What Unites Advocates of Speech Controls & Privacy Regulation? [pdf]

by Adam Thierer & Berin Szoka The Progress & Freedom Foundation, Progress on Point No. 16.19

Anyone who has spent time following debates about speech and privacy regulation comes to recognize the striking parallels between these two policy arenas. In this paper we will highlight the common rhetoric, proposals, and tactics that unite these regulatory movements. Moreover, we will argue that, at root, what often animates calls for regulation of both speech and privacy are two remarkably elitist beliefs:

1. People are too ignorant (or simply too busy) to be trusted to make wise decisions for themselves (or their children); and/or,
2. All or most people share essentially the same values or concerns and, therefore, “community standards” should trump household (or individual) standards.

While our use of the term “elitism” may unduly offend some understandably sensitive to populist demagoguery, our aim here is not to launch a broadside against elitism as Time magazine culture critic William H. Henry once defined it: “The willingness to assert unyieldingly that one idea, contribution or attainment is better than another.”^[1] Rather, our aim here is to critique that elitism which rises to the level of political condescension and legal sanction. We attack not so much the beliefs of some leaders, activists, or intellectuals that they have a better idea of what it in the public’s best interest than the public itself does, but rather the imposition of those beliefs through coercive, top-down mandates.

That sort of elitism—elitism enforced by law—is often the objective of speech and privacy regulatory advocates. Our goal is to identify the common themes that unite these regulatory movements, explain why such political elitism is unwarranted, and make it clear how it threatens individual liberty as well as the future of free and open Internet. As an alternative to this elitist vision, we advocate an empowerment agenda: fostering an environment in which users have the tools and information they need to make decisions for themselves and their families.

I. The Elitism of Speech Regulation

First, consider how those two elitist beliefs identified above are on display when lawmakers or regulatory advocates make efforts to control speech or content.^[2] Calls to regulate free speech are often premised on the belief that something must be done to “protect The Children.”^[3] Personal and parental responsibility ^[4] are regarded as inadequate safeguards ^[5] since some parents will inevitably fall down on the job by not adequately shielding their children’s eyes and ears from potentially objectionable (or supposedly harmful) speech. Therefore, government must regulate content that is indecent, profane, excessively violent, and so on. The definition of those things is then left to unelected bureaucrats and judges to make on our behalf.

But it’s not just about “The Children.” Some regulatory advocates believe that even the choices made by consenting adults must be disregarded because some people fail to understand the supposedly destructive nature of the speech they are consuming. Government must act to protect people from making what some regulatory advocates regard as destructive or even immoral choices that could bring harm to them or their loved ones.

In sum, regulatory advocates are essentially saying that people cannot be trusted or left to their own devices and, therefore, government must intervene and establish a baseline “community standard” on behalf of the entire citizenry to tell them what‘s best for them.^[6] Even if those citizens have tools and information at their disposal to make sensible decisions about objectionable content, that’s not good enough because they might not do the job properly. Government must do it for them!

II. The Elitism of Privacy Regulation

This same mentality motivates calls for privacy regulations. Those who call for government interventions to “protect privacy” often claim that people too willingly surrender personal information about themselves and that they don’t understand the adverse consequences of those actions.^[7] Alternatively, regulatory advocates claim that advertising and marketing efforts are inherently “manipulative” and that people do not realize they are being duped into surrendering personal information or into buying products or services they supposedly don’t need.^[8] Of course, those regulatory advocates rarely pause to explain to us how it is that they were not also duped and manipulated by the same things—again revealing their deeply-rooted elitism! (As discussed below, this makes it clear how the psychological phenomenon of “third-person effect hypothesis” is driving much of this debate.)

“Protecting The Children” is also used as a rhetorical cover for regulation here, but not as often in debates over speech controls.^[9] Instead, regulatory advocates mostly focus on adults who are presumed not to know what is in their own best interest—necessitating paternalistic government intervention on their behalf.

III. Intellectual Schizophrenia on Both the Left & Right

What is particularly interesting about all this is the way these two issues expose a sort of intellectual schizophrenia at work on both the Left and Right of the political spectrum. Left-leaning policymakers and intellectuals typically decry censorship efforts (except where “commercial speech,” “hate speech” and “bias” are at issue), but are quick to rally around proposals to layer privacy regulations on the Internet. The opposite is often true of many on the Right of the political spectrum: They typically declare privacy regulations to be paternalistic and antithetical to free enterprise (or perhaps just erosive of efforts to legislate morality),^[10] but in the next breath advocate controls on content they find objectionable.

Few on either side stop to consider the relationship between speech and privacy. In fact, they are but two sides of the same coin. After all, what is your “right to privacy” but a right to stop me from observing you and speaking about you?^[11] “Protecting privacy,” therefore, typically means restricting speech rights in the process. Advocates of privacy regulation often insist that the use, processing and collection of information are “conduct” unprotected by the First Amendment, but in fact, the First Amendment broadly protects the gathering and distribution of information as part of the process of communication (“speech”).^[12] Similarly, attempts to “clean up” speech or “protect The Children,” often require regulations that would betray the privacy of adults by expanding the role of government, and impose serious burdens on businesses and markets—such as age verification mandates ^[13] or extensive data retention requirements.^[14]

IV. Common Tactics & Regulatory Mechanisms

The two movements also share common political tactics and regulatory approaches. Privacy advocates generally favor “opt-in” mandates as the federal “baseline standard” for any website collecting information about users, especially their browsing habits (regardless of whether the information is “personally identifiable”). In other words, the law would create a property right in such “personal information” (ironically, many advocates of this approach criticize or reject intellectual property.) In a similar vein, many advocates of speech controls push for mandatory parental control tools or restrictive default settings.^[15] That is, if government won’t censor speech outright, regulatory advocates want lawmakers to at least (1) require that media, computing and communications devices be shipped to market with parental controls embedded or included (as proposed in Australia and with China’s “Green Dam” filter),^[16] and possibly, (2) that such controls be defaulted to their most restrictive position—forcing users to opt-out of the controls later if they want to consume media rated above a certain threshold.

More sophisticated advocates of speech controls and privacy regulation will likely argue that their paternalism is less elitist or intrusive because they merely want to “nudge” the public into making “better” decisions. Economist Richard Thaler and legal scholar Cass Sunstein (director of President Obama’s Office of Information and Regulatory Affairs, responsible for analyzing most new federal regulations) popularized this approach with their 2008 book Nudge: Improving Decisions about Health, Wealth, and Happiness. Based on behavioral economics studies, they argue that both government and private actors must inevitably make decisions about “choice architecture” and that, by setting defaults, incentives and rules smartly, “choice architects” can and should improve decision-making without blocking, fencing-off or significantly burdening choices.^[17]

In this regard, Sunstein and Thaler’s approach parallels the work of Lawrence Lessig, one of the most influential Internet policy thinkers. Lessig has argued that the “architecture” of “code” (how software is written) “regulates” all online activities and requires government oversight and intervention to keep in check. Otherwise, he warned ominously a decade ago, “Left to itself, cyberspace will become a perfect tool of control.”^[18] Lessig’s hyper-pessimistic predictions have proven unwarranted, however. Far from fostering a world of “perfect control,” code and cyberspace have proven remarkably difficult to regulate, but nonetheless has generally benefited consumers and citizens without centralized direction.^[19] Still, Lessig, Sunstein, and others of this ilk persist in their advocacy of “nudges” of many varieties to impose their will on cyberspace through mandates from above.

But while it might be possible to define “better decisions” and argue that poor choice architecture leads people to choose things they clearly don’t want in contexts like investment decisions and mortgages, how can elites know what other people really want in highly subjective contexts like privacy and speech? Should they rely on opinion polls—the highly subjective results of which depend heavily on “choice architecture” of question-crafting—to guess what the right default should be?^[20] Was the Chinese proposal to mandate deployment of “Green Dam” just a harmless “nudge” because users weren’t barred from uninstalling the filtering software that must accompany their computers (i.e., “opting-out”)? The problem becomes even more difficult where trade-offs among competing values are inevitable. For example, data collection about Internet users raises privacy concerns for some but benefits all, creating more funding for “free” content (i.e., speech) and services users prefer by making more valuable the advertising that supports online publishers. In short, regulations of speech and privacy are likely to be pure paternalism, even when billed as “libertarian paternalism as Thaler and Sunstein label their approach.^[21]

What might be called “regulatory blackmail” is also a time-honored tradition among both advocates of speech controls and privacy regulation. When censorship advocates have previously been impeded by the First Amendment, they have worked behind the scenes with lawmakers or regulatory agencies to use indirect pressure and strong-arming tactics to extract “voluntary concessions” from companies or others.^[22] For example, in 2004, the FCC strong-armed radio giant Clear Channel into agreeing to a “voluntary” consent decree that involved taking Howard Stern off the air.^[23] Similarly, in 2008, XM and Sirius Satellite Radio finally agreed to set aside 4% of their system capacity for use by politically favored racial minorities (a kind of speech control) as a “voluntary condition” of their merger—after the FCC had sat on their application for nearly 16 months.^[24] This race-based preference would have been unconstitutional if the FCC had imposed it directly.^[25] While the FTC has been far less prone to such abuse and actually plays a key role in holding companies to their promises, its current Chairman, Jon Leibowitz, has hung the “regulatory sword of Damocles” over the heads of the online advertising industry, threatening them with a “day of reckoning” if he doesn’t get what he wants from industry self-regulatory efforts.”^[26] The sword could actually fall if the FTC turns self-regulation into the European model of “co-regulation,” where the government steers and industry simply rows.^[27]

V. The Crisis Mentality that Drives Regulation

Speech and privacy regulatory advocates share another trait in common: an affinity for the use of a crisis mentality as a method of spurring political action. In his 1995 book The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy, political philosopher and economist Thomas Sowell formulated a model that he argued drives ideological crusades to expand government power over our lives and economy. “The great ideological crusades of the twentieth-century intellectuals have ranged across the most disparate fields,” noted Sowell. But what they all had in common, he argued, was “their moral exaltation of the anointed above others, who are to have their different views nullified and superseded by the views of the anointed, imposed via the power of government.”^[28] These government-expanding crusades shared several key elements, which Sowell identified as follows:

1. Assertion of a great danger to the whole society, a danger to which the masses of people are oblivious.
2. An urgent need for government action to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many, in response to the prescient conclusions of the few.
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes.

We see this model at work on a daily basis today with our government’s various efforts to reshape our economy, but the model is equally applicable to debates over speech controls and privacy regulation. In particular, the various “technopanics”^[29] we have witnessed in recent years fit this model. For example, consider how this model plays out in the debate over online social networking:

1. Assertion of a great danger to the whole society [online sexual predators], a danger to which the masses of people are oblivious.
2. An urgent need for government action [such as mandatory online age verification ^[30] or the Deleting Online Predators Act ^[31]] to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many [must stop kids and adults from being online together on same sites], in response to the prescient conclusions of the few [some state Attorneys General].^[32]
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes [child safety researchers and others are told that their research is meaningless or offbase].^[33]

We also see this model in play in other debates, such as efforts to regulate “excessively violent” video games and television programming.^[34] And consider how this model plays out on the privacy front:

1. Assertion of a great danger to the whole society [amorphous privacy violations], a danger to which the masses of people are oblivious.
2. An urgent need for government action [“baseline federal privacy regulation”] to avert impending catastrophe.
3. A need for government to drastically curtail the dangerous behavior of the many [anyone who shares information online], in response to the prescient conclusions of the few [a handful of privacy advocacy groups].
4. A disdainful dismissal of arguments to the contrary as either uninformed, irresponsible, or motivated by unworthy purposes [any suggestion that privacy concerns are being overblown and that most information-sharing is socially beneficial is dismissed out-of-hand].

