Once upon a time, some people developed a new technology for freely communicating with people around the world. While initially the purview of techies and hobbyists, it didn’t take long for commercial interests to notice the insanely popular new medium and rapidly move to displace the amateur stuff with professional content. But these companies had a problem. For years, people had gotten used to the idea that if you paid for the equipment to access the content, you could receive the content for free. No one wanted to pay for this new, high quality (and expensive to make) content. How could private enterprise possibly make money (other than selling equipment) in a market where people insisted on getting new content every day — heck, every minute! — for free?
Finally, a young techie turned entrepreneur came up with a crazy idea. Advertising! This fellow realized that if he could attract a big enough audience, he could get people to pay him so much for advertising it would more than cover the cost of creating the content. Heck, he even seeded the business by paying people to take his content, just so he could sell more advertising. Everyone thought he was crazy. What? Give away content for free? How the heck can you make money giving it away for free? From advertising? Ha! Crazy kids with their whacky technology. But over the course of a decade, this young genius built one of the most lucrative and influential industries in the history of the world.
I am talking, of course, about William Paley, who invented the CBS broadcast network and figured out how to make radio broadcasting an extremely profitable business. Not only did Paley prove that you could make a very nice living giving away content supported by advertising, he also demonstrated that you didn’t need to know anything about your audience beyond the most basic raw numbers and aggregate information to do it. For the first 80 or so years of its existence, broadcast advertising depended on extrapolated guesses about total aggregate viewing audience and only the most general information about the demographics of viewership. Until the recent development of real-time information collection via set-top boxes, broadcast advertising (and cable advertising) depended on survey sampling and such broad categories as “18-25 year old males” to sell targeted advertising — and made a fortune while doing it.
We should remember this history when evaluating claims by Facebook and others that any changes to enhance user privacy will bring the digital world crashing down on us and force everyone to start paying for content. Setting aside that some people might actually like the option of paying for services in exchange for enhanced privacy protection (I will deal with why this doesn’t happen on its own in a separate blog post), history tells us that advertising can support free content just fine without needing to know every detail of our lives to serve us unique ads tailored to an algorithms best guess about our likes and dislikes based on multi-year, detailed surveillance of our every eye-muscle twitch. Despite the unfortunate tendency of social media to drive toward the most extreme arguments even at the best of times, “privacy regulation” is hardly an all or nothing proposition. We have a lot of room to address the truly awful problems with data collection and storage of personal information before we start significantly eating into the potential revenue of Facebook and other advertising supported media.
Mind you, I’m not promising that solid and effective privacy regulation would have no impact on the future revenue earning power of advertising. Sometimes, and again I recognize this will sound like heresy to a bunch of folks, we find that the overall public interest actually requires that we impose limits on profit making activities to protect people. But again, and as I find myself explaining every time we debate possible regulation in any context, we don’t face some Manichean choice between libertarian utopia and a blasted regulatory Hellscape where no business may offer a service without filling out 20 forms in triplicate. We have a lot of ways we can strike a reasonable balance that provides users with real, honest-to-God enforceable personal privacy, while keeping the advertising-supported digital economy profitable enough to thrive. My Public Knowledge colleague Allie Bohm has some concrete suggestions in this blog post here. I explore some broader possible theoretical dimensions of this balance below . . . .
