Yesterday, the Article 29 Data Protection Working Party issued a press release providing more detailed guidance on how it would like to see Europe’s so-called “right to be forgotten” implemented and extended. The most important takeaway from the document was that, as Reuters reported, “European privacy regulators want Internet search engines such as Google and Microsoft’s Bing to scrub results globally.” Moreover, as The Register reported, the press release made it clear that “Europe’s data protection watchdogs say there’s no need for Google to notify webmasters when it de-lists a page under the so-called “right to be forgotten” ruling.” (Here’s excellent additional coverage from Bloomberg: “Google.com Said to Face EU Right-to-Be-Forgotten Rules“). These actions make it clear that European privacy regulators hope to expand the horizons of the right to be forgotten in a very significant way.

The folks over at Marketplace radio asked me to spend a few minutes with them today discussing the downsides of this proposal. Here’s the quick summary of what I told them:

• European privacy regulators are basically calling for an unprecedented global censorship regime that would impose their speech preferences and controls on the entire planet.
• Europe has no right to tell the rest of the world how to structure their policies governing online freedom of speech, yet they are trying to strong-arm major American tech companies like Google to do so indirectly.
• This is a grave threat to freedom of speech, freedom of expression, and Internet openness.
• This move sends a horrible signal to oppressive regimes worldwide. It could lead to a race to the bottom with governments in other countries attempting to export their own speech preferences to the rest of the global. You can kiss global Internet freedom goodbye if that happens.
• Relatedly, if European policymakers persist in these efforts, it could lead to future trade wars, even among friendly countries. Layers of speech controls like this could become formidable non-tariff barriers to trade and limit the growth of cross-border electronic commerce in the process.
• This certainly doesn’t help competition. Ironically, this news comes during the same week that we have learned some European policymakers want to break up Google on antitrust grounds. But the more that European regulators push Google to enforce global speech controls like this, the more market power those policymakers give the company! Google is one of the few companies that might be able to hire enough lawyers and engineers to comply with such a regulatory regime. Few other tech companies – and certainly no small startups – could ever hope to comply with this ruling. In essence, it’s a new regulatory barrier to entry that diminishes digital entrepreneurialism.
• Correspondingly, it’s another innovation-killer for Europe. If Europeans wonder why they fell so far behind in terms of Internet innovation over the past decade, they might consider looking at the wisdom of overly-restrictive data controls and speech regulations like this.
• Privacy is certainly an important value, and more could be done to protect it. But what European regulators are proposing here is completely over the top. It is like trying to kill a fly with an elephant gun. There are more sensible ways to encourage privacy protection.
• Instead of trying to export their speech controls and bully global innovators, European policymakers should just consider creating their own, government-funded search engines and then force their own citizens to use them. Let them try to create their own anti-free speech fortress and see how their citizens feel about living inside it.

Stay tuned, more to come on this front. In the meantime, here’s another response worth reading from of David Meyer of GigaOm.

As I’ve been saying, search is “Getting Better All the Time,” with constant innovation like Bing’s new integrated social functionality. I’m eagerly awaiting Microsoft’s new Bing 2.0. Here’s another small but very cool innovation from Google:

I vented my frustration earlier today with the FCC’s failure to make comments it receives easily accessible to the public—which means, more than anything, making them full-text searchable. This may seem like Inside Baseball to many, but it’s not. It’s a failure of the democratic process, a waste of taxpayer dollars, and a testimony to the general incompetence of bureaucracies, regardless of who’s running them. It denies the public an easy way to follow what goes on inside Washington, while essentially subsidizing law firms who get to bill clients for having paralegals or junior associates do things that existing web technology makes completely unnecessary—like reading through every comment in a document (at the rate of hundreds of dollars per hour) instead of just looking for keywords in a full-text search.

Later in the day the FCC announced:

1. RSS feeds for all news from the agency  (1 general feed + 48 issue-specific feeds);
2. “FCC Connect” a page for Social Media Sites—so you can follow the FCC on Twitter and become a fan on Facebook; and
3. A “crowdsourcing platform” to discuss the administration’s plan to transfer nearly $8 billion from taxpayers to broadband providers.