Worse yet, regulatory intervention in these cases simply begets more and more intervention to correct the inevitable failures of, or dissatisfaction with, previous interventions.^[35] Thus, the “crisis” cycle never ends.

VI. Third-Person Effect Hypothesis as an Explanation

Something more profound than simple political elitism seems to be at work here, however. A phenomenon psychologists refer to as the “third-person effect hypothesis” can explain many calls for government intervention, especially in the media world.^[36] Simply stated, speech and privacy critics sometimes seem to only see and hear in media or communications what they want to see and hear—or what they don’t want to see or hear. When they encounter perspectives or preferences that are at odds with their own, they are more likely to be concerned about the impact of those things on others throughout society and come to believe that government must “do something” to correct those perspectives. Many people desire regulation because they think it will be good for others, not necessarily for themselves. The regulation they desire has a very specific purpose in mind: “re-tilting” speech or market behavior in their desired direction.

The third-person effect hypothesis was first formulated by W. Phillips Davison in a seminal 1983 article:

In its broadest formulation, this hypothesis predicts that people will tend to overestimate the influence that mass communications have on the attitudes and behavior of others. More specifically, individuals who are members of an audience that is exposed to a persuasive communication (whether or not this communication is intended to be persuasive) will expect the communication to have a greater effect on others than on themselves.^[37]

Davison used this hypothesis to explain how media critics on both the Left and Right seemed to simultaneously find “bias” in the same content or reports when they couldn’t possibly both be correct. In reality, their own personal preferences were biasing their ability to fairly evaluate that content. Davison’s article prompted further research by many other psychologists, social scientists, and public opinion experts to test just how powerful this phenomenon was in explaining calls for censorship and other social phenomena.^[38] In these studies, third-person effect has been shown to be the primary explanation for why many people fear—or even want to ban—various types of speech or expression, including news,^[39] misogynistic rap lyrics,^[40] television violence,^[41] video games,^[42] and pornography.^[43] In each case, the subjects surveyed expressed strong misgivings about allowing others to see or hear too much of the speech or expression in question, but greatly discounted the impact of that speech on themselves. Such studies thus reveal the strong paternalistic instinct behind proposals to regulate speech. As Davison notes:

Insofar as faith and morals are concerned… it is difficult to find a censor who will admit to having been adversely affected by the information whose dissemination is to be prohibited. Even the censor’s friends are usually safe from the pollution. It is the general public that must be protected. Or else, it is youthful members of the general public, or those with impressionable minds.^[44]

It’s easy to see how this same phenomenon is at work in debates about privacy. Regulatory advocates imagine their preferences are “correct” (right for everyone) and that the masses are being duped by external forces beyond their control or comprehension, even though the advocates themselves are somehow immune from the brain-washing and privy to some higher truth that the hoi polloi simply cannot fathom. Again, this is Sowell’s “Vision of the Anointed” at work.

Consider the flare-up in 2004 over the introduction of Gmail, Google’s free email service. At a time when Yahoo! mail (then as now the leading webmail provider) offered customers less than 10 megabytes of email storage, Gmail offered an astounding gigabyte of storage that would grow over time (now over 7 GB). Rather than charging some users for more storage or special features, Google paid for the service by showing advertisements next to each email “contextually” targeted to keywords in that email—a far more profitable form of advertising than “dumb banner” ads previously used by other webmail providers.^[45] Self-appointed (or, to extend Sowell’s framework, “self-anointed”) privacy advocates howled that Google was going to “read users’ email,” and led a crusade to ban such algorithmic contextual targeting.^[46] Thierer responded to these critics by pointing out that the service was purely voluntary and noted:

you don’t speak for me and a lot of other people in this world who will be more than happy to cut this deal with Google. So do us a favor and don’t ask the government to shut down a service just because you don’t like it. Privacy is a subjective condition and your value preferences are not representative of everyone else’s values in our diverse nation. Stop trying to coercively force your values and choices on others. We can decide these things on our own, thank you very much.^[47]

Interestingly, however, the frenzy of hysterical indignation about Gmail was followed by a collective cyber-yawn: Users increasingly understood that algorithms, not humans, were doing the “reading” and that, if they didn’t like it, they didn’t have to use it. Today, nearly 150 million of people around the world use Gmail, and it has a steadily growing share of the webmail market. Even though cyber-consumers have embraced the service, some privacy advocates persist in their effort to shut down Gmail. They appear determined to stop at nothing to impose their will on others—the essence of political elitism—even if that means cutting off free email service for 150 million people!^[48]

A similar debate has played out more recently regarding targeted online advertising in general. Advertising on search engines is, much like Gmail, targeted “contextually” based on search terms entered by users and most advertising on other websites is based on the nature of content on a site or page. But certain data is collected about users as they browse to make that advertising more effective—by measuring its performance, reducing fraud, preventing over-exposure, etc. Some privacy advocates have insisted that industry self-regulation of such practices (even if enforced by the FTC) is inadequate and have called for preemptive regulation. They are even more offended by “behavioral advertising” which allows publishers whose content would have little value as the basis for contextually targeting advertising on their own sites to compete for more highly valued advertising by showing ads to users based on other sites they’ve visited. In both cases, data collection can increase the funding available to publishers to produce more of the content and services preferred by users, thus conferring an enormous indirect benefit on users, but also directly benefits users by increasing the relevance of the advertising they see.^[49] For some of the more extreme advocates of privacy regulation, however, there are no trade-offs, only absolutist “solutions:” To them, privacy is so obviously desirable that they feel at ease in deciding what’s best for everyone else. Such absolutists often respond with righteous indignation and conspiratorial fulmination when challenged to identify the harm against which they’re protecting consumers, while disdainfully dismissing all talk of the benefits of online advertising as self-serving industry propaganda.^[50]

VII. The Principled Alternative: Trust People & Empower Them

There is an alternative to this elitist mentality: freedom and personal responsibility. Individuals should be permitted to live a life of their own, even if they sometimes make mistakes or choices that are at odds with what elites think is best for them. ^[51]

Of course, the world isn’t perfect. In an ideal world, adults would be fully empowered to tailor speech and privacy decisions to their own values and preferences. Specifically, in an ideal world, adults (and parents) would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to not only block the things they don’t like—objectionable content, annoying ads or the collection of data about them—while also finding the things they want.

Achieving that ideal is likely impossible, but the good news is that we are moving closer to it with each passing day. Citizens have more tools and methods at their disposal than ever before which enable them to make decisions for themselves and their families. And this is true for both parental controls ^[52] and privacy controls.^[53]

Of course, some speech and privacy elitists will argue that we can’t trust empowerment tools ( e.g., filters, rating systems, or other controls) that are created by companies or other affected parties. But rather than trying to enhance those tools and educate users about how to use them, these elitists skip right past user empowerment and channel their energies into regulations that would impose a top-down, one-size-fits all standard on all adults and families—or even into trying to craft the perfect “nudge” that will help users make what elites believe to be the “right” decisions. Of course, these tools can, and should, be improved. Those groups worried about speech/content and privacy issues should focus on how we might drive such protections from the bottom-up by empowering individuals instead of government bureaucrats. The goal in both cases should be a “let-a-thousand-flowers-bloom” approach, which offers diverse tools and strategies for our diverse citizenry.^[54] We need not accept “one-size-fits” all approaches, whether they be regulatory mandates or “nudges,” based on the presumption that elites know best.

Finally, it is vital not to lose sight of what’s ultimately at stake here. If regulatory approaches trump the empowerment agenda we have described, the future of a free and open Internet—indeed, as technology converges, the future of all media—is at risk.^[55] By imposing technological solutions from the top-down that can never keep pace with technological change, regulation necessarily forecloses freedom and innovation.^[56] By contrast, individual empowerment allows innovation to flourish. The better approach across the board is education, not regulation.^[57] Empowerment, not elitism, is the path forward. The digital elite should be leading this effort by developing and promoting technologies of empowerment, not crafting regulatory mandates to force their will upon us.^[58]

#

Adam Thierer is a Senior Fellow with The Progress & Freedom Foundation and the director of its Center for Digital Media Freedom. Berin Szoka  is a Senior Fellow with PFF and the Director of PFF’s Center for Internet Freedom.

[1] . William A. Henry, In Defense of Elitism (1995) at 2-3.

[2] . See Adam Thierer, The Progress & Freedom Foundation, Congress, Content Regulation, and Child Protection: The Expanding Legislative Agenda, Progress Snapshot 4.4, Feb. 2008, www.pff.org/issues-pubs/ps/2008/ps4.4childprotection.html. Like American courts, we use the term “speech” as a broad catch-all for communications, including both actual speaking as well as other forms of transmitting, as well as receiving, information (“content”).

[3] . See generally Adam Thierer, Don’t Scapegoat Media, USA Today, Dec. 4, 2008, www.pff.org/issues-pubs/ps/2008/ps4.24scapegoatmedia.html; Marjorie Heins, Not in Front of the Children, “Indecency,” Censorship, and the Innocence of Youth (2001); Karen Sternheimer, It’s Not the Media: The Truth about Pop Culture’s Influence on Children (2003); Karen Sternheimer, Kids These Days: Facts and Fictions about Today’s Youth (2006).

[4] . See Adam Thierer, The Progress & Freedom Foundation, FCC Violence Report Concludes that Parenting Doesn’t Work, PFF Blog, Apr. 26, 2007, http://blog.pff.org/archives/2007/04/fcc_violence_re.html.

[5] . See Adam Thierer, The Progress & Freedom Foundation, Sen. Rockefeller Gives Up on Parenting at Senate Violence Hearing, PFF Blog, June 26, 2007, blog.pff.org/archives/2007/06/sen_rockefeller_1.html.

[6] . Adam Thierer, Conservatives, Porn, and “Community Standards,” The Technology Liberation Front, March 2, 2009, http://techliberation.com/2009/03/02/conservatives-porn-and-community-standards.

[7] . Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, Online Advertising & User Privacy: Principles to Guide the Debate, Progress Snapshot 4.19, Sept. 2008, www.pff.org/issues-pubs/ps/2008/ps4.19onlinetargeting.html.

[8] . Jeff Chester, for decades the great gadfly of American advertising, has decried “the system … developed to track each and every one of us and our behavior for one-on-one marketing efforts” as “manipulative, intrusive and un-democratic.” Wendy Melillo, Q&A: Chester Writes the Book on Privacy, Dec. 11, 2007, www.gfem.org/node/227. For instance, Chester and other leading “privacy advocates” ridicule the idea of smart phones as a “liberating technology” and insist that,

Despite the glowing words about customization and personalized service, what marketers and advertisers are increasingly offering consumers is merely the illusion of free choice. Mobile operators offer their various options and services, not on an individual basis, but preconfigured according to segmented demographic profiles.

