Today I filed comments with the Federal Communications Commission (FCC) in its proceeding examining the marketplace for “advanced blocking technologies.” This proceeding was required under the “Child Safe Viewing Act of 2007,” which Congress passed last year and President Bush signed last December. The goal of the bill and the FCC’s proceeding (MB 09-26) is to study “advanced blocking technologies” that “may be appropriate across a wide variety of distribution platforms, including wired, wireless, and Internet platforms.” My colleagues will no doubt laugh about the fact that I have dropped an absurd 150 pages worth of comments on the FCC in this matter, but I had a lot to say on this topic! Parental controls, child safety, and free speech issues have been the focus of much of my research agenda over the past 10 years.
In my filing, I argue that the FCC should tread carefully in this matter since the agency has no authority over most of the media platforms and technologies described in the Commission’s recent Notice of Inquiry. Moreover, any related mandates or regulatory actions in in this area could diminish future innovation in this field and would violate the First Amendment rights of media creators and consumers alike. The other major conclusions of my filing are as follows:
- There exists an unprecedented abundance of parental control tools to help parents decide what constitutes acceptable media content in their homes and in the lives of their children.
- There is a trade-off between complexity and convenience for both tools and ratings, and no parental control tool is completely foolproof.
- Most homes have no need for parental control technologies because parents rely on other methods or there are no children in the home.
- The role of household media rules and methods is underappreciated and those rules have an important bearing on this debate.
- Parental control technologies work best in combination with educational efforts and parental involvement.
- The search for technological silver-bullets and “universal” solutions represent a quixotic, Holy Grail-like quest and it will destroy innovation in this marketplace.
- Enforcement of “household standards” made possible through use of parental controls and other methods negates the need for “community standards”-based content regulation.
My entire filing can be found here and down below in a Scribd reader. All comments in the matter are due tomorrow and then reply comments are due on May 18th.
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Leave it to the English—famous for their superior fluency in the language that bears their name—to reach unparalleled heights of hysteria in the war of words being waged against Google. The Guardian’s Henry Porter claims that “Google is just an amoral menace: The ever-growing empire produces nothing but seems determined to control everything.”
Porter declares that Google is the world’s “most prominent WWM,” his acronym for the “worldwide monopolies that sweep all before them with exuberant contempt for people’s rights, their property and the past.”
Google is in the final analysis a parasite that creates nothing, merely offering little aggregation, lists and the ordering of information generated by people who have invested their capital, skill and time. On the back of the labour of others it makes vast advertising revenues – in the final quarter of last year its revenues were $5.7bn, and it currently sits on a cash pile of $8.6bn.
Let’s review Google’s 2008 Annual Report. Of Google’s 2008 Revenue ($21.78 billion), two-thirds ($14.41 billion) came from advertising on Google sites and just under one-third ($6.71 billion) came from advertising on Google Content Network (GCN) web sites (made up of publishers that sell their ad space to advertisers through Google AdSense). On this revenue, Google made a net profit of $4.2 billion after taxes. To put these numbers in context, Microsoft (Google’s closest peer) earned three times ($60.42 billion) Google’s revenue and produced 4.21 times ($17.68 billion) Google’s profit. Google’s revenue was just 0.1528% of 2008 U.S. GDP and its net income, 0.0294%.
So what does Google actually
create with all that revenue? The answer is free content and services.
First, Google cross-subsidizes dozens of its own free services—starting with its search engine but also including email, a free browser, YouTube, a word processing suite, IM, maps, news, and much more.
Second, as the world’s leading ad network, Google supports a significant percentage of the free content and services offered by others. In 2008, Google paid out $5.28 billion (24.22% of revenue) to GCN publishers—significantly more than the $4.2 billion Google earned in net income (19.3% of revenue). Continue reading →
I’ve already laid out my own reactions to Google’s roll-out of an “interest based advertising” (IBA) program here. In a nutshell, I applauded Google setting a new “gold standard” in user empowerment by providing:
- Notice in their IBA-targeted ads of who’s paying for the ad and the fact that Google is serving it; and
- A link to a powerful “Ad Preference Manager” that allows users to:
- See and modify the “digital dossier” (to use the fearmonger’s term) of interests associated with the cookie on their computer; and
- Opt-out of tracking for IBA purposes.
But as I predicted, despite these pro-privacy features (and despite the fact that other major companies such as Yahoo! and Microsoft already have IBA programs), a number of privacy advocacy organizations are attacking Google for daring to enter the IBA (or “online behavioral advertising”) business at all. I’ll have much more to say about the criticism of Google’s new Ad Preference Manager soon, especially coming from Marc Rotenberg of EPIC (a “disaster“) and Jeff Chester of CDD—precisely the sort of the “paroxysms of privacy hysteria” I predicted.
