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Sunday, November 15, 2009

Apple Empowering Users to "Sell" Their Attention to Advertisers for "Free" Stuff
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Why do (most) stores have walls? Because, obviously, walls are generally (at least in the developing world) a cost-effective technology for enforcing the value exchange that stores offer customers: products or services for customers' cash. Open-air markets exist, but tend to be reserved for items cheap enough that the costs of theft fall below some "acceptable loss threshold." All stores ultimately rely on employees and the police to chase down shoplifters.

Abbie_hoffman_steal_this_bookYet many valuable media products have long been simply given away by their producers in the implicit value exchange of advertising: newspapers, magazines, radio, television and online content/services for customers' attention. It's as if publishers set up a store with no walls and put up a big "steal this book!" sign inviting shoplifters in. Advertisers simply have to hope that their ads are interesting enough to catch the attention of readers/viewers/listeners--and, on the Web, maybe even get users to click on the ad! It should be obvious that the lack of any "enforcement technology" simply means that there will be less funding for this "free" stuff enjoyed by consumers--just as there would be fewer goods and/or higher prices if stores were prevented from discouraging or punishing shoplifting.

Ethicists could debate until the cows come home whether ad-blocking (or ad-ignoring) is morally tantamount to shoplifting--taking without "paying" (through attention)--but who cares? Whatever the morality of it, the important, and undeniable, thing is that those who ignore/block commercials are free-riding on the economic value created by those who don't.

Enter Apple, which recently filed a patent application for a technology intended to ensure that users are seeing, and actually paying attention to, ads. Randall Stross, author of the excellent book Planet Google, hates the idea of "compelling attention" and suggests that it would so annoy consumers that it would cost Apple more in reputational capital than it's worth. Stross may well be proven right in the marketplace (and, if so, fine), but does that make Apple's proposal wrong? The brilliantly satirical "Secret Diary of Steve Jobs" calls the idea "evil," and suggests that, in the pretended voice of Steve Jobs:

We don't expect anyone will choose the ads. Because, for a very reasonable monthly fee, you'll be able to eliminate all those ads and get your content free of all interruptions. How reasonable, you say? Well, let's say that for $30 a month you could watch all the TV you wanted. Let's say that we can get all the TV networks, or most of them anyway, on board for this. Let's say that we give you not just this week's shows but an enormous archive, one that ultimately includes every TV show ever made. Tear out the cable box, stop paying those assholes $100 or $200 a month, and go with us instead.

Thus Apple now becomes the cable company. And the cable company dies. Yes, friends, another enormous, ridiculous, old-fashioned, greedy, fat, slow-moving, change-averse, stupid industry falls before the power of Steve. Or, as we call it, "Internet + Steve = you're dead." We did it to music retailers. Doing it now to mobile phone companies. Why not cable TV? These guys are ripe for a takedown.

It may well be true that and others will ultimately "disintermediate" existing cable companies, but that speculation misses the important point: It's amazing that, despite the overwhelming success of advertising-supported business models on the Internet, even some of the cleverest commentators simply can't fathom that some users would actually prefer to enter into a deal to get more stuff for free even if it meant dealing with the annoyance of "enforceable"/"compelled" advertising. Instead, Apple's technology must be part of an evil plot to trick users into paying for content!

This is a classic seen/unseen problem: These critics see the annoyance of advertising (and resented bitterly) but they can't see just how much value is created by empowering (yes, empowering) users to hold themselves to their promise to watch the ads that fund the content and services they get for free.

As I've noted, "sometimes we're better off by being able to 'bind' our future selves--just as Ulysses asked his crew to tie him to his ship's mast so he could enjoy the Siren's enchanting song without giving in to their spell." If users don't have a way of proving that they're paying attention, advertisers will have to discount the amount they pay publishers to account for uncertainty as to whether who is actually paying attention to ads--which means less free stuff for consumers. Similarly, if the digital rights management technology didn't exist to ensure that movies downloaded from some online services could only be played for a certain number of days after download or first view (one day in the case of iTunes), consumers would actually be worse off because they would probably have to pay a price closer to the cost of downloading the movie to own forever (~$20 on iTunes) rather than being able to rent it for far less ($4-5).

Ultimately, if advertising is to sustain media and culture, advertisers may have to make explicit the currently implicit quid pro quo attention-for-content/services: There is simply no moral reason that users who choose to block/ignore ads hould be able to enjoy the fruits of everyone else's attention/time/data. The only question is a practical one: whether it's worthwhile for advertisers and publishers to invest in "enforcement" technologies like Apple's.

But this same dynamic plays out in the ongoing debate over efforts to restrict online advertising (particularly behavioral advertising or "OBA") in the name of "privacy." As Adam Thierer and I have warned about regulations on the data collection that makes online advertising profitable for publishers:

regulation could short-circuit the eternal battle of technological one-upmanship between online advertisers and those users who rely on the technologies of evasion to "opt-out" of seeing ads or being tracked. Such privacy-conscious users are "free-riding" off of those users who don't opt-out, since (at present) they generally don't lose access to the free content and services supported by the targeted advertisements that other users do see. The user who blocks tracking, but not ads, is still free-riding off those users who don't opt-out of tracking. On a large enough scale, such self-help has the potential to disrupt the value exchange of the Internet, just as automatic commercial-skipping has already disrupted the value exchange of television. As with all "Spy v. Spy" battles, this long-term trend is inevitable: As more sophisticated technologies of evasion are incorporated seamlessly into browsers and can be used without significantly degrading the browsing experience, their use will become increasingly mainstream. But ultimately, just as with television commercial-skipping, market forces can and will, if permitted, respond through technological means and the development of new business models. Today's implicit quid pro quo may become, of necessity, explicit: Websites and ad networks will have to find increasingly creative ways to grant access to certain content and services for users who do not block ads or the tracking that makes ad space more valuable. Policymakers should take care not to ban such technologies or cripple such business models (e.g., through requiring opt-in), which may rely on more sophisticated forms of targeting such as the use of packet inspection data.

As users face an increasingly clear choice between (i) getting content and services for free supported by behavioral advertising and (ii) paying to receive those same services and content without tracking or even without ads altogether, policymakers will finally see whether users are really as bothered by profiling as the advocates of OBA regulation insist. Given the ongoing and widespread replacement of fee- or subscription-supported web business models with ad-supported models, it seems likely that the vast majority of consumers will continue to choose ad-supported models, including profiling.

posted by Berin Szoka @ 10:46 PM | Advertising & Marketing , Appleplectics , Philosophy / Cyber-Libertarianism

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I think the decline in some of the major T.V. networks and Magazines is the result of the "stealing" of information. DVR's, internet, and social media have focused on the consumers' value of time. Consumers have a perceived value of their time as one of the most important aspects of their lives. They want quick information that is in real time. They like their information in 140 characters or less.

Posted by: Devin the SMS Guy at August 5, 2010 4:49 PM

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