Center for Digital Democracy and U.S. Public Interest Research Group, Complaint and Request for Inquiry and Injunctive Relief Concerning Unfair and Deceptive Mobile Marketing Practices, Jan. 13, 2009 (emphasis original), www.democraticmedia.org/files/FTCmobile_complaint0109.pdf. See generally Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, Targeted Online Advertising: What’s the Harm & Where Are We Heading?, Progress on Point 16.2, Feb. 2009, www.pff.org/issues-pubs/pops/2009/pop16.2targetonlinead.pdf.

[9] . Berin Szoka & Adam Thierer, The Progress & Freedom Foundation, COPPA 2.0: The New Battle over Privacy, Age Verification, Online Safety & Free Speech, Progress on Point 16.11, May 2009, www.pff.org/issues-pubs/pops/2009/pop16.11-COPPA-and-age-verification.pdf.

[10] . The Supreme Court has used a “right to privacy” to strike down laws against the use of contraception by married couples, Griswold v Connecticut, 381 U.S. 479 (1965), and abortion, Roe v. Wade, 410 U.S. 113 (1973).

[11] . Eugene Volokh, Freedom of Speech and Information Privacy: The Troubling Implications of a Right to Stop People From Speaking About You, 52 Stanford L. Rev. 1049 (2000), available at www.pff.org/issues-pubs/pops/pop7.15freedomofspeech.pdf.

[12] . See , Amicus Brief for Association Of National Advertisers, Cato Institute, Coalition For Healthcare Communication, Pacific Legal Foundation And The Progress & Freedom Foundation In Support Of Appellants, IMS Health v. Sorrell, No. 09-1913-cv(L), 09-2056-cv(CON) (2nd Cir. 2009), available at www.pff.org/issues-pubs/filings/2009/071309-Brief-Amici-Curiae-ANA-et-al-Second-Circuit-(09-1913-cv).pdf.

[13] . See Adam Thierer, The Progress & Freedom Foundation, Social Networking and Age Verification: Many Hard Questions; No Easy Solutions, Progress on Point No. 14.5, March 2007, www.pff.org/issues-pubs/ pops/pop14.8ageverificationtranscript.pdf; www.pff.org/issues-pubs/pops/pop14.5ageverification.pdfAdam Thierer, The Progress & Freedom Foundation, Statement Regarding the Internet Safety Technical Task Force’s Final Report to the Attorneys General, Jan. 14, 2008, www.pff.org/issues-pubs/other/090114ISTTFthiererclosingstatement.pdf; Nancy Willard, Why Age and Identity Verification Will Not Work—And is a Really Bad Idea, Jan. 26, 2009, www.csriu.org/PDFs/digitalidnot.pdf; Jeff Schmidt, Online Child Safety: A Security Professional’s Take, The Guardian, Spring 2007, www.jschmidt.org/AgeVerification/Gardian_JSchmidt.pdf.

[14] . Adam Thierer, The Progress & Freedom Foundation, Mandatory Data Retention: How Much is Appropriate, PFF Blog, June 26, 2006, http://blog.pff.org/archives/2006/06/mandatory_data.html

[15] . Adam Thierer, The Progress & Freedom Foundation, The Perils of Mandatory Parental Controls and Restrictive Defaults, Progress on Point 14.4, Apr. 11, 2008, www.pff.org/issues-pubs/pops/2008/pop15.4defaultdanger.pdf.

[16] . Adam Thierer, China’s Green Dam Filter and the Threat of Rising Global Censorship, PFF Blog, June 17, 2009, http://blog.pff.org/archives/2009/06/chinas_green_dam_filter_and_threat_of_rising_globa.html

[17] . They define choice architecture as follows: “A structure designed by a choice architect(s) to improve the quality of decisions made by homo sapiens. Often invisible, choice architecture is the specific user-friendly shape of an organization’s policy or physical building when homo sapiens come into contact with it. Examples of choice architecture include a voter ballot, a procedure for handling well-meaning people who forget a deadline, or a skyscraper.” Nudge Glossary of Terms, www.nudges.org/glossary.cfm.

[18] . Lawrence Lessig, Code and Other Laws of Cyberspace (1999) at 6.

[19] . See Adam Thierer, Code, Pessimism, and the Illusion of “Perfect Control,” Cato Unbound, May 2009, www.cato-unbound.org/2009/05/08/adam-thierer/code-pessimism-and-the-illusion-of-perfect-control

[20] . See Solveig Singleton & Jim Harper, With A Grain of Salt: What Consumer Privacy Surveys Don’t Tell Us, 2001, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=299930.

[21] . As Cato Institute scholar Will Wilkinson has argued, the book’s “agreeably banal doctrine of choice-preserving helpfulness” blurs the lines between paternalism and libertarianism, and thus “the thrust of the conceptual renovation behind the term libertarian paternalism is to empower, not limit, political elites.” Why Opting Out Is No “Third Way,” Reason, October 2008, www.reason.com/news/show/128916.html. See also Adam Thierer, The Progress & Freedom Foundation, Sunstein’s “Libertarian Paternalism” is Really Just Paternalism, PFF Blog, April 7, 2008, http://blog.pff.org/archives/2008/04/sunsteins_liber.html.

[22] . See Robert Corn-Revere, “’Voluntary’ Self-Regulation and the Triumph of Euphemism,” in Rationales & Rationalizations: Regulating the Electronic Media (Robert Corn-Revere, ed., 1997), at 183-208.

[23] . Telecom Policy Report, Commission Settles Indecency Charges, But At What Cost?, June 30, 2004, http://findarticles.com/p/articles/mi_m0PJR/is_25_2/ai_n6091525.

[24] . See Adam Thierer, XM-Sirius, Regulatory Blackmail, and Diversity, June 17, 2008, http://blog.pff.org/archives/2008/06/xmsirius_regula.html.

[25] . See Comments of W. Kenneth Ferree on Implementation of Sirius-XM Merger Condition, The Progress & Freedom Foundation, MB Docket No. 07-57, March 30, 2009, www.pff.org/issues-pubs/filings/2009/033009siriusXMconditionfiling.pdf.

[26] . See Szoka & Adam Thierer, supra note 8 at 3.

[27] . See id. at 2.

[28] . Thomas Sowell, The Vision of the Anointed: Self-Congratulation as a Basis for Social Policy (1995) at 5.

[29] . Alice Marwick, To Catch a Predator? The MySpace Moral Panic, First Monday, Vol. 13, No. 6-2, June 2008, www.uic.edu/htbin/cgiwrap/bin/ojs/index.php/fm/article/view/2152/1966; Wade Roush, The Moral Panic over Social Networking Sites, Technology Review, Aug. 7, 2006, www.technologyreview.com/communications/17266; Anne Collier, Why Techopanics are Bad, Net Family News, April 23, 2009, www.netfamilynews.org/2009/04/why-technopanics-are-bad.html; Adam Thierer, Parents, Kids & Policymakers in the Digital Age: Safeguarding Against ‘Techno-Panics,’ Inside ALEC, July 2009, at 16-17, www.alec.org/am/pdf/Inside_July09.pdf; Adam Thierer, Progress & Freedom Foundation, Technopanics and the Great Social Networking Scare, PFF Blog, June 10, 2008, http://techliberation.com/2008/07/10/technopanics-and-the-great-social-networking-scare.

[30] . Supra note 13.

[31] . In the 109th Congress, former Rep. Michael Fitzpatrick (R-PA) introduced the Deleting Online Predators Act (DOPA), which proposed a ban on social networking sites in public schools and libraries. DOPA passed the House of Representatives shortly thereafter by a lopsided 410-15 vote, but failed to pass the Senate. The measure was reintroduced just a few weeks into the 110th Congress by Senator Ted Stevens (R-AK), the ranking minority member and former chairman of the Senate Commerce Committee. It was section 2 of a bill that Sen. Stevens sponsored titled the “Protecting Children in the 21st Century Act” (S. 49), but was later removed from the bill. See Declan McCullagh, Chat Rooms Could Face Expulsion, CNet News.com, July 28, 2006, http://news.com.com/2100-1028_3-6099414.html?part=rss&tag=6099414&subj=news.

[32] . See Emily Steel & Julia Angwin, MySpace Receives More Pressure to Limit Children’s Access to Site, Wall Street Journal, June 23, 2006, online.wsj.com/public/article/SB115102268445288250-YRxkt0rTsyyf1QiQf2EPBYSf7iU_20070624.html; Susan Haigh, Conn. Bill Would Force MySpace Age Check, Yahoo News.com, March 7, 2007, www.msnbc.msn.com/id/17502005.

[33] . See, e.g., Letter of Henry McMaster, Attorney General, South Carolina to Attorney General Richard Blumenthal and Attorney General Roy Cooper Regarding Internet Safety Task Force (“ISTTF”) Report, January 14, 2009, www.scag.gov/newsroom/pdf/2009/internetsafetyreport.pdf

[34] . See Adam Thierer, The Progress & Freedom Foundation, Video Games and “Moral Panic,” PFF Blog, Jan. 23, 2009, http://blog.pff.org/archives/2009/01/video_games_and_moral_panic.html ; Adam Thierer, The Progress & Freedom Foundation, Fact and Fiction in the Debate over Video Game Regulation, Progress Snapshot 13.7, March 2006, www.pff.org/issues-pubs/pops/pop13.7videogames.pdf.

[35] . “All varieties of interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state affairs which they were designed to alter. If one wants to correct their manifest unsuitableness and preposterousness by supplementing the first acts of intervention with more and more of such acts, one must go farther and farther until the market economy has been entirely destroyed and socialism has been substituted for it.” Ludwig von Mises, Human Action, at 858 (3rd ed. 1963) (1949).

[36] . See generally Adam Thierer, The Progress & Freedom Foundation, Media Myths: Making Sense of the Debate over Media Ownership (2005) at 119-123, www.pff.org/issues-pubs/books/050610mediamyths.pdf (Explaining how the third-person effect serves as a powerful explanation for the heated backlash that followed an FCC effort to moderately liberalize media ownership rules in 2003-04).

[37] . W. Phillips Davison, The Third-Person Effect in Communication, 47 Public Opinion Quarterly 1, Spring 1983, at 3.

[38] . For the best overview of third-person effect research, see Douglas M. McLeod, Benjamin H. Detenber, and William P. Eveland., Jr., Behind the Third-Person Effect: Differentiating Perceptual Processes for Self and Other, 51 Journal of Communication, Vol. 51, No. 4, 2001, at 678-695.

[39] . Vincent Price, David H. Tewksbury & Li-Ning Huang, Third-person Effects of News Coverage: Orientations Toward Media, Journalism & Mass Communications Quarterly, Vol. 74, at 525-540.

[40] . Douglas M. McLeod, William P. Eveland & Amy I. Nathanson, Support for Censorship of Violent and Misogynic Rap Lyrics: And Analysis of the Third-Person Effect, Communications Research, Vol. 24, 1997, at 153-174.