I’m thrilled about the RSS feeds, which go a long way in letting all Americans know what the FCC does, supposedly in the “public interest.” Still, I can’t help but note that the FCC waited until after a huge discussion about whether RSS is dead to finally start using RSS in a serious way—fully a decade after the birth of the RSS standard. Better late than never, I suppose.

FCC Connect is also good news: once you have an RSS feed, there’s really no reason not to pipe that feed into as many platforms as possible—which is precisely why RSS isn’t dead, even if most people will never use an RSS reader.

But I’m less thrilled about the crowdsourcing platform. It’s not that it’s not a good idea; it is: The site allows users to submit suggestions, comment on suggestions,  and vote them up or down—allowing the best ideas to rise to the top (at least in theory). This sort of functionality really could make the process of commenting to regulatory agencies much more interactive and democratic. But I don’t understand why the FCC invested time, effort and taxpayer dollars into developing a separate forum for just one of the many important issues currently before the FCC when the 10,000+ comments filed in the official docket on that issue (and many thousands more comments in many other dockets) are still unsearchable and essentially inaccessible to the public .

As I emphasized this morning, the FCC doesn’t need to build a fancy new search engine to open up access to these comments (although that might be nice). All the agency has to do is edit their robots.txt file to allow search engines like Google and Big to “crawl” the contents of the agency’s Electronic Filing Comment System (ECFS) database—which would be completely free and should take less than a minute. The FCC has already allowed crawling on some subdomains, such as the International Bureau’s filing system, which is mainly used for satellite licensing (for example). So… what’s the hold up, guys?

This matters a great deal because, like all federal agencies, the FCC is required by the Administrative Procedures Act of 1946 to give “consideration” to public comments on the agency’s regulatory proposals. Essentially, the comment process is one big “town hall,” and intended to give every citizen their right to be heard by the regulator. Fundamentally, this implements the “due process” guaranteed by the Constitution and the Fourteenth Amendment. Even if the FCC were required to give “consideration” to the comments filed on the crowdsourcing platform, that wouldn’t diminish the need for transparency into the comments filed in the “Big Boys” area—ECFS. In short, Crowdsourcing may be a great way to engage the general public, but it’s no substitute for opening up the comments that matter most.

So what’s going on here? I certainly don’t think the FCC is intentionally creating a sideshow of Web 2.0 interactivity to divert from the inaccessibility of official dockets (although I fear that is the practical consequence). Instead, I can only assume this mis-prioritization of resources has to do with two factors:

1. The agency feels pressure to do something about the National Broadband Plan issue because that particular subject has reached a critical mass of public attention—but doesn’t care enough about fixing these problems across the board; and
2. The agency has caught a case of “Shiny Object Syndrome,” (SOS) the irresistible desire to try out some new Web 2.0 gadget that seems really cool, even if the time spent on that could be used to address issues of far higher priority.

Two final notes:

• The crowdsourcing platform built by the FCC has some serious problems: anonymous posting and commenting may sound great to the tin-foil hat privacy brigade, but as the top suggestion (currently with 27 votes) points out: “Anonymous, cookie-based voting is so easily game-able and therefore unreliable. User accounts are a better way to prevent multiple voting.” Since the FCC currently requires anyone submitting comments to provide their name and basic contact information, I don’t think it’s unreasonable to ask users to associate a name and e-mail address with suggestions, comments or votes they submit on the crowdsourcing platform. Of course, there’s nothing to stop anyone from using a pseudonym, but… that’s how just about every blog comment area on the web works!
• The FCC needs a modern Content Management System. The announcement of today’s news isn’t available in HTML on the FCC website.  Instead, users have to go FCC.gov > updates > recent releases to find a list of releases, each with a link to the document in .doc, .pdf and .txt.  Here‘s the .txt of release announcing the FCC’s foray into social media—which looks as though it was sent by telegraph back when the Federal Communications Act was written back in 1934.

Again, we need to realize that government will always be behind the times. So why trust them to get it right when it comes to regulating the Digital Revolution?

I’ve noted that Google and Microsoft both face what Clayton Christensen famously called the “Innovator’s Dilemma” in trying to handle disruptive innovation in search technology. But noting Microsoft’s innovations in bringing social functionality to search with its “Ping” tools in Bing, I pointed out a few days ago that, “Microsoft, with less to lose and without a huge installed user base to worry about annoying by violating Google’s ‘Prime Directive’ of elegant simplicity, may have an easier time introducing ‘disruptive’ innovations to search than Google.”

