Pluralistic: Everything advertised on social media is overpriced junk (08 Apr 2023)


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A man's hand holds a mobile phone. Its screen displays an Instagram ad. The ad has been replaced with a slice of a vintage comic book 'small ads' page.

Everything advertised on social media is overpriced junk (permalink)

In "Behavioral Advertising and Consumer Welfare: An Empirical Investigation," a trio of business researchers from Carnegie Mellon and Pamplin College investigate the difference between the goods purchased through highly targeted online ads and just plain web-searches, and conclude social media ads push overpriced junk:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4398428

Specifically, stuff that's pushed to you via targeted ads costs an average of 10 percent more, and it significantly more likely to come from a vendor with a poor rating from the Better Business Bureau. This may seem trivial and obvious, but it's got profound implications for media, commercial surveillance, and the future of the internet.

Writing in the New York Times, Julia Angwin – a legendary, muckraking data journalist – breaks down those implications. Angwin builds a case study around Jeremy's Razors, a business that advertises itself as a "woke-free" shaving solution for manly men:

https://www.nytimes.com/2023/04/06/opinion/online-advertising-privacy-data-surveillance-consumer-quality.html

Jeremy's Razors spends a fucking fortune on ads. According to Facebook's Ad Library, the company spent $800,000 on FB ads in March, targeting fathers of school-age kids who like Hershey's, ultimate fighting, hunting or Johnny Cash:

https://pluralistic.net/jeremys-targeting

Anti-woke razors are an objectively, hilariously stupid idea, but that's not the point here. The point is that Jeremy's has to spend $800K/month to reach its customers, which means that it either has to accept $800K less in profits, or make it up by charging more and/or skimping on quality.

Targeted advertising is incredibly expensive, and incredibly lucrative – for the ad-tech platforms that sit between creative workers and media companies on one side, and audiences on the other. In order to target ads, ad-tech companies have to collect deep, nonconsensual dossiers on every internet user, full of personal, sensitive and potentially compromising information.

The switch to targeted ads was part of the enshittification cycle, whereby companies like Facebook and Google lured in end-users by offering high-quality services – Facebook showed you the things the people you asked to hear from posted, and Google returned the best search results it could find.

Eventually, those users became locked in. Once all our friends were on Facebook, we held each other hostage, each unable to leave because the others were there. Google used its access to the capital markets to snuff out any rival search companies, spending tens of billions every year to be the default on Apple devices, for example.

Once we were locked in, the tech giants made life worse for us in order to make life better for media companies and advertisers. Facebook violated its promise to be the privacy-centric alternative to Myspace, where our data would never be harvested; it switched on mass surveillance and created cheap, accurate ad-targeting:

https://lawcat.berkeley.edu/record/1128876?ln=en

Google fulfilled the prophecy in its founding technical document, the Pagerank paper: "advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers." They, too, offered cheap, highly targeted ads:

http://infolab.stanford.edu/~backrub/google.html

Facebook and Google weren't just kind to advertisers – they also gave media companies and creative workers a great deal, funneling vast quantities of traffic to both. Facebook did this by cramming media content into the feeds of people who hadn't asked to see it, displacing the friends' posts they had asked to see. Google did it by upranking media posts in search results.

Then we came to the final stage of the enshittification cycle: having hooked both end-users and business customers, Facebook and Google withdrew the surpluses from both groups and handed them to their own shareholders. Advertising costs went up. The share of ad income paid to media companies went down. Users got more ads in their feeds and search results.

Facebook and Google illegally colluded to rig the ad-market with a program called Jedi Blue that let the companies steal from both advertisers and media companies:

https://techcrunch.com/2022/03/11/google-meta-jedi-blue-eu-uk-antitrust-probes/

Apple blocked Facebook's surveillance on its mobile devices, but increased its own surveillance of Iphone and Ipad users in order to target ads to them, even when those users explicitly opted out of spying:

https://pluralistic.net/2022/11/14/luxury-surveillance/#liar-liar

Today, we live in the enshittification end-times, red of tooth and claw, where media companies' revenues are dwindling and advertisers' costs are soaring, and the tech giants are raking in hundreds of billions, firing hundreds of thousands of workers, and pissing away tens of billions on stock buybacks:

https://doctorow.medium.com/mass-tech-worker-layoffs-and-the-soft-landing-1ddbb442e608

As Angwin points out, in the era before behavioral advertising, Jeremy's might have bought an ad in Deer & Deer Hunting or another magazine that caters to he-man types who don't want woke razors; the same is true for all products and publications. Before mass, non-consensual surveillance, ads were based on content and context, not on the reader's prior behavior.

There's no reason that ads today couldn't return to that regime. Contextual ads operate without surveillance, using the same "real-time bidding" mechanism to place ads based on the content of the article and some basic parameters about the user (rough location based on IP address, time of day, device type):

https://pluralistic.net/2020/08/05/behavioral-v-contextual/#contextual-ads

Context ads perform about as well as behavioral ads – but they have a radically different power-structure. No media company will ever know as much about a given user as an ad-tech giant practicing dragnet surveillance and buying purchase, location and finance data from data-brokers. But no ad-tech giant knows as much about the context and content of an article as the media company that published it.

Context ads are, by definition, centered on the media company or creative worker whose work they appear alongside of. They are much harder for tech giants to enshittify, because enshittification requires lock-in and it's hard to lock in a publication who knows better than anyone what they're publishing and what it means.