But first, the criticism from Ari Schwartz of the Center for Democracy & Technology requires a response today. At its best, CDT plays a vital role in calling corporations to continually raise the bar on privacy. My own think tank, the Progress & Freedom Foundation, works closely with CDT on many issues, such as advocating user empowerment through technological means as a constitutionally “less restrictive” way of protecting children than government censorship.
Here’s what Ari had to say: Continue reading →
There’s been plenty written about the death spiral that America’s newspaper industry finds itself stuck in — here’s an amazing summary of the recent online debates — and I’ve spent a lot of time writing on this issue here in the past, too. Ben Compaine, one of America’s sharpest media analysts and the co-author of the classic study Who Owns the Media?, has added his own two cents in his latest essay over at the Rebuilding Media blog. Like everything Ben writes, it is well worth reading:
If newspapers have essentially been able to thrive on the revenue from advertisers alone (again, with cost of printing more or less covered by circulation revenue), why are they having so much trouble today? The answer is not one single factor, but a major contributor is that newspapers – whether print or digital—are just worth less to advertisers than they were 20 years ago. Back then, local advertisers did not have many options for reaching the mass local audience. What was the alternative for auto dealers? For real estate agents? Supermarkets or department stores? For some, direct mail was one possible option. But that was about it. Using pre-prints instead of ROP became attractive for some large display advertisers, leaving the publishers with a piece of the cash flow. Advertisers were hit with regular rate increases. And they pretty much had to pay, The publishers made good money.
But then a double whammy. Just about the time the Internet became a real alternative for classified listings—think Craigslist, Monster.com, eBay, Autotrader.com—and for retailers—think DoubleClick, Google, et al—the boys at the cable operators had perfected the insertion of highly local spots into their feeds. Between 1989 and 2007 local cable advertising increased from $500 million to $4.3 billion—or from 0.4% of all advertising to 1.6%. Advertising in newspapers fell from 26% to 15% in this period. Although some of the highly local advertisers going to cable may have taken some of their funds from budgets for radio or other local media, it is probable that a significant share came from the hides of newspapers. I estimate perhaps up to 20% of the decline in local newspaper advertising share can be attributed to local cable spots.
The other whammy, the gorilla in the room, is Internet advertising. No need to elaborate. But its impact on newspapers is not just that it has siphoned off dollars per se. Much more importantly is that
the Internet has given most advertisers greater market power against newspaper publishers. Many big advertisers—like car dealers, real estate offices and big box retailers—don’t need the newspapers as much.
Ben’s got it exactly right. The decline of newspapers comes down to the death of “protectable scarcity” (thanks to Canadian media expert Ken Goldstein for that phrase). There’s just too much other competition out there online already for our eyes and ears. We’re witnessing substitution effects on a scale never seen in the media world, with disruptive digital technologies and networks splintering our attention spans. That de-massification of media means that high fixed cost endeavors like daily newspapers are not going to be able to sustain the cross-subsidies they’ve long gotten from advertisers.
If you want to boil the newspaper death spiral down to an equation, it would look something like this:
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Interesting article here (“Not All Information Wants to Be Free“) by Jack Shafer of Slate. He notes that many people focus on why “pay wall” business models don’t work online, but few people discuss those models that do (i.e., the ones that successfully get customers to pay for access to content behind the wall). Shafer walks through some of the ones that have worked and concludes:
Not all successful paid sites are alike, but they all share at least one of these attributes:
1) They are so amazing as to be irreplaceable.
2) They are beautifully designed and executed and extremely easy to use.
3) They are stupendously authoritative.
Succinctly stated, the pay-per-view sites are damn unique, offering content or a service that consumers are unlikely to find elsewhere. Of course, that’s a pretty small universe of sites, and unless you content is extraordinarily unique and time-sensitive, I have a hard time believing that a pay wall model will work for most sites.
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Statue at FTC Headquarters: “Man Controlling Trade” (We’re rooting for the horse!)
Adam Thierer and I have just released a new PFF paper entitled “Targeted Online Advertising: What’s the Harm & Where Are We Heading?” (PDF) about the FTC’s new “Self-Regulatory Principles for Online Behavioral Advertising.” Adam lampooned some of the attitudes at play in this debate in a great rant yesterday.
But we give the FTC credit for resisting calls to abandon self-regulation, and for its thoughtful consideration of the danger in stifling advertising-the economic engine that has supported a flowering of creative expression and innovation online content and services. That said, we continue to have our doubts about the FTC’s approach, however-well intentioned:
- Where is this approach heading? Will a good faith effort to suggest best practices eventually morph into outright government regulation of the online advertising marketplace?
- What, concretely, is the harm we’re trying to address? We have asked this question several times before and have yet to see a compelling answer.