The trick will be for Microsoft to find ways of promoting radical innovation from inside, despite the forces of inertia inherent in any large company. One way to do that, as I noted, would be by imitating Google’s “20 percent” program. But a more radical way would be for Microsoft to make Bing a “skunkworks” much like Lockheed Martin’s original “skunkworks,” Xerox’s Palo Alto Research Center (PARC), AT&T’s Bell Labs, GM’s Saturn Motors—or Microsoft’s own XBox. That’s precisely what SEO guru Rand Fishkin (CEO of SEOmoz) suggests Microsoft needs to do to “get serious” in an interview with Affilorama:

I think Google[‘s search market share] could be reduced from like 85% to like 75%, and you could see Microsoft, basically Bing taking over 25%. I don’t think they’ll get more than that. I don’t think they have the ability to do it. Until or unless they are willing do with Bing what they did with Xbox. So Microsoft had, you know, the game market was well established – Sony competing head to head with Nintendo and other players like Neo Geo coming in and this kind of thing and how is Microsoft going to win this? They didn’t know the first thing about it, you know, they weren’t in this field. So what they did with XBox is they made it a startup. They didn’t even put it on Microsoft campus, they made it a different team of people who were only reporting to Xbox people, they basically built a separate company. The fact that it was owned by Microsoft just means that they get the benefits of the cash and the relationships. That’s extremely powerful. The fact that they’re unwilling to do this with search tells me they’re not serious about it. Right? So you might hear like Steve Balmer and other executives from Microsoft say like “search is very important to us, we’re really serious about it”. I think it’s like “serious to them” and I’m using air quotes here, like serious to them in the same way that Google says “competing with Microsoft Office is serious to us”. It’s just sort of like, “Oh yeah?! You’re going to fight us there, well we’re going to fight you on this front!” Like, serious my ass. I just don’t see it. If they do serious and spin it out, I’ll be interested – I’ll be very interested if it becomes it’s own startup if it becomes like its own XBox, that kind of thing, that could be exciting – that could be interesting.

Microsoft is making a major push to integrate social networking tools like Facebook and Twitter into its Bing search engine: users will soon be able to “Ping” search results they like to their friends directly from Bing. Back in January, in “Google, the Innovator’s Dilemma and the Future of Search & Web Ads,” I talked about the implications of this history of search from the WSJ):

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… 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.

My prediction seems to be coming true: Microsoft, with less to lose and without a huge installed user base to worry about annoying by violating Google’s “Prime Directive” of elegant simplicity, may have an easier time introducing “disruptive” innovations to search than Google. Of course, it’s unlikely that any one feature will prove the “killer app” that suddenly causes Bing’s market share to explode—and Google’s to plummet—but a steady stream of such nifty features could convince many users to switch to Bing.

At 29, I’m old enough to remember when Microsoft seemed as cool as Google does today. Hell, I remember being thrilled as a sophomore in high school by Bill Gates’ 1995 book The Road Ahead and the accompanying CD-ROM (which included, as I recall, a tour of Gates’s ultra-futuristic home).  If Microsoft can “get its mojo back,” the company could truly become a web services provider to rival Google.  We’d all benefit from having more choices in search engines, advertising platforms and related tools. And, driving each other to “build a better mousetrap,” the two companies could lead us down the “Road Ahead” from Search 2.0 to Search 3.0 and beyond. So here’s to hoping that Redmond can solve the “Innovator’s Dilemma” with tools like Google’s “20 percent” time that free engineers to innovate!

We’ve written a lot lately about Microsoft’s efforts to reinvent itself, first rebranding its Live search engine as the Bing, and then partnering with Yahoo! to make Bing the search engine on Yahoo!’s still-impressive empire of content and services. But if Microsoft is going to beat Google in Search 3.0 and master shifts in the driving paradigms of the Internet from search and browsers to ubiquitous integration of social networking and other paradigms as yet unforeseen, Microsoft will need more than just brilliant engineering: They’ll need clever marketing.

