The privacy conversation we should be having in the advertising industry

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When Apple rolled out new privacy changes in iOS 14 that gave the option to block apps from doing any kind of tracking on their device, an estimated 94% of users decided to opt-in, rendering impossible almost any type of targeting on nearly 60% of smartphones in the US. While this comes across as a righteous move from Apple, it delivers a devastating blow to the advertising industry and the many companies that depend on it. In addition, it also brings a long-term toll on consumers, creators, and journalists that will not be immediately evident.

We’re not talking enough about this impact.

User privacy is of paramount importance, and further regulation is needed, but the way this change was implemented was a crass and selfish fix from a company that decided to create a polarizing narrative to a nuanced issue to contrive a differentiating feature. The communication associated with the release aggravates the situation by further distorting user perception and forcing other companies to quickly follow suit with similar one-sided solutions to avoid falling at a competitive disadvantage. Not to say there aren’t bad actors or companies that use consumer data irresponsibly or illegally, but these should not characterize the rest of the industry. As the saying goes, let’s not “throw out the baby with the bathwater.”

But while Apple is exploiting common perceptions around advertising and tracking to its own advantage, the blame for making this possible goes to someone else. The advertising industry, the operators, the trade associations, and the executives (myself included) who have focused all their energies and resources in the past thirty years to make advertising more efficient and effective, should have taken time to educate people on the benefits of a functioning, transparent, and privacy-compliant advertising ecosystem.

For this reason, every time people think about advertising, targeting, tracking, and the use of data associated with it, they immediately assume nefarious intent or an invasion of their privacy. We shouldn’t be surprised if 94% of the population opts out of it when given a choice.

I want to take a moment to highlight some often-neglected aspects of the use of data in advertising and encourage a more nuanced conversation about advertising and privacy.

Four aspects we should consider when thinking about advertising.

One:

“Any sufficiently advanced technology is indistinguishable from magic.” Arthur C. Clarke

Photo by Philipp Katzenberger on Unsplash

My wife is convinced that the Facebook app listens to her. Despite me explaining to her that’s not the case and multiple studies proving that’s not true, it’s easy to understand her skepticism when she has a conversation about something random and then sees an ad about that exact thing on her phone.

The fact is, humans are way more predictable than they like to think, and when you spend dozens of hours a week for multiple years leaving a digital trail of what you like and what catches your attention, that makes you even more predictable. Combining and cross-referencing your preferences with those around you, it’s not hard to make educated guesses on what you may be interested in next.

The other thing working against us is the fact that humans are also very prone to selection bias. We don’t remember the hundreds of ads we saw that resulted from a very sophisticated algorithm guessing something utterly irrelevant to us. Still, we’ll never forget the ones that are the perfect message at the perfect time, fueling our belief of being spied upon.

Two:

Advertisers are not creeps. The benefits of a permanent ID.

scrabble letters
Photo by Brett Jordan on Unsplash

Probably the biggest misconception about the advertising industry is the belief that advertisers want to collect data on you for the sake of holding you captive.

It’s easy to understand why: in a world where we don’t know exactly what data point will predict actual behavior, the safe but questionable choice is to hoard as much data as possible, to have it available if needed further down the line. But if this approach sounds straight out of an Orwellian novel, the most important thing to remember is that advertisers don’t care about you as a person in your entirety; they care about those traits that make you a better consumer.

An advertiser may be interested in how many times you go to the gym to see if you could be a consumer of protein shakes, training shorts, low-calorie beer, or a fasting diet. The aggregate of the information you are sharing may build a very accurate profile of who you are. Consumers have a choice about how to share this data, and all the major digital platforms have a way to view their profiling practices and fine-tune ad preferences.

There are other benefits people often don’t consider when thinking about a permanent identity solution in the advertising ecosystem. For one, a permanent identity allows companies to tailor their message or avoid you, according to your preference. You’ve likely put this control into practice by simply blocking an annoying ad you saw over and over (frequency control). Having a permanent identity solution can prevent an ad that may be irrelevant to you (a drug for an illness you don’t have). It can also be a way to protect you physically. Say, for example, you want to avoid all alcohol advertising because you are a recovering alcoholic. Platforms and advertisers should do everything in their capacity never to show you an ad for alcohol. If there is no means of identifying you for the purpose of exclusion because your phone blocks all tracking, you can be exposed to messages that go from a simple annoyance to downright harmful.