We should ban surveillance advertising. Period. Companies should not be allowed to collect our data without our meaningful opt-in consent, and if that was the standard, there would be no data-collection:

https://pluralistic.net/2022/03/22/myob/#adtech-considered-harmful

Remember when Apple created an opt out button for tracking, more than 94 percent of users clicked it (the people who clicked "yes" to "can Facebook spy on you?" were either Facebook employees, or confused):

https://www.cnbc.com/2022/02/02/facebook-says-apple-ios-privacy-change-will-cost-10-billion-this-year.html

Ad-targeting enables a host of evils, like paid political disinformation. It also leads to more expensive, lower-quality goods. "A Raw Deal For Consumers," Sumit Sharma's new Consumer Reports paper, catalogs the many other costs imposed on Americans due to the lack of tech regulation:

https://advocacy.consumerreports.org/wp-content/uploads/2023/04/A-Raw-Deal-for-US-Consumers_March-2023.pdf

Sharma describes the benefits that Europeans will shortly enjoy thanks to the EU's Digital Markets Act and Digital Services Act, from lower prices to more privacy to more choice, from cloud gaming on mobile devices to competing app stores.

However, both the EU and the US – as well as Canada and Australia – have focused their news industry legislation on misguided "link taxes," where tech giants are required to pay license fees to link to and excerpt the news. This is an approach grounded in the mistaken idea that tech giants are stealing media companies' content – when really, tech giants are stealing their money:

https://pluralistic.net/2022/04/18/news-isnt-secret/#bid-shading

Creating a new pseudocopyright to control who can discuss the news is a terrible idea, one that will make the media companies beholden to the tech giants at a time when we desperately need deep, critical reporting on the tech sector. In Canada, where Bill C-18 is the latest link tax proposal in the running to become law, we're already seeing that conflict of interest come into play.

As Jesse Brown and Paula Simons – a veteran reporter turned senator – discuss on the latest Canadaland podcast, the Toronto Star's sharp and well-reported critical series on the tech giants died a swift and unexplained death immediately after the Star began receiving license fees for tech users' links and excerpts from its reporting:

https://www.canadaland.com/paula-simons-bill-c-18/

Meanwhile, in Australia, the proposed "news bargaining code" stampeded the tech giants into agreeing to enter into "voluntary" negotiations with the media companies, allowing Rupert Murdoch's Newscorp to claim the lion's share of the money, and then conduct layoffs across its newsrooms.

And in France, the link tax depends on publishers integrating with Google Showcase, a product that makes Google more money from news content and makes news publishers more dependent on Google:

https://www.politico.eu/article/french-competition-authority-greenlights-google-pledges-over-paying-news-publishers/

A link tax only pays off for so long as the tech giants remain dominant and continue to extract the massive profits that make them capable of paying the tax. But legislative action to fix the ad-tech markets, like Senator Mike Lee's ad-tech breakup bill (cosponsored by both Ted Cruz and Elizabeth Warren!) would shift power to publishers, and with it, money:

https://www.lee.senate.gov/2023/3/the-america-act

With ad-tech intermediaries scooping up 50% or more of every advertising dollar, there is plenty of potential to save the news industry without the need for a link tax. If unrigging the ad-tech market drops the platforms' share of advertising dollars to a more reasonable 10%, then the advertisers and publishers could split the remainder, with advertisers spending 20% less and publishers netting 20% more.

Passing a federal privacy law would end surveillance advertising at the stroke of a pen, shifting the market to context ads that let publishers, not platforms, call the shots. As an added bonus, the law would stop Tiktok from spying on Americans, and also end Google, Facebook, Apple and Microsoft's spying to boot:

https://pluralistic.net/2023/03/30/tik-tok-tow/#good-politics-for-electoral-victories

Mandating competition in app stores – as the Europeans are poised to do – would kill Google and Apple's 30% "app store tax" – the percentage they rake off of every transaction from every app on Android and Ios. Drop that down to the 2-5% that the credit cards charge, and every media outlet's revenue-per-subscriber would jump by 25%.

Add to that an end-to-end rule for tech giants requiring them to deliver updates from willing receivers to willing senders, so every newsletter you subscribed to would stay out of your spam folder and every post by every media company or creator you followed would show up in your feed:

https://pluralistic.net/2022/12/10/e2e/#the-censors-pen

That would make it impossible for tech giants to use the sleazy enshittification gambit of forcing creative workers and media companies to pay to "boost" their content (or pay $8/month for a blue tick) just to get it in front of the people who asked to see it:

https://pluralistic.net/2023/02/19/twiddler/

The point of enshittification is that it's bad for everyone except the shareholders of tech monopolists. Jeremy's Razors are bad, winning a 2.7 star rating out of five:

https://www.facebook.com/JeremysRazors/reviews

The company charges more for these substandard razors, and you are more likely to find out about them, because of targeted, behavioral ads. These ads starve media companies and creative workers and make social media and search results terrible.

A link tax is predicated on the idea that we need Big Tech to stay big, and to dribble a few crumbs for media companies, compromising their ability to report on their deep-pocketed beneficiaries, in a way that advantages the biggest media companies and leaves small, local and independent press in the cold.

By contrast, a privacy law, ad-tech breakups, app-store competition and end-to-end delivery would shatter the power of Big Tech and shift power to users, creative workers and media companies. These are solutions that don't just keep working if Big Tech goes away – they actually hasten that demise! What's more, they work just as well for big companies as they do for independents.

Whether you're the New York Times or you're an ex-Times reporter who's quit your job and now crowdfunds to cover your local school board and town council meetings, shifting control and the share of income will benefit you, whether or not Big Tech is still in the picture.

(Image: freeimageslive.co.uk, CC BY 3.0, modified)

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Colophon (permalink)

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