So it seems that the software titan is turning to user-generated advertising, such as this gem:

WARNING: Battlestar Galactica spoiler: Google may well be in danger of losing its monopoly on cool to Microsoft if Bing can get at least four of the Final Five Cylons to volunteer as back-up singers in a promo video contest.

Google clearly considers Microsoft a threat, having recently launched an ad campaign of its own for its Apps services, which compete directly with Microsoft Office.

The advocates of regulation pay lip service to the importance of advertising in funding online content and services but don’t seem to understand that this quid pro quo is a fragile one:  Tipping the balance, even slightly, could have major consequences for continued online creativity and innovation.

Who is this handsome young man and why does he have “Mr. Yogato Stamped Me!!!” on his forehead? More importantly, why does he look so darn happy?

Flashback: Earlier this week, my partner Michael (pictured) and I visited Mr. Yogato, a frozen yogurt shop in Washington’s Dupont Circle neighborhood which describes itself as “the FUNNEST yogurt experience you’ll ever have.”

Apart from serving exceptionally tasty frozen yogurt and letting customers play a vintage Nintendo, Mr. Yogato is famous for the eight “Rules of Yogato,” which offer discounts if users achieve certain feats, including:

• Answering devilishly difficult trivia (10% off—or extra if you fail)
• Reciting the Stirling battlefield speech from Braveheart in a great Scottish accent (20% off)

But the best discount, which Michael does every time (unless I’m there to help identify, say, countries that end in ‘L’), is offered for wearing the Yogato stamp on your forehead. Being stamped is, of course, almost as much fun as singing along to “Mr. Roboto” if you’re lucky enough to hear that played while you’re in the shop (10% off).  But the real fun is in engaging passersby on the street about the icy-sweet joys of Yogato. It’s also, of course, probably the most effective advertising Mr. Yogato could ever want.

So, the next time you hear Adam Thierer and I talk about the benefits of advertising, especially online, just remember that while there is no free lunch (nor free frozen yogurt), there is discounted frozen yogurt.  It’s a simple, obvious quid pro quo:  10% off in exchange for spreading the Gospel of Yogato.

The most obvious example of a  quid pro quos is the use of discount cards in grocery stores: Users receive discounts in exchange for having their purchases tracked, which allows advertisers to target advertising to them and the grocery store to better manage its inventory. Online, Microsoft’s Live search engine (now Bing) pioneered the use of rewarding users with “cashback” for purchases made through the search engine.

But the more significant quid pro quo online is indirect: users receive “free” content and services in exchange for seeing advertising and sharing data about their browsing habits, which makes advertising significantly better targeted, more effective for advertisers and therefore more profitable for online content publishers and service providers. As Adam and I noted in response to the FTC’s recently-released self-regulatory guidelines for “behavioral advertising” (now likely to be superseded by pre-emptive “privacy” legislation):

The advocates of regulation pay lip service to the importance of advertising in funding online content and services but don’t seem to understand that this quid pro quo is a fragile one: Tipping the balance, even slightly, could have major consequences for continued online creativity and innovation. [FTC] Commission Harbour talks about companies competing on privacy as a “non-price dimension”-and that is clearly a positive thing. In traditional economics, there are three primary variables that are considered when discussing industry competition and efforts to regulate market structures: price, quantity, and quality. But in the context of the Internet, where digital economics have relentlessly driven prices down to zero, and where advertising support has become the only viable business model for most providers of content and services, the price variable has largely been removed from the picture. This means-unless industry could somehow find a way to make pay-per-use, pay-per-view, or subscription-based models work in the future-that regulation of online advertising would have its most dramatic impact on the quantity and quality of content and services provided. 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…. Apart from a hardcore fringe who embrace the Marxist dogma that advertising is inherently deceptive and wasteful, most participants in this debate at least pay lip service to the economic importance of online advertising. One might therefore be lulled into a false sense of complacency that “sensible” regulation (or government-led co-regulation) would surely avoid crippling this dynamo. This widespread assumption calls to mind the famous quip of Chris Patten, last British Governor of Hong Kong, who paraphrased those who dismissed his concerns about the potentially negative effects of a Chinese take-over of the British colony in 1997, as follows: “It is unimaginable that the Chinese would kill such a goose.” To this, Patten responded, “Yet we wouldn’t need the metaphor of golden eggs and geese if history weren’t full of dead geese.” The dangers of regulation to the health of the Internet are real, but the ease with which government could disrupt the economic motor of the Internet (advertising) is not widely understood-and therein lies the true danger in this debate.