[41] . Hernando Rojas, Dhavan V. Shah, and Ronald J. Faber, For the Good of Others: Censorship and the Third-Person Effect, International Journal of Public Opinion Research, Vol. 8, 1996, at 163-186.

[42] . James D. Ivory, Addictive, But Not For Me: The Third-Person Effect and Electronic Game Players’ Views Toward the Medium’s Potential for Dependency and Addiction, University of North Carolina at Chapel Hill, School of Journalism and Mass Communication, Aug. 2002.

[43] . Albert C. Gunther, Overrating the X-rating: The Third-person Perception and Support for Censorship of Pornography, Journal of Communication, Vol. 45, No. 1, 1995, at 27-38

[44] . Supra note 37 at 14. Along these lines, a December 2004 Washington Post article documented the process by which the Parents Television Council, a vociferous censorship advocacy group, screens various television programming. One of the PTC screeners interviewed for the story talked about the societal dangers of various broadcast and cable programs she rates, but then also noted how much she personally enjoys HBO’s “The Sopranos” and “Sex and the City,” as well as ABC’s “Desperate Housewives.” Apparently, in her opinion, what’s good for the goose is not good for the gander! See Bob Thompson, Fighting Indecency, One Bleep at a Time, The Washington Post, Dec. 9, 2004, at C1, www.washingtonpost.com/wp-dyn/articles/A49907-2004Dec8.html.

[45] . See Chris Anderson, Free: The Future of a Radical Price at 112-118 (2009).

[46] . See Letter from Chris Jay Hoofnagle, Electronic Privacy Information Center, Beth Givens, Privacy Rights Clearinghouse, Pam Dixon, World Privacy Forum, to California Attorney General Lockyer, May 3, 2004, http://epic.org/privacy/gmail/agltr5.3.04.html.

[47] . See email from Adam Thierer to Declan McCullaugh on Politech Email discussion group, April 30, 2004, http://lists.jammed.com/politech/2004/04/0083.html (emphasis added).

[48] . See Complaint and Request for Injunction of the Electronic Privacy Information Center against Google, Inc., March 17, 2009, http://epic.org/privacy/cloudcomputing/google/ftc031709.pdf; see also Ryan Radia, Should the FTC Shut Down Gmail and Google Docs Because of an Already-Fixed Bug?, Technology Liberation Front Blog, March 18, 2009, http://techliberation.com/2009/03/18/should-the-ftc-shut-down-gmail-and-google-docs-because-of-an-already-fixed-bug/.

[49] . See Berin Szoka & Mark Adams, The Progress & Freedom Foundation, The Benefits of Online Advertising & the Costs of Regulation, PFF Working Paper, forthcoming.

[50] . Anti-advertising crusader Jeff Chester often resorts to questioning the motives of those who question whether his regulatory prescriptions would actually benefit consumers, see, e.g., http://techliberation.com/2009/06/17/behavioral-advertising-industry-practices-hearing-some-issues-that-need-to-be-discussed/#comment-11698840. See generally Jeff Chester, Digital Destiny: New Media and the Future of Democracy (2007).

[51] . “The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily or mental and spiritual.” John Stuart Mill, On Liberty (Penguin Classics, 1859, 1986) at 72.

[52] . Adam Thierer, The Progress & Freedom Foundation, Parental Controls & Online Child Protection, Special Report, Version 4.0, Summer 2009, www.pff.org/parentalcontrols.

[53] . Adam Thierer, Berin Szoka & Adam Marcus, The Progress & Freedom Foundation, Privacy Solutions, PFF Blog, Ongoing Series, http://blog.pff.org/archives/ongoing_series/privacy_solutions.

[54] . Comments of Adam Thierer, The Progress & Freedom Foundation, In the Matter of Implementation of the Child Save Viewing Act; Examination of Parental Control Technologies for Video or Audio Programming; MB Docket No. 09-26, April 16, 2009, www.pff.org/issues-pubs/filings/2009/041509-%5bFCC-FILING%5d-Adam-Thierer-PFF-re-FCC-Child-Safe-Viewing-Act-NOI-(MB-09-26).pdf.

[55] . See Adam Thierer, FCC v. Fox and the Future of the First Amendment in the Information Age, Engage, Feb. 20, 2009, www.fed-soc.org/doclib/20090216_ThiererEngage101.pdf

[56] . “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.” Friedrich von Hayek, “The Pretence of Knowledge,” in The Essence of Hayek, (Hoover Inst., 1984), at 276.

[57] . Adam Thierer, The Progress & Freedom Foundation, Two Sensible, Education-Based Legislative Approaches to Online Child safety, Progress Snapshot 3.10, Sept. 2007, www.pff.org/issues-pubs/ps/2007/ps3.10safetyeducationbills.pdf.

[58] . See, e.g., Berin Szoka, Google, CDT, Online Advertising & Preserving Persistent User Choice Across Ad Networks Through Plug-ins, Technology Liberation Front Blog, March 13, 2009, http://techliberation.com/2009/ 03/13/google-cdt-online-advertising-preserving-persistent-user-choice-across-ad-networks-through-plug-ins/.

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!.

To my absolute astonishment, I have received dozens of emails, several txt messages and a couple of direct tweets telling me that the :11 seconds of commercial messaging “cheapens” MediaBytes. Several of my core viewers told me that putting a commercial for my own stuff in MediaBytes takes away from my credibility and makes me a huckster, etc. All of the writings were thoughtful and all were vicious in their certitude that MediaBytes should contain no advertising. Now every bit of data I have ever seen on the subject says that a short, well-scripted pre-roll is the best form of message management for online content. My core audience obviously disagrees. So, I’ll put it to you. I want to sell my training courses to my audience as a way to offset/subsidize the cost of creating MediaBytes. I don’t want to charge a subscription fee, I don’t want to expose my audience to third party advertising that may be extremely irrelevant to them. I want to sell the online training, DVD’s, books, etc. that I create and produce. You know how many different deliverables we create each day, the advertising has to work as video and audio, so it must be written like “radio with pictures.” What would you do? How would you offer these products? And,  if you really don’t want to see any advertising in the body of MediaBytes, how do you suggest paying for the creation, production and distribution of the content?

Well, what say ye, o wise and noble “consumer advocates” who yearn to save us from the indignity of having “Free!” ad-supported content and services foisted on us?  Why should Shelly have to choose between slaving away for free, and just deciding to “take his ball and go home?”  Why should Shelly’s viewers get something for nothing?

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!

Our Approach

We have previously set forth a framework for analyzing advertising policy issues in two PFF reports: “Online Advertising & User Privacy: Principles to Guide the Debate” and “Targeted Online Advertising: What’s the Harm & Where Are We Heading?” At root, our model depends heavily on two common-sense, and inter-related, principles:

1. We live in a world of trade-offs; and
2. There is no free lunch.

Their Approach

We are deeply concerned that too few people are talking about—or even understand the relevance of—those two principles in the debate over targeted online advertising. It seems that too many who wish to retard the further evolution of the advertising marketplace are living a lie based upon the antithesis of our model. Many privacy advocates seem to imagine that regulatory actions don’t have consequences and that Congress can simply mandate new privacy standards for the Internet without having any impact on the free flow of ideas supported by, and direct facilitated through, advertising.

Simply put, the privacy critics often imagine that their values are indicative of everyone’s values. Our blogging colleague Jim Harper of the Cato Institute has referred to this as “preference imposition” but we’ll use a simpler term: Elitism. In essence, privacy advocates seem to believe that:

1. People are too ignorant, busy or just plain stupid, and cannot be trusted to make wise decisions for themselves (or their children); and/or
2. Everyone shares the same values or concerns when it comes to privacy such that a national “baseline” regulatory standard (namely, mandatory “opt-in” regulations for data collection and use) should govern the entire online marketplace.

Let’s be clear: Such a mandate, and the thinking behind it, would greatly impoverish the future Internet economy. Too many people think of the Internet as a magic box that just keeps cranking out free goodies. But something powers that box of goodies: advertising.  More than anything else, it’s advertising that keeps the Internet “Free, Innovative & Open,” to borrow the slogan of our friends at CDT, which seems to flirt with joining the PETD movement, despite their well-earned reputation for pragmatic skepticism of government interference with the Internet.

The regulatory advocates complain that giving consumers the right to opt-out of data collection and use isn’t meaningful because very few consumers will exercise the opt-out.  Again, they presume that this must be because users just don’t know what’s good for them because of course if they really understood what was being done with “their data,” they would never choose to just “give it away” for a few scraps from the advertisers’ table.  It never occurs to them that (i) many, perhaps most, users just don’t care and that (ii) that their “ignorance” about the all specific details of “how the sausage is made” (online data collection and use practices for targeting advertising) may be completely rational.

But just as importantly, would-be privacy regulatory don’t seem to understand—or perhaps simply don’t care—that what’s true of opt-out is also true of opt-in:  in practice, few people will bother doing either.  In a world of perfect information and infinite time, of course, there would be no difference in outcomes with the two different rules.  But in the real world with real constraints on time, knowledge and everything else, mandating opt-in would make all the difference in the world by severely limiting the ability of advertisers to target advertising.

The Ignored Trade-offs

We’ve been assembling evidence on the real-world costs of restricting targeted advertising. Here are just a few data points we’ve seen to give you a sense of what’s at stake:

• Relevance to Users: The best evidence that users prefer seeing more relevant ads is their increased likeliness to actually click on an ad—instead of just ignoring it or trying to block it. The most recent study of this issue concluded that Click-Through Rates (CTR) can be improved by as much as 670% by using basic behavioral targeting as compared to simple contextual targeting—0r even more than 1000% using more sophisticated targeting. Conversion rates (the percentage of clicks that actually result in a sale) also strongly indicate that consumers find ads more interesting, and in one 2005 study, were estimated to increase up to 3000% with behavioral targeting.
• Macro: More Revenue to Fund All Services & Content: eMarketer (in June 2008) estimated that U.S. spending on behavioral targeting would grow from $.775 billion in 2008 to $4.4 billion in 2012—representing fully a quarter of display ad spending.  The total amount of money at stake is huge:  U.S. online ad revenues totaled $23.5 billion in 2008.
• Micro: More Revenue for Individual Publishers: Estimates on the increased profitability of behavioral targeting range as high as 1200% (eMarketer).

While these examples illustrate the broad outlines of the trade-offs ignored by privacy regulatory advocates, the key dilemma to understand is this: If, under an opt-in regime, publishers would be able to target advertising for webpages based on the keywords contained within those pages, and not on other content the user has looked at, the value of most Internet content will depend not on how many eyeballs it attracts but primarily on the economic value of the keywords that are directly associated with it. Pages with keywords related to products and services will fetch a fine price because advertisers will be able to make money off ads on those pages ( e.g., a site for digital camera reviews). But content with little commercial value will generate little revenue. Indeed, this is perhaps the single greatest problem faced by journalism sites. Who wants to advertise on a story about North Korea? How many users are going to be interested in taking a honeymoon in the DMZ?