- What will creeping “co-regulation” mean for the future of “free” Internet services? Is the mother’s milk of the Internet-advertising-about to be choked off by onerous privacy mandates?
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.
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. 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.
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Google’s latest major launch is “Latitude,” a geo-location service that lets users find friends on a digital map and then network with them. These services are often referred to as “LBS,” which stands for “location-based services.” I wrote about LBS here before in my essay on “The Next Great Technopanic: Wireless Geo-Location / Social Mapping.” As I pointed out in that piece, LBS raise privacy concerns with some people because, by their nature, these technologies involve the tracking of users.
But I’ve argued that those concerns are generally over-blown, especially because you have to download and opt-in to these services. In other words, you know what you’re getting into. Moreover, companies who offer these services, like Loopt and now Google, go out of their way to offer privacy safeguards. Indeed, even some privacy activists agree.
For example, Michael Zimmer of the School of Information Studies at the University of Wisconsin-Milwaukee, is someone who pays close attention to privacy issues and is often critical of Google and other companies for supposedly not paying enough attention to privacy concerns. In the case of Latitude, however, he argues that “Google Actually Got it (Mostly) Right.” Here’s his snapshot of “what Google’s done to help give users control of their information flows in Latitude”:
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The WSJ reports that a study will be released tomorrow noting an 8% drop in total “paid search” revenues in 2008. Google’s Fourth Quarter results will be released Thursday. While this is clearly bad news for Google, Yahoo!, Microsoft and other companies that sell ads next to the results of their search engines, it’s also terrible news for the Internet users who have come to take for granted not just these free search engines, but the other free services and content cross-subsidized by search ad revenue. A quick look at the offerings pages of Google, Yahoo! and Microsoft (downloads and some services) should remind you of a few of these ad-supported offerings.
What’s even worse for users is that search ad spending may be the “canary in the coalmine” for online advertising overall: A drop in search ad spending may suggest that display ad revenue for 2008 may have fared even worse. While search ad revenue funds offerings from search engine providers, display ad revenue is the bread & butter of millions of websites, from the “short head” (big websites like ESPN.com) to through the “long tail” (small websites). As advertisers cut back on buying web ads, there will be less funding available for “Free!” culture—and we’ll all suffer from the resulting decline in creativity and innovation.
Let’s hope 2009 is a better year for advertising—both search and display—than 2008.
[Note: I updated this discussion and chart in a subsequent essay. See: “Are You An Internet Optimist or Pessimist? The Great Debate over Technology’s Impact on Society.”]
A number of very interesting books have been released over the past year or two which debate how the Internet is reshaping our culture and the economy. I’ve reviewed a couple of them here but I have been waiting to compile a sort of mega-book review once I found a sensible way to conceptually group them together. I’m not going to have time to cover each of them here in the detail they deserve, but I think I have at least found a sensible way to categorize them. For lack of better descriptors, I’ve divided these books and thinkers into two camps: “Internet optimists” versus “Internet Pessimists.” Here’s a list of some of the individuals and books (or other articles and blogs) that I believe epitomize these two camps of thinking:
Adherents & Their Books / Writings
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Internet Optimists
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Internet Pessimists
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Yochai Benkler, The Wealth of Networks
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Andrew Keen, The Cult of the Amateur
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Chris Anderson, The Long Tail and “Free!”
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Lee Siegel, Against the Machine
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Clay Shirky, Here Comes Everybody
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Nick Carr, The Big Switch
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Cass Sunstein, Infotopia
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Cass Sunstein, Republic.com
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Don Tapscott, Wikinomics
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Todd Gitlin, Media Unlimited
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Kevin Kelly & Wired mag in general
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Alex Iskold, “The Danger of Free”
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Mike Masnick & TechDirt blog
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Mark Cuban
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And here’s a rough sketch of the major beliefs or key themes that separate these two schools of thinking about the impact of the Internet on our culture and economy:
Beliefs / Themes
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Internet Optimists
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Internet Pessimists
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Culture / Social
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Net is Participatory
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Net is Polarizing
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Net yields Personalization
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Net yields Fragmentation
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a “Global village”
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Balkanization
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Heterogeneity
/ Diversity of Thought
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Homogeneity
/ Close-mindedness
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Net breeds pro-democratic tendencies
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Net breeds anti-democratic tendencies
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Tool of liberation & empowerment
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Tool of frequent misuse & abuse
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Economics / Business
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Benefits of “free”
(“Free” = future of media / business)
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Costs of “free”
(“Free” = end of media / business)
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Increasing importance of “Gift economy”
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Continuing importance of property rights, profits, firms
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“Wiki” model = wisdom of crowds; power of collective intelligence
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“Wiki” model = stupidity of crowds; errors of collective intelligence
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Mass collaboration
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Individual effort
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So, what to make of this intellectual war? Who’s got the story right?
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.