I think Mr. Yogato would understand this. Let’s hope Chairman Boucher and the folks on the Hill who seem to be so adamant about regulation do, too.

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

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

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

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

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

I find it amazing that people will willingly post personal information to websites that will only use it for data mining and advertising revenue. They lay their entire life open to a corporation that’s only looking to profit from the information said corporation can gather for itself or it’s affiliates. When the government reads our emails, listens to our phone conversations, reads our text messages and monitors what we do online people are outraged at the invasion of our privacy. But then they log in to Facebook or Myspace or Twitter and reveal all. The Facebook “community”. Please. It’s a way for Big Business to pry into our private lives and exploit us in any way they can for the money they can make.

Such arrogant entitlement is astonishing—but hardly atypical: What makes this person (or his PETD comrades) so certain that they really know what’s best for everyone else and that Facebook users are poor, ignorant suckers being victimized by corporate greed?  As Adam Thierer and I have been saying, there is no free lunch! Do the PETD folks expect investors to pour hundreds of millions into building innovative social networks like Facebook out of… love?  As Adam Smith put it, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

While most in the PETD crowd are too young (or just historically deprived) to know the words to  The Internationale (my favorite line: “Masses, slaves, arise, arise!”), one can easily imagine them kicking off PETD meetings with a somewhat more recent anthem, Aquarius, from the hit 1967 rock musical Hair:

When the moon is in the Seventh House And Jupiter aligns with Mars Then peace will guide the planets And love will steer the stars This is the dawning of the age of Aquarius Harmony and understanding Sympathy and trust abounding No more falsehoods or derisions Golden living dreams of visions Mystic crystal revalation And the mind’s true liberation

Nothing better captures the spirit of that thankfully-bygone era of narcissistic self-indulgence than the beginning of the 1979 film version:

Yes, Virginia, the marijuana-induced socialist-utopian delusions of the Sixties live on in a new generation of Techno-Aquarians, who want to have their digital cake—and eat yours too.  Something for nothing, free lunch for everyone!  Down with profit, up with privacy!  The “vision” (as in “Golden living dreams of”) behind this frenzy of frustration with online capitalism and PETD’s demands for regulation is what Thomas Sowell has called the “Vision of the Anointed,” “the talented few” who consider themselves wiser than everyone else, and therefore seek to impose their preferences on others, as Adam Thierer and I have both discussed.

But back to Wired:

The drumbeat of controversy surrounding Facebook illustrates the catch-22 the social network faces: It has a massive storehouse of user data, but every time it tries to capitalize on that information, its members freak out. This isn’t an academic problem; the company’s future depends on its ability to master the art of behavioral targeting—selling customized advertising based on user profiles. In theory, this should be an irresistible opportunity for marketers; Facebook’s performance advertising program allows them to design and distribute an ad to as narrow an audience as they would like. (It has also developed a program to create ads that are designed to be spread virally.) But as the Beacon debacle showed, there is a fine line between “targeted and useful” and “creepy and stalkerish”—and so far, not enough advertisers have been willing to walk that line… In a way, Facebook’s dilemma extends from its success. Users see the site as sanctified space, a place to engage in intimate conversations with friends—not to be laser-beamed by weirdly personal advertising. But with initiatives like Connect and Open Stream, Facebook can sell ads beyond its own site. Just as Google’s AdSense program sells ads on any participating Web site, Connect and Open Stream will eventually push Facebook-brokered advertising to any member site or app. But unlike with AdSense, Facebook’s ads could be exquisitely tailored to their targets. “No one out there has the data that we have,” says COO Sandberg.

