Is an ad-based business model the original sin of the web — and if so, what do we do about it?

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Ethan Zuckerman, director of the Center for Civic Media at MIT and co-founder of the blog network Global Voices, argues in a fascinating post at The Atlantic that the “original sin” of the internet was that almost every web business defaulted to an advertising-based business model — and that this in turn led to the privacy-invading, data-collecting policies that are the foundation of companies like Facebook and Google. But is that true? And if so, what should we do about it?

Zuckerman says his thoughts around advertising and its effects were shaped in part by a presentation that developer Maciej Ceglowski gave at a conference in Germany earlier this year. Ceglowski is the founder of Pinboard, a site that allows users to bookmark and store webpages, and someone who has argued in the past that free, ad-supported services are bad for users, since they usually wind up having to sell the company to someone who will ultimately shut it down.

Ceglowski describes the arrival of Google as a turning point, since the company — which started out as a kind of science project with no business model whatsoever — eventually created what became AdSense, and showed that advertising could be a huge revenue generator for a web business:

“The whole industry climbed on this life raft, and remains there to this day. Advertising, or the promise of advertising, is the economic foundation of the world wide web. Let me talk about that second formulation a little bit, because we don’t pay enough attention to it. It sounds like advertising, but it’s really something different that doesn’t have a proper name yet. So I’m going to call it: Investor Storytime.”

A fairy tale of advertising revenue

By “investor storytime,” what Ceglowski means is the fairy tale that most web and social companies tell their venture-capital investors and other shareholders — about how much money they will be able to generate once they add advertising to their site or service or app, or aggregate enough user data to make it worth selling that information to someone. Ceglowski calls this process “the motor destroying our online privacy,” the reason why you see facial detection at store shelves and checkout counters, and “garbage cans in London are talking to your cellphone.”

Nest-advertising

Zuckerman notes that he played a rather critical role in making this future a reality, something he says he regrets, by coding the first “pop-up” ad while he was working at Tripod, an early online portal/community web-hosting company, in the late 1990s (a solution he says was offered to an advertiser because they were concerned about having their advertisement appear on a page that also referred to anal sex). And as advertising has become more ubiquitous, companies have had to come up with more inventive ways of selling ads — and that means using big data:

“Demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance—tracking users’ mobile devices as they move through the physical world, assembling more complex user profiles by trading information between data brokers. Once we’ve assumed that advertising is the default model to support the Internet, the next step is obvious: We need more data so we can make our targeted ads appear to be more effective.”

In his post, Zuckerman admits that free or ad-supported content and services have many benefits as well, including the fact that they make the web more widely available — especially to those who couldn’t afford to pay if everything had paywalls — and that being based on advertising probably helped the web spread much more quickly. But he also says that advertising online inevitably means surveillance, since the only important thing is tracking who has actually looked at or clicked on an ad, and knowing as much as possible about them.

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Micro-payments, or find a way to fix ads?

So what should we do to solve this problem? Zuckerman’s proposed solution is to implement micro-payments, using Bitcoin or some other method — something that wasn’t possible when the web first arrived. In that way, he says, users will be able to support the things they wish, and won’t have to worry about paying with their personal information instead of cash. He asks: “What would it cost to subscribe to an ad-free Facebook and receive a verifiable promise that your content and metadata wasn’t being resold, and would be deleted within a fixed window?”

In a response to Zuckerman’s post, Jeff Jarvis argues that instead of throwing our hands up and declaring that advertising as a model doesn’t work any more, we should be re-thinking how advertising works and trying to improve it. Although he doesn’t mention it, this seems to be part of what interested VC firm Andreessen Horowitz about BuzzFeed, and caused it to give the company $50 million, valuing the company at close to $1 billion. AH partner Chris Dixon has talked about the benefits of BuzzFeed’s version of “native advertising” or sponsored content — content that is so appealing and/or useful that it ceases to be advertising.