But if such websites could target advertising to users’ user’s likely interests based on an anonymous profile of their interests created by collecting data about their browsing “behavior,” web content becomes valuable because of the audience it attracts, not just because the content itself serves as a rough proxy for a user’s interests. This democratization of Internet advertising revenue is essential for sustaining the future of journalism in particular, but also for “free” culture more generally.

As we noted in our response to the FTC’s proposed self-regulatory guidelines on data collection for advertising:

Depending on how regulation is structured, therefore, it is possible that new privacy mandates would severely curtail the overall quantity of content and services offered—and greatly limit the ability of new providers to enter the market with innovative offerings. Alternatively, or perhaps additionally, companies would change the character of their offerings and water-down sophisticated services that cater to consumer demand; in other words, the quality of service would deteriorate. Bottom line: Something must give because there is no free lunch. Regulation is a giant game of economic whack-a-mole: Attempting to control one of the primary variables of price, quantity, or quality inevitably results in non-optimal adjustments in the other two variables. The absence of price as a variable in this context means there is one less variable for the government to control in the first place. Simply stated, stifling the evolution of the online advertising marketplace will likely result in fewer free online services and less content, less high-quality online services and content, or some combination of both… We stand at an important crossroads in the debate over the online marketplace and the future of a “free and open” Internet. Many of those who celebrate that goal focus on concepts like “net neutrality” at the distribution layer, but what really keeps the Internet so “free and open” is the economic engine of online advertising at the applications and content layers. If misguided government regulation chokes off the Internet’s growth or evolution, we would be killing the goose that laid the golden eggs…. These observations are even more relevant to the online marketplace, where advertising has been shown to be the only business model with any real staying power. Walled gardens, pay-per-view, micropayments, and subscription-based business models are all languishing. Consequently, the overall health of the Internet economy and the aggregate amount of information and speech that can be supported online are fundamentally tied up with the question of whether we allow the online advertising marketplace to evolve in an efficient, dynamic fashion. Heavy-handed privacy regulation (or co-regulation) could, therefore, become the equivalent of a disastrous industrial policy for the Internet that chokes off the resources needed to fuel e-commerce and online free speech going forward.

Our Challenge to the Advocates of Privacy Regulation

For these reasons, we have repeatedly issued the following three-part challenge in our previous work to those who advocate the regulation of online advertising:

1. Identify the harm or market failure that requires government intervention.
2. Prove that there is no less restrictive alternative to regulation.
3. Explain how the benefits of regulation outweigh its costs.

We’re still waiting…

We’ve also made it clear that there is an alternative to the pre-emptive, one-size-fits-all regulation demanded by the regulatory advocates:  We’ve proposed a “layered approach” based on user education, user empowerment, self-regulation and FTC enforcement of privacy policies.  Our goal is as follows:

The ideal state of affairs would be to create a system of tools and data disclosure practices that would empower each user to implement their personal privacy preferences while also recognizing the freedom of those who rely on advertising revenues to “condition the use of their products and services on disclosure of information”—not to mention the viewing of ads! Self-regulatory efforts can be refined, especially through technological innovation to better satisfy the concerns of policymakers, privacy advocates, and average consumers. For example, if websites and ad networks participating in a self-regulatory framework supplemented their current “natural language” privacy policies with equivalent “machine-readable” code [ e.g., P3p], that data could be “read” by browser tools that would implement pre-specified user preferences by blocking the collection of information depending on whether the privacy policies of certain websites or ad networks met the user’s preferences about data-use. Such robust and granular disclosure, if implemented for behavioral advertising, would exceed the wildest dreams of those who argue that users currently do not read privacy policies—without disrupting the browsing experience or cluttering websites. But this system would only work if users had to make real choices about “pay*ing+ for ‘free’ content and services by disclosing their personal information.”

A Final Word About Advertising

On some level, this debate isn’t about user privacy at all, but about the alleged evils of advertising as inherently manipulative.  Jeff Chester straddles both camps.  His rantings about the use of “neuromarketing” boil down to the same simple idea that the Neo-Marxists have been pushing for decades:  Since people are stupid, ignorant and/or lazy (see above), they’re easy to control and trick with shiny objects, pretty faces, memorable slogans, and catchy jingles. No better response to this argument has ever been made than was offered in this 1959 magazine ad by the ad firm Young & Rubicam (emphasis added for Chester’s benefit):

There is no chestnut more overworked than the critical whinny: “Advertising sells people things they don’t need.” We, as one agency, plead guilty. Advertising does sell people things they don’t need. Things like television sets, automobiles, catsup, mattresses, cosmetics, ranges, refrigerators, and so on and on. People don’t really need these things. People don’t really need art, music, literature, newspapers, historians. wheels, calendars, philosophy, or, for that matter, critics of advertising, either. All people really need is a cave, a piece of meat and, possibly, a fire. The complex thing we call civilization is made up of luxuries. An eminent philosopher of our time has written that great art is superior to lesser art in the degree that it is “life-enhancing.” Perhaps something of the same thing can be claimed for the products that are sold through advertising. They enhance life, to whatever degree they can.

Google has announced that it will soon begin allowing U.S. advertisers to use trademarked keywords in limited circumstances in text ads, much as Yahoo! already does.  Google currently allow advertisers to bid on trademarked terms as keywords that could cause an ad to appear, either next to Google search results or on a third-party publisher’s website.  That policy will not change, and is discussed here by my PFF colleague Sid Rosenzweig.  The new policy is focused on the text seen by users in ads themselves and applies only if the “landing page” (to which the ad links) is used by a reseller, aggregator or parts supplier to sell only products that are relevant to the mark in question, or if the page is used to provide impartial reviews or other information about the trademarked product.  The new policy does not apply to sites/pages that (a) facilitate the sale of counterfeit goods, (b) allow the sale of a competitor’s goods, (c) criticize the trademarked good, or (d) do not provide substantial information or a purchase option.  Despite these limitations and other safeguards, Google has been sharply criticized by some trademark holders and might even be sued (e.g., for contributory infringement).

I’ll defer to the real trademark lawyers to figure out whether Google is correct that its new policy falls within the bounds of trademark law (particularly the “nominative fair use” doctrine).  But since Adam Thierer and I have been involved in an ongoing defense of online advertising against those who would squelch it through regulation in the name of privacy concerns (not at play here), I think it’s important to highlight the potential benefits to users from this seemingly arcane policy change-and to consider what this episode says about online advertising generally.  I see three main benefits to consumers from the policy change that should be considered alongside the vitally important role that trademarks play in our economy in communicating reputational information.

First, Google’s new policy will allow consumers to find products more easily because advertisers will be able to offer more descriptive and therefore informative ads, mentioning what they sell by name. Looking for a Prada handbag?  You’d probably find the ads that appear next to your search results for “Prada Handbag” more useful if the text of the ad specifically mentioned “Prada”-and if, as Google’s new policy requires (to protect trademark holders), the landing page actually sold Prada handbags, and only Prada handbags.  You’ll currently see a few ads that mention Prada, reflecting the current policy, which allows advertisers to use a trademark in an ad text, but only with permission of the trademark holder.  But the new policy will allow any advertiser that meets the criteria stated above to compete for attention with ads that convey more useful information to users and that are therefore more likely to be clicked on.  This might particularly benefit the Long Tail of products and services, because it could help retailers of niche products advertise, particularly if those products are accessories to major brands.

Of course, Marxists have long argued that advertising is a dead-weight loss to society because it doesn’t actually convey useful information:  Ads just “manipulate” users, who are-the elites tell us-too stupid to tell the difference between what they really want and what they’ve been tricked into thinking they want (“false consciousness”).  Whatever one thinks of this argument, it’s pure hypocrisy to criticize advertising as being “information-poor” and also attack tools and policies that convey more information-in this case, the fact that the advertised page concerns a particular trademarked good/service.

Second, this policy change will allow the Long Tail of retailers & review/information sites to compete more effectively by letting users know they’re out there.  As anyone who’s ever started a business knows, perhaps the single greatest barrier to entry is simply the difficulty and expense entailed in building awareness among potential customers.  This is why effective, targeted speech is so vitally important to competition and the overall health of the economy.  Giving consumers more information means more small businesses will be able to break in to compete with entrenched firms by offering lower prices and higher quality (including on non-price factors like privacy).

Third, by raising the value of advertising, this policy change will create more funding for free content & services, both those provided directly by Google and those provided by third parties supported by ads sold through Google.  Obviously, Google wouldn’t be adopting this new policy they didn’t think it would allow them to make more money:  Allowing more descriptive ads means users are more likely to find the ads they see relevant and to click on them, which, in turn raises the value of ads sold by Google.  But contrary to what some Googlephobes might have us believe (based on the usual reaction to every Google announcement), Larry & Serge won’t just spend that new revenue on building a Clone Army to implement some nefarious scheme to take over the Galaxy.  I can’t disprove the Clone Army possibility any more than I can disprove the existence of the Easter Bunny, Sasquatch or Zeus, but if this phantom menace does exist (perhaps on one of Google’s planned floating data centers), our soon-to-be Digital Overlords are sure doing a good job of hiding it amid all the “free” (i.e., ad-supported) stuff they give away to consumers-at considerable expense:

• As I’ve written previously, two-thirds ($14.41B) of Google’s 2008 global revenue ($21.78B) came from advertising on its own sites, primarily the search engine. These sites and the dozens of its free services like Maps and Gmail aren’t cheap, altogether costing Google another $3.34B to support, including the enormous cost of its data centers (“cost of revenues”). Google spent $2.79B on R&D, much of which will lead to innovative new services for users. Of course, until the Clone Army can take over Google’s daily operations, someone’s got to keep the lights on (and the Cylons machines from rebelling)-so throw in another $1.8 billion for personnel, post-it notes, ethically harvested coffee and other “general and administrative” expenses.
• The remaining third of Google’s global 2008 revenue ($6.71B) came from ads sold on the “Google Content Network”: third-party publishers that sell ad space on their pages to advertisers through the AdSense auction system. Of that, Google paid out $5.28B (78.7%) to publishers, who used the money to support the content and services they give away to users-from simply paying hosting costs in the case of the smallest sites to, say, trying to keep cash-strapped newspapers alive.

Again, there is great value to protecting trademarks to minimize the possibility of confusion and fraud among Internet users.  But while this policy change is ultimately an issue of trademark law, it also highlights the benefits of improved online advertising for consumers.  If Google (and other ad networks) can increase the value of information-richness of advertising (and therefore its effectiveness and economic value) in a way that is consistent with the consumer protection purposes of trademark law, that’s something to be celebrated.   Sure, Google will benefit, but in this case, a rising tide will truly lift all boats.