For these reasons, the solution should not be avoiding targeting or consumer profiling but adding more transparency in the collection of data and a centralized and straightforward option to tailor ad preferences. We should not weaken the ability to establish personal identifiers, but we should double down our efforts to make their privacy compliant and put the users in control.

Three:

The ability for everyone to access reliable information and quality content

google news picture
Photo by Nathana Rebouças on Unsplash

Imagine a world where every news article you read, every picture of your friends you see, every utility you use, and every question Google answers for you would come with a fee. Some people like to say that “when you are not paying for the product, you are the product,” but this paints a picture of The Matrix-style human farming rather than what it is: a way to provide affordable content. Users are able to access a free service or content that costs millions of dollars to develop and maintain in exchange for seeing an ad for something that they may be interested in with no obligation to buy it, or even to watch the ad in its entirety.

While we can argue that advertising-supported content or news is subject to some distortion for monetization (a.k.a. click-bait), we need to remember that equitable accessibility is an issue. If we lock all the best content behind a paywall, we are de-facto creating a two-tier class system. Wealthy consumers can have access to high-quality information while the rest have to consume whatever is left, or nothing at all.

Scott Galloway likes to say that “Advertising is the tax on the poor” with an inherently negative connotation. But since the foundation of a fair and harmonious society is also based on equal opportunities to access content and information, we can tweak the previous sentence just a little bit. A fairer representation of what advertising can truly be is an “alternative form of payment for those with fewer means.”

Four:

Advertising as a conduit for innovation and economic opportunity

Open business
Photo by Álvaro Serrano on Unsplash

Without leveraging targeted digital advertising, many small businesses with remarkable and innovative products would fail before reaching a critical mass or get crushed by established players. Easy access to highly effective digital marketing (powered by effective targeting and personalization) allows many companies to test their products in the market and reach a global audience that will enable them to innovate, test, and scale by offering a differentiated product from established players.

The more significant the friction to identify and connect with the right customers, the higher the waste in advertising. By extension, the greater the cost to run the business. In short, without differentiated advertising, only the most prominent players will have the means to innovate.

Sure, there were always some small, innovative companies that found success prior to direct-response advertising, but the current explosion of these success stories is unprecedented. Similar to artists, musicians, and filmmakers, everyone can now reach an audience at little to no cost, and this is possible only because many of the tools and the platforms to create and distribute their ideas, services, and products are made available to them for free.

What now?

do something great sign
Photo by Clark Tibbs on Unsplash

Data privacy in advertising is complex and requires way more time to address than what I can put in a single post. But in an effort to be part of the solution, or at least to start the right conversation, I want to offer a few next steps.

Industry Collaboration– The entire industry should collaborate to establish a positive (or at least more balanced) narrative about advertising, highlighting the benefits of a healthy ecosystem. This should be the number one priority of any trade group. If you don’t exist for the right reasons, everything else becomes irrelevant.

User Control Over Blockades– Tech companies should avoid blocking the use of data to create a deeper moat/ higher walled garden to position themselves competitively against other players in the market. Instead, they should collaborate on an open standard that gives consumers ultimate control over which of their data are shared with whom and for what purpose.

Consumer Awareness– Next time they are tempted to skip, block, or complain about ads, consumers should ask themselves what content or services they are accessing for free thanks to advertising and evaluate if they would be willing to pay directly instead.

Creator Flexibility- And finally, creators should always try to find a way to offer their content for a fee or with an ad-supported model. Not everyone has the means to afford to pay for access, but no one should be denied access to content that can entertain, support, inform, or just inspire to create the next big thing.

There’s no denying that changes to advertising in the light of privacy concerns are coming — indeed, they’re already here. Our work now must be to add balance to the narrative and develop more sustainable solutions.


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Author: Paolo

Economist by education, marketer by profession, coffee roaster by hobby.