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For my part, I think Zuckerman has a point to a certain extent: an ad-based model does encourage companies to try and find out as much about their users as possible, and that often causes them to cross various ethical boundaries. But this isn’t something the internet invented — newspapers and magazines and political campaigns have been doing that kind of data collection for decades. The web just makes it orders of magnitude easier. In other words, it probably would have happened even if advertising wasn’t the foundation for everything.

One of the big flaws in Zuckerman’s proposal is that it would still make large parts of the web unavailable to people without the means to pay, either in Bitcoin or something else. And like Jarvis, I think advertising could become something better — if native advertising is useful or interesting enough, and it meets the needs of its users, then it should work much better than search keywords or pop-ups. That’s not to say we shouldn’t force companies like Facebook to be more transparent about their data collection — we should do that as well, not just let them off the hook by allowing them to charge us directly.

Post and thumbnail images courtesy of Flickr user Thomas Leuthard and Shutterstock / F.Schmidt

9 Comments

Kirk Caraway

If you think that websites earning their money via subscriptions instead of advertising will solve the privacy problem, guess again. Publishers are going to want to know just as much about their readers as advertisers do. In addition, to make the subscription-based model work across enough of the web to make a difference, you are going to need third-party payment systems, which will of course be tracking all their users as well.

The only real route I see to protect users’ privacy would have to come via the legal system, forcing websites to get readers to specifically opt in to tracking. The big advertisers will hate this, as will the big aggregation sites/content farms that draw diverse audiences. They need to know who the readers are to serve up the right ads to the right people. Forcing opt in could kill a lot of the tracking, as well as killing off a lot of low-quality websites.

But who benefits would be the organizations that specialize in certain topics, where advertisers would be assured that their ads will be well received. Think a website about skiing, which companies involved in the ski industry would advertise in even if they don’t know exactly who is reading it.

Or, think local news websites, whose content only really interests local residents. In the absence of tracking from big ad networks, local businesses would find advertising directly on their local news sites an effective way to reach local readers.

Ad tracking rewards the worst kinds of content, while punishing quality content that costs more to produce. Maybe it’s time to put an end to that.

Lance

Basically what needs to happen (and should have happen) is a website has three different flavors:

1) Ads supported – The website is accessible if you allow yourself to be exposed to Ads and tracking. When you visit a website the first time you “opt-in” into allowing this, and the website is added to your “Ad supported” whitelist.

2) Fee supported – The website is accessible if you allow a micro-fee payment. As the article mentioned, something like Bitcoin, or some other cash-to-credit system. When you visit a website the first time you “opt-in” into the micro-payments for that website (added to your “Free supported” whitelist). It could be charged on a per page viewed basis for example, where 1 page view is 1 credit. You would just refill your credits online by exchanging cash for web browsing credits.

3) Completely FREE – The website is accessible for free, and does not include any ads or tracking.

The above 3 would have to be built into HTTP (browser and server) in some way. So the browser would include settings for opt-in for “Ad supported” and “Fee supported” websites. It would also include somewhere to add web browsing credits which could be used for “Fee Supported” websites.

The best way to enforce this right away is to build in functionality like “AdBlock Plus” and “Ghostery” directly into the web browser. So by default all Ads and tracking are blocked. If you don’t specify your website (on the HTTP server end) as a “Ad supported” or “Fee supported” website, then it will be FREE. This would force people to upgrade their HTTP server to a version that supports the “Ad supported” and “Fee supported” methods. If you don’t upgrade your server, then all your Ads and Tracking will be blocked since this functionality is built into the browser by default. So people who want to make money off their website (using Ads or Payments) will have to upgrade their HTTP server.

That is the way things should have been. You get to decide from the beginning if you want to pay using your privacy, or pay using your cash. If neither are acceptable to you, then you can find someone else that offers the information your looking for in a completely free manner. This is the fairest model I can think of. In addition websites can have hybrid flavors, where you can specify a certain part of your website to be Ads, Fee, or Free.