Better targeted ads?  More useful information for Internet users?  A strong competitor for Google that could provide an alternative channel for advertisers and help drive up advertising revenue for publishers of “free” content and services?  Sounds great for all concerned.  Oh, but some people find relevant advertising “creepy?”  Ah, well, let’s call the whole thing off!  I’m sure Facebook will get by just fine selling crudely targeted ads on its own site for pennies a click.  Maybe they could ask for donations or hold a digital bake-sale (including tie-dyed t-shirts, of course)? Or we could just have “the government” support the most popular social networks (along with newspapers, banks, hedge funds and car manufacturers). And while they’re at it, why not have wise bureaucrats use antitrust laws to cripple Google and thus make up for the lack of a competitive threat from Facebook and the other Google-killers-that-might-have-been?

Wired suggests that Facebook’s strategy played some role in causing Google to embrace Interest-Based (behavioral) Advertising, playing catch-up to No.2 Yahoo!:

Google has even shown a willingness to join Facebook in gingerly tapping the third rail of Internet marketing—behavioral targeting. The search giant has long assured its users that it would never use their personal information to deliver targeted advertising, relying instead on aggregate data or search activity that preserves anonymity. (“There is a line with users that you don’t want to cross,” Google CEO Eric Schmidt said in the wake of the Beacon controversy.) But in March, Google started its own behavioral targeting campaign—tracking users’ browsing to deliver more-customized ads. Users have the option to either edit their profiles or opt out entirely.

With Google in the game, the fight is on.  The grand prize is clear—tapping into the most lucrative advertising purchased by leading brands:

Today, global online brand advertising accounts for just $50 billion a year. Offline brand advertising, meanwhile, accounts for an estimated $500 billion.

But I doubt there will ever be any clear “winner” in this race.  Instead, we’re likely to see fierce competition and ongoing one-upsmanship over the coming decade (and beyond) for users, for user data, and for they ad dollars they bring, among a variety of paradigms for what the Internet of the future should look like.  Facebook has already started implementing its paradigm with  Connect (launched Dec. 2008) and  Open Stream API (launched April 2009):

Connect and Open Stream don’t just allow users to access their Facebook networks from anywhere online. They also help realize Facebook’s longtime vision of giving users a unique, Web-wide online profile. By linking Web activity to Facebook accounts, they begin to replace the largely anonymous “no one knows you’re a dog” version of online identity with one in which every action is tied to who users really are. To hear Facebook executives tell it, this will make online interactions more meaningful and more personal…  But you don’t build a competitor to Google with people alone. You need data. And Connect and Open Stream are intended to make Facebook a much more powerful force for collecting user information. Any time someone logs in to a site that uses Connect or Open Stream, they give Facebook the right to keep track of any activity that happens there—potentially contributing tons more personal data to Facebook’s servers. Facebook Connect and Open Stream are also designed to make each user’s friend network, which belongs to Facebook, even more valuable and crucial to the Web experience. Together, they aim to put Facebook users’ social networks at the center of all they do online.

I, for one, think this competition will create enormous value for users by driving innovation that improves the usefulness of the Internet and increases the amount of funding available for an ever-greater, ever-richer torrent of “free” (ad-supported) content and services.  But if the Techno-Aquarians at PETD succeed in imposing regulatory mandates on the collection and use of online data through legislation or creeping regulation at the FTC, the Internet of the future won’t look all that different from the Internet of today: online content and services will continue to attract a small share of all ad dollars (just 7% in 2008), search engines will reap the bulk of that (42% in 2008), and most online content-publishers and service-providers will continue to get literally pennies per click while only a few are able to meet evolving standards of quality with purely ad-supported business models.

Heaven forbid we should allow those who offer “free” content and services to extract… profit from the unwashed masses of helpless consumers who are either too stupid, too lazy or too ignorant to manage their own privacy, no matter how powerful the privacy management tools at their disposal! The better alternative is empower users to make their own decisions about privacy, rather than imposing top-down “Industrial Policy for the Internet” on the entire country through outright prohibitions or restrictive defaults concerning data collection and use for targeting advertising—as Adam and I have said:

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!

As Google and Facebook do battle with each other, Microsoft, Yahoo! and other upstart rivals as-yet-unknown, I only hope they all—particularly their government affairs departments—remember that their common enemy is the Techno-Aquarians who seek to impose their subjective preferences about privacy on everyone else, no matter the costs to innovation, consumers, culture or media. We’ll discuss these trade-offs at our upcoming PFF Capitol Hill Briefing on July 10.