If Google wants to minimize concerns about the automated process Google will use in deciding whether a trademark may be included in an ad for any particular page, the company could proactively address these concerns by providing trademark owners (and the third parties that monitor their online brands) tools that would indicate whether a particular trademark could be used in advertising a particular page.  This would alleviate the uncertainty of trademark holders as to whether their brands are at risk and allow them to call attention to inevitable shortcomings in Google’s algorithm, which will have to evolve constantly.  This would allow Google to keep its algorithms secret, but in order to prevent those who would abuse such tools from reverse-engineering Google’s abuse-detection algorithm, it would probably be necessary to restrict access to these tools to legitimate trademark holders and monitoring services.  How to implement that system might not be easy, but if anyone can figure that out, it’s Google.  I’ve applauded Google’s leadership in the privacy context, where Google has given users tools (the Ad Preference Manager and the Advertising Cookie Opt-Out Cookie plug-in) to manage their preferences about behavioral advertising.  I hope to see Google follow the same approach here:  addressing legitimate concerns through technological means in a way that maximizes consumer welfare.

Finally, it’s interesting to note here that Google is playing catch-up with Yahoo! here-just as Google lagged behind Yahoo! in introducing behavioral targeting, which has caused considerable privacy consternation.  As I’ve said before:

it’s no accident that Google was a late-comer to the [Online Behavioral Advertising] market, lagging behind Yahoo! in particular.  The most likely reason Google has taken its time in rolling out an OBA product is that Google is subject to a unique level of scrutiny by privacy advocates by virtue of its size.  Being the “big kid on the block,” Google has to be especially careful not to appear to be “Big Brother.”  This reputational check on Google should allay some concerns about Google’s size.

Google’s new “Interest Based Advertising” (IBA) program represents the company’s first foray into what is generally called “Online Behavioral Advertising” (OBA):  In order to deliver more relevant advertising, Google will begin tailoring ads delivered through AdSense on the Google Content Network (GCN) and YouTube.com (but not Google.com).  This tailoring will be based on a profile of each user’s interests created by tracking their browsing activity across sites that use AdSense-but not search queries or other user information.  Until now, (i) AdSense has delivered essentially “contextual” advertising by choosing which ad to display on a page based on an algorithmic analysis of keywords on that page; and (ii) Google has tracked users’ browsing only for analytics purposes-to limit the number of times a user sees a particular ad (to prevent overexposure) and to allow sequencing of ads in campaigns where one ad must follow another. 

Google is sure to be attacked for crossing a “line in the sand” drawn by some privacy advocates between contextual and behavioral advertising-even though Google’s closest competitor, Yahoo!, already offers a similar program, and the concept in general is hardly new.  Google’s position as the leading search engine and third party ad-delivery network will no doubt cause paroxysms of privacy hysteria among those who consider targeted advertising inherently invasive, unfair or manipulative.

But those whose first priority is advancing consumer privacy, not advancing a political or regulatory agenda, should applaud Google for excluding sensitive categories and for putting the new Ad Preference Manager at the core of the company’s new IBA program.  The Ad Preference Manager sets a new “gold standard” for implementing the principles of Notice and Choice, which have formed the core of both OBA industry self-regulation and the various regulatory proposals made in recent years.  Indeed, Google has done precisely what Adam Thierer and I have called for:  giving consumers more granular control over their own privacy preferences by developing better tools.

How Google’s Ad Preference Manager Works

For years, debates about how OBA should be regulated (whether by industry or by government) have revolved around two key questions: 

• Notice: How should consumers best be informed about the data that’s being collected about them, how it’s being used, by whom, and so on?
• Choice: How should consumers be given the ability to opt-out of tracking for OBA purposes?

While there are significant philosophical disagreements about some aspects of these debates-such as whether the default should be opt-in or opt-out-much of the debate has come down to questions of implementation that may seem trivial or easily-solved to lay people:  Where should notice be provided?  If notice is provided in ads themselves, what should the link say and how big should it be?  By what technological means should users be able to opt-out of tracking?  Google has provided an elegantly simple solution to these questions. 

Google provides “notice” to users in two ways:

• In the ads.  In the bottom left corner of each AdSense ad on sites in the GCN, users will see the URL for the advertiser’s website.  This is already the case for all text ads, but not for display ads.  In the bottom right corner of both display and text ads, users will see an “Ads by Google” link.  Thus, the ad itself provides the user notice of (i) who’s paying for the ad and (ii) who’s serving it. 
• In the Ad Preference Manager.  If the user clicks the “Ads by Google” link, they will see which of the ~20 categories and ~600 subcategories have been associated with the tracking cookie in their browser.  Thus, Google provides notice to the user of what’s in their so-called “digital dossier.”

Google provides “choice” to the user in two ways:

• Editing categories.  The Ad Preference manager not only shows the profile that has been algorithmically assembled of their likely interests, but it lets them decide for themselves which categories they’re really interested in.  If a user finds that they have been placed in the “Automotive > Motorcycles” category but actually owns a SUV, they could select “Automotive > Trucks & SUVs”-or no Automotive category at all.  
• A persistent opt-out.  Users can decide to opt-out completely from having their data collected for IBA purposes.  That choice will be respected in the future, and will therefore be “persistent.”

The Persistent Opt-Out Plug-in

For roughly a decade, the OBA industry has operated under a self-regulatory scheme developed by the Network Advertising Initiative (NAI).  NAI lets users opt-out of receiving ads based on OBA targeting.  But privacy advocates have objected on three grounds:

First, privacy advocates argue that it’s currently too hard for users to find the NAI opt-out tool since users don’t know which ad network is serving which ads and there’s no obvious way to get from an ad to the opt-out option.  Google moots this argument by making its opt-out easily accessible to anyone who clicks on the “Ads by Google” link that appears beneath every IBA-targeted ad.

Second and most importantly, privacy advocates decry NAI’s opt-out because it isn’t “persistent”- i.e., it requires the placement of a special “opt-out cookie” on the user’s computer, which may be inadvertently deleted when users delete all their cookies.  Indeed, many users do precisely that on a regular basis through either their browser or antivirus software-thus erasing their own opt-out choice.  Google moots this argument too:  While Google’s opt-out also relies on a special opt-out cookie, Google has created an easily installed plug-in for the two most common Web browsers, Internet Explorer and Firefox, that ensures that the opt-out cookie is automatically recreated even if a user deletes their cookies.  For the Chrome and Safari Web browsers (which do not support plug-ins), Google has outlined a simple procedure whereby users can achieve the same result.

Third, many critics worry that any cookie-based opt-out mechanism still involves sending data to ad networks that the ad networks could use to track users-despite promises in their privacy policies not to do so.  Even though the FTC can enforce such policies, it may be difficult for users to determine what the ad networks are doing with the data they receive from users that have opted out of tracking.  Although Google’s system seems to be no different in this regard from how other NAI member companies handle opt outs, truly privacy-sensitive users could easily address this concern by configuring their Web browser to not send any data to these networks and/or not allow any persistent cookies, as we’ve discussed in our Privacy Solutions Series.   

A Superior Solution to a “Do-Not-Track” Registry

The privacy advocates who lambaste the inadequacies of the NAI opt-out system have demanded the creation of a government-run “Do-Not-Track” registry loosely modeled on-but very different in practice from-the FTC’s Do-Not-Call registry, by which over 170 million Americans have opted out of receiving telemarketing calls.  Google’s Ad Preference Manager provides a better system.

First, it proves that the “persistency” problem can be solved.  In fact, since Google’s plug-in is open source, these privacy advocates may be able to use it to create a browser plug-in that works for opt-out cookies from other NAI member companies.  Indeed, given how simple Google’s plug-in is, one wonders why they didn’t do this when NAI’s Opt-Out Tool was first made available.  Perhaps the technologists at these organizations have spent a little too much time developing elaborate regulatory solutions and too little time focusing on empowering users.  Or perhaps these organizations simply decided that creating such a tool would undercut their argument that only government intervention could protect users’ privacy.  Ironically, some of the organizations pushing Do-Not-Track have joined us in emphasizing the effectiveness of user empowerment tools in other contexts-such as online child protection, where parental control software offers a more effective alternative to government regulation of Internet content that also does less to restrict constitutionally protected speech.  Even more ironically, their Do-Not-Track proposal specifically calls for the development of browser-based tools to implement the government-maintained Do-Not-Track database.  In an era when anyone can write a browser plug-in that can achieve wild popularity (such as the roughly 43 million downloads of the Firefox plug-ins AdBlock Plus and NoScript), these advocacy organizations have little excuse for not practicing what they preach. 

Second, Google has set a new standard in both Notice-by including a link to the opt-out in every ad-and Choice-by respecting user’s opt-out preferences.  Other ad networks now face intense pressure to catch up with, or outpace, Google by implementing the same kind of Notice and Choice.  Indeed, NAI will now be expected to improve its own opt-out system with a browser plug-in capable of preserving opt-out preferences for all of its members’ ad networks.  To the extent that this plug-in might work better with cooperation from the ad networks, that cooperation should now be more forthcoming than ever. 

Third, if these privacy advocates’ real objection to any cookie-based opt-out system-whether the NAI opt-out tool or Google’s plug-in-is uncertainty as to whether opt-out preferences would really be respected by ad networks that continue to collect tracking data (as discussed above), who better than Google to lead the market in setting higher standards for privacy protection?  Ultimately, these standards will be, and should be, enforced by the FTC under its existing authority to punish unfair and deceptive trade practices.

What This Episode Says About Google

Some privacy advocates will argue that Google is just too big-and therefore too “scary”-to be allowed to engage in OBA, and may try to paint Google’s entry in the OBA marketplace as a net loss to privacy, notwithstanding the extremely pro-privacy way in which Google has implemented its “IBA” service.  But if this incident demonstrates anything about Google, it’s the following:

First, it’s no accident that Google is now leading the pack of third party ad networks by developing innovative solutions that respect consumer privacy.  Unlike most third party ad networks, Google is directly focused on the demands of consumers:  In addition to the ad network they acquired from DoubleClick, of course, Google offers consumers a wide array of other online services (search, email, maps, etc.).  Because these services (and their competitors) are all free, Google has to compete in what economists call “non-price terms”-such as privacy.  So, Google has a lot to lose by alienating its users and a lot to gain by being seen as a leader in privacy protection.  Would an independent DoubleClick have taken so much care to address privacy concerns?  As the developer of a competing search engine once said about the Internet search industry, ”you earn your right to be in business every day, page view after page view, click after click.”  

Second, it’s no accident that Google was a late-comer to the OBA market, lagging behind Yahoo! in particular.  The most likely reason Google has taken its time in rolling out an OBA product is that Google is subject to a unique level of scrutiny by privacy advocates by virtue of its size.  Being the “big kid on the block,” Google has to be especially careful not to appear to be “Big Brother.”  This reputational check on Google should allay some concerns about Google’s size.

Third, this episode also demonstrates the advantages of having a player like Google large enough to be able to singlehandedly set a new paradigm in privacy protection.  Google risks alienating some advertisers and publishers with its bold empowerment of users, but was willing to take those risks because of its incentives as a consumer-facing company and able to do so because of its leadership in the marketplace.  Uncomfortable as this reality may be for those who fret about antitrust issues and indeed for Google itself, the simple reality is that sometimes it takes “big dogs” to make self-regulatory systems truly effective.  For example, the video game industry’s highly effective content rating system has worked because the titans in that field were big enough to push through a tough system and keep it working.  Similarly, Microsoft has led the way for years in empowering users by offering in Internet Explorer the most sophisticated cookie management tools available in any browser, as we’ve discussed.  In a nutshell, privacy leadership requires scale. 