Derick Eisenhardt

The real answer is to make everything *freemium.* Yes, free ad-driven websites do encourage such problems, however…most people will not be willing to pay for anything, and if they do, they will still probably not be willing to pay for the majority of content out there. The way to balance this is to offer two options, free + ads, or ad free for a price. Even if only 1% of your user base is willing to pay the fee, just having that little pocket of ad free users to consider in your design choices will help make the site’s overall design better, and give your free users a experience better too.

Matthew Graybosch

I don’t have any third-party ads on my web site. How do I pay the hosting bill? I have this thing called a day job.

The H.E.A.T. Exchange

“…if you’re not paying, you’re the product.”

I would agree with this concept if I was told this at the onset of joining or using an online service. Most websites purport to be free or as having no hidden fees or charges. Yet, behind the scenes, are indeed treating users as commodities for exchange.

This is the real problem with the practice of online advertisement: deception and covert behavior by the online service.

Collecting personal information and selling it is something most users would not agree to if told beforehand. Yet, some websites will justify their actions by claiming (behind close doors) that users are mere products who shouldn’t expect to get something for nothing.

When you click a link to a website and other pages are loaded behind the scenes, this is something most users do not expect and, by technical guidelines, should not expect. Tracking cookies and plug-in cookies are other technical and covert activities that the average Internet users simply do not understand.

Advertisement, by itself, is not a bad thing. As previously stated, ads have been part of television and newspaper for the longest. The Internet opens the door for other covert and dishonest practices that circumvent the trust a user wants to have with a website.

If you offer a website to users as a free service, then treat them accordingly. If you want to charge a fee, then do so upfront. Offering a site for free, then treating users as products and guinea pigs for marketing analysis is both professionally and ethically wrong.

Most users of Twitter and Facebook are simply looking to enjoy a free service and have fun interacting with other users. Visitors to Amazon.com and JCPenney.com are simply looking to find merchandise.

If anything is being done with the user’s personal data or their online behavior in support of advertisement (or anything else, for that matter), then users MUST (should) be told so UPFRONT.

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A non-ad-based internet would be much worse and much less seem-less. Imagine trying to access a service you payed for in the many different ways we do. If I pay for a website, does my home IP get access, or just a single device? Do I have to enter a username/password when accessing it, or is it managed in another way? Trying to access gmail from a device not my own is painful enough, I couldn’t imagine suffering the same thing with every site I visit.
Also, it is much less extensible for people who visit several different sites, unless you are willing to be charged per-site you visit. Quick research questions would become very costly in that system, checking several sites and pages for information.
The only way I see of achieving the same ease of access that we have with an ad-based system would be to get the profit through a tax. How such a tax would be administered would be complex. However, I don’t know why we would ever want to go down that road when we already have a sustainable model now.

Ralph Haygood

I’d say (loosely speaking) it’s the web’s original sin of commission. There’s also an original sin of omission, which is that security of most kinds is largely an afterthought in the protocols and software from which the web is built. It’s mind-boggling how much complexity is involved in making a web service reasonably secure. (I speak as someone who’s gone through it several times and is currently going through it yet again.)

As for the solution, the general solution is, obviously, that users need to pay for services. As many have noted, the Fundamental Theorem of Online Services is that if you’re not paying, you’re the product. As for how the paying happens, different approaches are appropriate for different contexts. Micropayments will work for some services but not for things resembling Facebook, for which plain old subscriptions are probably the best option.

antonyma

Reblogged this on A-INFOSEC and commented:
Is the lack of a transparent and convenient payment system for consuming content hinder Internet growth? There is a vicious circle the author did not mention. Ad-based business model fuels the creation of content specially fit for ads, both format and subject! User behaviour also adopt to bite size content. We are stuck but very few is searching for a way out.

annbrocklehurst

Anyone who thinks native advertising will be some kind of salvation has never worked with sponsored content.

I have and I can tell you it has its very clearly delineated limits.

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