips, but the work flow for any given show takes approximately 6 hour and all of the people involved in the production are on salary here at Advanced Media Ventures Group. And, for the record, MediaBytes, and the associated production materials, takes up approximately 25% of my day.

Unfortunately, Shelly’s audience seemed to feel entitled to receive the fruit of his hard work for free—without suffering the  agony of watching… horror of horrors: advertising!. Continue reading →

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Behavioral Advertising Industry Practices Hearing: Some Issues that Need to be Discussed

by on June 17, 2009 · 23 comments

by Berin Szoka & Adam Thierer

This morning, the House Energy & Commerce Committee will hold a hearing on “Behavioral Advertising: Industry Practices And Consumers’ Expectations.” If nothing else, it promises to be quite entertaining:  With full-time Google bashers Jeff Chester and Scott Cleland on the agenda, the likelihood that top Google officials will be burned in effigy appears high!

Chester, self-appointed spokesman for what one might call the People for the Ethical Treatment of Data (PETD) movement, is sure to rant and rave about the impending techno-apocalypse that will, like all his other Chicken-Little scenarios, befall us all if online advertisers were permitted to better tailor ads to consumers’ liking. After all, can you imagine the nightmare of less annoying ads that might actually convey more useful information to consumers? Isn’t serving up “untargeted” dumb banner ads for Viagra to young women and Victoria’s Secret ads to Catholic school kids the pinnacle of modern online advertising?  Gods forbid we actually make advertising more relevant and interest-based!  (Those Catholic school boys may appreciate the lingerie ads, but few will likely buy bras.)

Anyway, according to National Journal’s Tech Daily Dose, the hearing lineup also includes:

  • Charles Curran, Executive Director, Network Advertising Initiative
  • Christopher Kelly, Chief Privacy Officer, Facebook
  • Edward Felten, Director, Center for IT Policy, Princeton University
  • Anne Toth, Chief Privacy Officer & Vice President, Policy, Yahoo!
  • Nicole Wong, Deputy General Counsel, Google

That’s an interesting group and we’re sure that they will say interesting things about the issue. Nonetheless, because four of them have a corporate affiliation that fact will inevitably be used by some critics to dismiss what they have to say about the sensibility of more targeted or interest-based forms of online advertising. So, we’d like to offer a few thoughts and pose a few questions to make sure that Committee members understand why, regardless of what it means for any particular online operator, targeting online advertising is very pro-consumer and essential to the future of online content, culture, and competition.  As Wall Street Journal technology columnist Walt Mossberg has noted, “Advertising is the mother’s milk of all the mass media.”  Much of the “free speech” we all cherish isn’t really free, but ad-supported!

Continue reading →

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