Conclusion

Google’s Ad Preference Manager, with its persistent opt-out plug-in, offers precisely the kind of robust opt-out that privacy advocates have always demanded.  Google deserves a rousing “Amen!” from privacy advocates.  But those who respond to this program by insisting that “more needs to be done on how to educate people and tell them how to opt out,” are right in two senses.  First, Google has shown other ad networks how to do more to empower users.  I am confident that they will rise to that challenge by continuing to refine self-regulation through technological innovation.  Second, this is by no means the last word in privacy protection from Google, which operates in the midst of continually-evolving privacy standards.  I expect Google and competing ad networks will continue to innovate in developing technologies that empower users to manage their own privacy-and that this competitive “race to the top” will improve online privacy protection in a broader sense beyond just advertising by putting pressure on other online service providers to improve their privacy practices and policies.

But I fear that too many privacy advocates will instead see this as just another reason for the government to intervene-perhaps because of fear of Google engaging in OBA or  because they think the government, not Google, should be developing privacy solutions.  Or perhaps they think Google’s system shows that a system of government-mandated solutions really could work.  To the contrary, Google’s approach is precisely the kind of innovation that would be discouraged by pre-emptive government regulation.  Worse, those who would freeze privacy protection in place would also freeze in place much of the Internet itself, precluding development of new business models that would compete with Google, allaying concerns about competition and benefiting consumers.  Why preclude broadband providers, for example, from figuring out how to deploy ad-targeting technologies in a manner that does as much to empower users with better privacy controls as Google has-especially when this could create a new source of funding for “free” content and services and even discounts on broadband? 

I hope instead that the effectiveness of Google’s approach will shift the policy debate about protecting user privacy back to an emphasis on the layered approach Adam Thierer and I have outlined, supplementing consumer education, industry self-regulation, existing state privacy tort laws, and  FTC enforcement of corporate privacy policies with increasingly powerful technological “self-help” tools that allow privacy-wary consumers to take privacy into their own hands.

Jerry Yang’s departure as Yahoo! CEO opens the door to a renewed bid by Microsoft to buy Yahoo!’s search business (or Yahoo! itself).  Such a merger could produce a significantly stronger challenger to Google in the search market.  With this possibility in mind, the WSJ just ran a fascinating history of the “paid search” business—the placement of “contextually targeted” ads next to search engine results based on the search terms that produced those results.

In a nutshell, Microsoft failed to see (back in 1998-2003) the enormous potential of paid search—just as small start-ups (such as Google) were starting to develop the technology and business model that today account for a $12+ billion/year industry, which is  twice the size of the display ad market and which supports a great deal of the online content and services we have all come to take for granted online.  Microsoft first put its toe in the water of paid search with a small-scale partnership with Goto.com in 1999-2000.  But this partnership failed because of internal resistance from the managers of Microsoft’s display-ad program.  In 2000, Google launched Adwords and thus began its transformation from start-up into economic colossus.  By 2002, Microsoft realized that it needed to catchup fast, and approached Goto.com (by then renamed Overture) about a takeover.  But Microsoft ultimately chose in 2003 not to buy the startup because  Bill Gates and Steve Ballmer “balked at Overture’s valuation of $1 billion to $2 billion, arguing that Microsoft could create the same service for less.” 

Microsoft, meanwhile, spent the next 18 months deploying hundreds of programmers to build a search engine and a search-ad service, which it code-named Moonshot. The company launched its search engine in late 2004 and its search-ad system in May 2006.

But Microsoft’s ad system came too late:

Advertisers applauded Moonshot for its technical innovation. But Microsoft had trouble coaxing people to migrate to its search engine from Google; advertisers were unwilling to spend large sums on MSN’s search ads. By building a new system instead of buying Overture, Mr. Mehdi says, “we really delayed our time to market.”

What’s most fascinating about the piece is that it seems to suggest that Microsoft missed its opportunities to get into paid search not because it was “dumb,” “uninnovative” or a “bad” company, but for the same sorts of reasons that big, highly successful and even particularly innovative companies fail.  The reasons companies generally succeed in mastering “adaptive” innovation of the technologies behind their established business models are the very reasons why such great companies struggle to encourage or channel the “disruptive” innovation that renders their core technologies and business models obsolete.  This dynamic was described brilliantly in Harvard Business School professor Clayton Christensen’s classic 1997 book The Innovator’s Dilemma:  When New Technologies Cause Great Firms to Fail.  (Read chapter one here and Tim Lee’s recent discussion of the book here.)  

Whatever one thinks about the debate over whether antitrust intervention is necessary to restrain Google’s growth, I’m sure we’d all applaud the evolution of increased competition in the paid search market through market forces.  Let’s hope that Microsoft—as well as Yahoo!—have carefully studied the vast literature produced by business schools in the wake of Christensen’s book about how big companies can avoid the Innovator’s Dilemma by promoting—and capitalizing on—radical innovation from within.  Indeed, this seems to be precisely what has guided Google’s own strategy as it has grown from “disruptive innovator” to become the very sort of behemoth that cannot easily escape the Dilemma, even if corporate managers are fully aware of the problem on a theoretical level.  If Google can do it, Microsoft should be able to, too.  But let’s also not discount the possibility that, no matter how hard Google’s management might try to retain the innovative culture of a start-up, the giant  can’t do that well enough to prevent its own apparent market dominance from being disrupted by new upstart innovators in search and advertising technologies.  

The head of Google Research talked about some of these possibilities in July 2007 and the Google has recently covered other possibilities.  Here are my own bets—for what little they’re worth—as to what such “disruptors” might be:

• Semantic search and social search – whichever search engine masters these tools will likely dominate the market for search, and thus search advertising.
• Micro-payments to search users for using a search engine and discounts for clicking on ads – something Microsoft has pioneered with its Cashback system but which is probably still only in its infancy.
• Behavioral targeting that can make display ads competitive with search ads by making display ads as relevant to consumers as search ads (or even more so), rather than simply trying to target display ads based on the context of a page—which limits the economic value of the ad “display inventory” that websites try to fill with ads, especially for smaller websites in the Internet’s “long tail” whose subject matter might have little relevance to the keywords for products or services that are more highly valued by advertisers.  
• Technologies that allow contextual targeting of ads in or around videos based on the contents of the video (and associated discussion by viewers in comments). Even the imperfect ability to automatically create transcripts of a video, and then search for keywords, could hugely increased the value of advertising associated with video content.

I suspect we’d all be at least a little surprised if we could see what search engines—and online advertising—really looked like in, say, 2019.  But I won’t be terribly surprised if Google—for all its ingenuity—ends up making some of the same mistakes Microsoft made with Search 1.0 ( c. 1998-2005).

Today’s USA Today features a debate between the editors and me on the question of the impact media has on children and what should be done about it. Their editorial argues that “Today’s mass media penetrate deeply and quietly, inflicting real damage on young children, an increasing body of research shows.” Specifically, they are referring to a new study commissioned by Common Sense Media (CSM), which claims that a review of 173 studies shows “that a strong correlation exists between greater exposure and adverse health outcomes.”

In my response entitled “Don’t Scapegoat Media,” which appears in its entirety down below the fold, I argue that “Media have long been a convenient scapegoat for the woes of the world,” and that we must be careful not to assume correlation equals causation when surveying the impact of media on kids. After all, I argue, “how do [those studies] account for the other variables that influence youth development, including broken homes, bad parents, socioeconomic status, troubled peer relations, poor schools and so on? And how is media exposure weighted relative to these other influences? Is a beer ad really as much of a negative influence as an alcoholic parent?” Again, read my entire response below. [Of course, even if one assumes some media has an impact on some kids, there are plenty of ways for parents and guardians to take control over the media in their lives, as I have shown in my big book on the subject.]

I was also quoted in this Washington Post article about the new CSM study on Tuesday.

Don’t Scapegoat Media by Adam Thierer 12/4/08

USA Today

Media have long been a convenient scapegoat for the woes of the world. In particular, fears about the influence media might have on our children have often prompted calls for “crackdowns” on speech and expression.

Typically, these fears fade as one generation’s media boogeyman becomes another’s treasured art form. That’s not to say media don’t have an impact on some children. Clearly, media are among many factors that influence culture and behavior.

But what about those other influences? Some studies summarized in the new Common Sense Media (CSM) report suggest a potential link between media exposure and certain social pathologies. But how do they account for the other variables that influence youth development, including broken homes, bad parents, socioeconomic status, troubled peer relations, poor schools and so on? And how is media exposure weighted relative to these other influences? Is a beer ad really as much of a negative influence as an alcoholic parent?

That’s why it’s important to recall a fundamental tenet of all social sciences: Correlation does not necessarily equal causation. Human behavior is complicated and quite difficult to measure “scientifically.” Just defining “media exposure” and “negative health outcomes” is tricky enough; identifying root causes is even more challenging.

The sky hasn’t fallen the way some media critics feared. While childhood obesity is a growing problem, it’s important not to lose sight of the impressive gains we’ve made in other areas, such as falling juvenile violence, teen pregnancy, and youth drug and alcohol abuse. Moreover, even if some media negatively influence some children, that must be balanced against the many ways media inspire and empower.

The authors of the CSM survey are to be commended, however, for avoiding regulatory recommendations and instead focusing on the sensible steps parents, schools, industry and government can take to educate kids and empower families to take control over the media in their lives. More information, increased media options and better mentoring of our children are the prudent approaches.

In a City Journal article earlier this year, I wondered “how long some local papers have left when they are barred from restructuring their businesses or partnering with other local media operators to stem the bleeding and reinvent their business models.”  I was responding to the Senate’s smack-down of a half-hearted reform effort that FCC chairman Kevin Martin pushed through in November 2007, which proposed relaxing the FCC’s newspaper/broadcast cross-ownership rule. That rule, unrevised since going into effect in 1975, prohibits a newspaper operator from also owning a radio or television station in the same media market. However, waivers were granted to grandfather in some combined newspaper and broadcast operations that had existed long before the ban took effect. Martin’s proposal was to simply tweak the rule to permit similar combinations in just the nation’s 20 largest media markets.

Martin’s limited liberalization proposal, however, led to howls of disapproval from FCC democrats like Michael Copps and many folks on both side of the aisle in Congress. Supposedly, this was nothing more than a “giveaway” to the newspaper industry, which critics said was doing just fine.  It really makes you wonder if any of those critics even both reading the news about newspapers today.

As I have documented here on many occasions, as well as in my big Media Metrics report, the newspaper industry is in huge trouble with every financial variable of importance rapidly heading south. Alan Mutter does a good job here of summarizing “the secular forces dragging down newspapers: Declining readership, shrinking advertising, high fixed costs and growing online competition that makes it increasingly difficult to charge the premium ad rates that were possible prior to the Internet.”  As a result of these forces, everyday brings another headline like this one today in the New York Times: “The Star-Ledger of Newark Plans 40% Cut,” or this one in the Wall Street Journal: “Some Newspapers Shed Unprofitable Readers.”  The numbers are just miserable, and they just get worse and worse.

Now, you might say, “So what? That’s creative destruction at work.” Indeed it is, and it’s an entirely natural and healthy marketplace phenomenon. The problem, however, is that there’s still a lot of regulating going on.  Specifically, papers remain bound by red tape in the form of artificial market ownership restrictions that disallow the creation of new business models that might save them what appears to be their possible extinction.

I am not at all confident that consolidation or creative ownership arrangements will actually throw them much of a lifeline — it’s probably too little, too late, now that so many readers and advertisers have flocked to the Net and other media platforms.   Nonetheless, they should not be bound by archaic media ownership rules put on the books a quarter century ago in an era of less competition and consumer choice.  Let papers restructure and compete.  It may be their only chance at survival.

Update: Just a few minutes after posting this I came across this NYT article documenting the latest quarterly newspaper circulation numbers and how the numbers just keep getting worse. Sales in the spring and summer fell almost 5 percent from the previous year according to the Audit Bureau of Circulations.

By Adam Thierer & Berin Szoka

The goal of our “Privacy Solution Series,” as we noted in the first installment, is to detail the many “technologies of evasion” (i.e., user-empowerment or user “self-help” tools) that allow web surfers to better protect their privacy online—and especially to defeat tracking for online behavioral advertising purposes.  These tools and methods form an important part of a layered approach that, in our view, provides an effective alternative to government-mandated regulation of online privacy.

In this second installment in this series, we will highlight Adblock Plus (ABP), a free downloadable extension for the Firefox web browser (as well as for the Flock browser, though we focus on the Firefox version here).

Purpose: The primary purpose of Adblock Plus is to block online ads from being downloaded and displayed on a user’s screen as they browse the Web.  In a broad sense, this functionality might be considered a “privacy” tool by those who consider it an intrusion upon, or violation of, their “privacy” to be “subjected” to seeing advertisements as they browse the web.  But if one thinks of privacy in terms of what others know about you, Adblocking is not so much about “privacy” as about user annoyance (measured in terms of distracting images cluttering webpages or simply in terms of long download times for webpages).  In this sense, ABP may not qualify as a “technology of evasion,” strictly speaking.  But, as explained below the fold, ABP does allow its users to “evade” some forms of online tracking by blocking the receipt of some, but not all, tracking cookies.

Cost: Like almost all other Firefox add-ons, both the ABP extensions and the filter subscriptions on which it relies (as described below) are free.

Popularity / Adoption: While there are a wide variety of ad-blocking tools available, Adblock Plus is far and away the leader.  ABP has proven enormously popular since its release in November 2005 as the successor to Adblock, which was first developed in 2002 and reached over 10,000,000 downloads before being abandoned by its developer and even today garners nearly 40,000 downloads a week.  This history of Adblock provides further details.

ABP was named one the 100 best products of 2007 by PC World magazine and is now the #1 most downloaded add-on for Firefox with over 500,000 weekly downloads, up significantly for just a few months.  In a blog post last month, ABP creator Wladimir Palant estimated that “no more than 5% of Firefox users have Adblock Plus installed,” but that percentage is bound to grow larger as more people discover Adblock.  As one indicator of ABP’s popularity, the number of Google searches for “Adblock” has nearly eclipsed the number of searches for “identity theft,” which seems like a far more serious concern than having to look at web ads.

Of course, not every Firefox user would chose to use Adblock even if they were aware of it.  For example, one of us (Berin) finds it indispensable and leaves it on all the time.  The other (Adam) almost never turns it on, preferring to see what sort of ads are being served on each page he visits.  For those users primarily concerned with having their browsing tracked, there are other tools more effective than ABP for that purpose, as future entries in this series will describe.

This raises a point we make in our upcoming paper on online advertising and privacy:  Internet users all have different preferences and sensitivities when it comes to ads and online privacy.   Some of us find ads annoying, intrusive, and potentially privacy-violating.  Others of us just don’t care or even find some informational benefit in seeing them—especially when they are tailored to our particular interests.  Fortunately, tools like Adblock Plus let us each decide for ourselves what sort of browsing experience and privacy protections to use—rather than relying on the heavy, clumsy hand of Big Government to impose sweeping regulations that make a one-size-fits-all determination for everyone.

How Adblock Plus Works: Adblock Plus on its own offers nothing more than the capability to filter certain elements (images, external scrips, frames, Flash, etc.) sent to the user’s computer when they attempt to download the contents of a webpage.  Unbeknownst to many users, the HTML code of most webpages includes instructions to download images and other content (such as ads) stored on that website or on third party sites.  ABP does not recognize ad images as such, so it cannot automatically distinguish ads from non-ad content.  Instead, ABP relies on a blacklist of terms that the keeper of the list has determined correspond to parts of a URL used to load ads.  The following screenshot illustrates how ABP works:

The user here (Berin) subscribed to EasyList USA, the most commonly-used U.S. “filter” (blacklist + whitelist) when he first installed AdBlock.  (Additional filter subscriptions are available here.)  The “filter rules” are ranked by “Hits” or number of ads blocked since the filter was installed (in May 2008).  Shown here are only the top examples of effective filters, such as any URL that begins with “http://ad.” or contains “/ads/”.  Also shown here are three custom ad filters created by Berin.  This clip (click on “Show me how this is done”) illustrates how users can block images to create their own custom ad filter.  Last, the green text is just the most commonly-applied filter rule contained in EasyList’s white list of terms that should not be blocked, trumping black list filters.  For example, htttp://wikimedia.org/wikipedia/ads/… would normally be blocked because of the “/ads/” filter rule in the blacklist, but the green white list filter rule in our example trumps that rule to make sure that all URLs containing “htttp://*.wikimedia.org/wikipedia” (where * is a wild card operator) will not be blocked.

As mentioned above, ABP can block the downloading of some tracking cookies by preventing the user’s computer from attempting to download an element (usually an image) associated with that cookie—called “web bugs” or “web beacons.”  As Wikipedia explains:

Originally, a Web bug was a small (usually 1×1 pixel) transparent GIF or PNG image (or an image of the same colour of the background) that was embedded in an HTML page, usually a page on the Web or the content of an e-mail. Modern Web bugs also use the HTML IFrame, style, script, input link, embed, object, and other tags to track usage. Whenever the user opens the page with a graphical browser or e-mail reader, the image or other information is downloaded. This download requires the browser to request the image from the server storing it, allowing the server to take notice of the download. As a result, the organization running the server is informed when the HTML page has been viewed.

Larger Implications: As you can imagine, advertising networks and advertisers are less than thrilled about the idea of users blocking their ads, but it is website operators that have thus far objected most strongly to ad-blocking, because it threatens what is for many websites the only source of revenue.  Even amateur sites that do not have to pay for content production often rely on advertising revenue to cover other costs, such as hosting.  It’s not hard to imagine why many site operators might want to discourage or thwart ad-blocking to maintain the quid pro quo of the online economy:  Users get free content and services from websites in exchange for looking at advertising, which websites can sell through ad networks to advertisers.  This dilemma is not unique to the online world, of course.  In the offline context, television advertisers have responded to ad-skipping via DVRs through increasing reliance on product placement.

But because web-browsing is an essentially interactive experience between the user’s browser and the website, website operators may have greater leverage in the relationship with a user who wants to block ads.  In particular, the website may be able to detect the use of ABP, at least indirectly through the pattern of page element blocking caused by ABP’s use. (Prior to June 2008, websites could directly detect whether a browser was using ABP by noticing the presence of an API interface designed to allow ABP to work with other extensions, but this feature was removed in a recent update to ABP.)

Thus, once adblocking rises above a certain “acceptable loss” threshold, a website could respond in at least three distinct ways:

1. Moral exhortation – websites might display this kind of pop-up notice to ABP users:

   

2. “Blocking” adblocking – Because ABP’s relies on relatively crude keyword filters to distinguish ad elements of a page from content elements, websites can confuse these filters by making advertisements less easily distinguishable from content.  On the one hand, websites might attempt to “embed” advertisements a la television product placement.  On the other, we may see ad networks rely more on distributing ads through websites directly, rather than from ad network servers, so that adblocking filters cannot easily identify ads by the source referenced in their URL.
3. Tying website functionality to the acceptance of tracking cookies – As mentioned above, Adblock will block some “tracking cookies” by blocking the downloading from ad network servers of web beacons—which is often how such cookies are placed on the uer’s computer in the first place.   By requiring the downloading of those cookies to access the full functionality of the site, websites might be able to require users to accept tracking cookies in exchange for full access to the site.

As is so often the case, this will likely result in a war of “spy v. spy,” whereby the user community develops better evasive measures, and the websites community develops better countermeasures, and so on–as illustrated in this scene from the 1998 Marky Mark cult-classic film, The Big Hit: (Warning: Includes foul language).

Related Reading & Links

• Download Adblock Plus for Firefox (ver. 0.7.5.5)
• Adblock for Flock browser
• Adblock Plus main page (English language version)
• Adblock Plus blog
• How to disable Adblock Plus on your bookmarked pages (i.e., create a whitelist for accepted ads)
• Wikipedia entry
• Interview with Adblock creator Wladimir Palant
• New York Times article: Noam Cohen, “Whiting Out the Ads, but at What Cost?” New York Times, September 3, 2007.
• Nick Carr on Adblock: “What Would Jesus Do?” (and Wladimir Palant’s response to such criticisms)
• YouTube demo videos:
http://www.youtube.com/v/RAYtLA1ZKW0&hl=en&fs=1 http://www.youtube.com/v/vl4_NEiyVIk&hl=en&fs=1

I used to get endless grief from pro-regulatory media activists here in DC when I put forward the argument in days past that Google was a media company and a major player in the battle for eyes, ears and ad dollars in America’s media marketplace. Increasingly, however, more people are coming around to seeing that point, even the crusty old media giants themselves.

In a smart essay over at the Freedom to Tinker blog, David Robinson takes the New York Times to task for an article today again wondering, “Is Google a Media Company?” As David rightly argues:

I hope the Times’s internal business staff is better grounded than its reporters and editors appear to be—otherwise, the Times is in even deeper trouble than its flagging performance suggests. Google isn’t becoming a media company — it is one now and always has been. From the beginning, it has sold the same thing that the Times and other media outlets do: Audiences. Unlike the traditional media outlets, though, online media firms like Google and Yahoo have decoupled content production from audience sales. Whether selling ads alongside search results, or alongside user-generated content on Knol or YouTube, or displaying ads on a third party blog or even a traditional media web site, Google acts as a broker, selling audiences that others have worked to attract. In so doing, they’ve thrown the competition for ad dollars wide open, allowing any blog to sap revenue (proportionately to audience share) from the big guys. The whole infrastructure is self-service and scales down to be economical for any publisher, no matter how small. It’s a far cry from an advertising marketplace that relies, as the newspaper business traditionally has, on human add sales. In the new environment, it’s a buyer’s market for audiences, and nobody is likely to make the kinds of killings that newspapers once did. As I’ve argued before, the worrying and plausible future for high-cost outlets like the Times is a death of a thousand cuts as revenues get fractured among content sources.

Exactly right. I’ve made a similar argument in Chapter 2 of my big “Media Metrics” report.