Bad news for online advertisers – you’ve been ’ad | John Naughton

Precision marketing through digital and social media aims to open our hearts and wallets. If only

There is, alas, no such thing as a free lunch. The trouble with digital technology, though, is that for a long time it encouraged us to believe that this law of nature had been suspended. Take email as an example. In the old days, if you wanted to send a friend a postcard saying: “Just thinking of you”, you had to find a postcard and a pen, write the message, find a stamp and walk to a postbox. Two days later – if you were lucky – your card reached its destination. But with email you just type the message, press “send” and in an instant it is delivered to your friend’s inbox, sometimes at the other end of the world. No stamp, no expense, no hassle.

It is the same with using the cloud to store our digital photographs, browse the web, download podcasts, watch YouTube Lolcats, look up Wikipedia and check our Facebook newsfeeds. All free.

Well, up to a point. Most of us eventually tumbled to the realisation that if the service is free, we are the product. Or, rather, our personal data and the digital trails we leave on the web are the product. The data is sliced, diced and sold to advertisers in a vast, hidden – and totally unregulated – system of high-speed, computerised auctions that ensure each user can be exposed to ads that precisely match their interests, demographics and gender identity.

And this is done with amazing, fine-grained resolution: Facebook, for example, holds 98 data points on every user. Welcome to the world of “surveillance capitalism”.

Still, consider the benefits for advertisers. Once upon a time, advertising was like carpet bombing. You paid a lot of money to put ads in newspapers and magazines or on television and billboards, but it was all hit and miss: you could never be sure what worked. As a US department store magnate, John Wanamaker, once said: “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

But when Google and then Facebook arrived, all this apparently changed. The technology deployed by these outfits could ensure that only people likely to be receptive to particular messages would be shown those messages. Wanamaker’s heirs could be sure that their advertising dollars were hitting the spot. And on this foundation, Google and Facebook (and, for a while, Yahoo) made money like it was going out of fashion. It was, as the cliche puts it, a win‑win situation.

And so the advertisers’ money, diverted from print and TV, cascaded into the coffers of Google and co. In 2012, Procter & Gamble announced that it would make $1bn in savings by targeting consumers through digital and social media. It has got to the point where, according to last week’s Financial Times, 2017 will be the year when advertisers spend more online than they do on TV.

Trebles all round, then? Not quite. It turns out that the advertising industry is beginning to smell a rat in this hi-tech nirvana. In a speech to the annual conference of the Internet Advertising Bureau in January, the Procter & Gamble boss, Marc Pritchard, said this: “We have seen an exponential increase in, well… crap. Craft or crap? Technology enables both and all too often the outcome has been more crappy advertising accompanied by even crappier viewing experiences… is it any wonder ad blockers are growing 40%?”

But the exponential growth in crap is not the biggest problem, he said. Much more worrying was the return of the Wanamaker problem: how many people are actually seeing these ads? Perhaps what he had in mind was an advertising industry investigation that suggested around a third of online ads may be “seen” not by humans but by bots. Pritchard regards the hidden machinery of surveillance capitalism as “murky at best and fraudulent at worst. We need to clean it up and invest the time and money we save into better advertising to drive growth.”

So here’s version 2.0 of the Wanamaker problem: the US industry is throwing astonishing amounts of money at online advertising and yet the growth rate of the industry is anaemic and nobody knows how effective online advertising really is. “Some might say,” said Pritchard, “we’re squandering this wonderful gift of technology.”

They might. But eventually people will ask: what’s the rate of return of online advertising? Who’s benefiting from this vast, opaque, unregulated, unmonitored and ultimately user-hostile online auction system? Part of the answer may be glimpsed in the share prices of Google and Facebook. But mostly it’s to be found in the profits of the data-brokers, cookie monsters, trackers and other corporate creatures that lurk in the shadows cast by the internet giants. And they’re not talking.

Contributor

John Naughton

The GuardianTramp

Related Content

Article image
Been duped on Facebook and Amazon’s platforms? Well, you’re not alone | John Naughton
Allowing third parties access to the online giants is as risky as it is profitable

John Naughton

31, Aug, 2019 @3:00 PM

Article image
The tide is starting to turn against the world’s digital giants | John Naughton
Multimillion fines are just the start for Facebook and Google, as the world comes to realise how political big tech has become

John Naughton

24, Sep, 2017 @6:00 AM

Article image
The profits and perils of drilling for crude data
Our online information is the raw resource of the digital age, yet mining it can be risky for the new industrial giants

John Naughton

01, May, 2016 @8:00 AM

Article image
One man’s online politics is another man’s poison | John Naughton
We may end up with Kremlin-sponsored ads but the democratising effect of new technology opens the door to all voices

John Naughton

15, Oct, 2017 @6:00 AM

Article image
All I want for 2021 is to see Mark Zuckerberg up in court | John Naughton
The tech giants’ law-free bonanza is coming to an end on both sides of the Atlantic, but let’s speed up the process

John Naughton

02, Jan, 2021 @4:00 PM

Article image
Why does Twitter let Alex Jones break its rules with his rants? Well, money rules | Hannah Jane Parkinson
The tech giant is scared of losing power, yet as a media platform it must be responsible for its content

Hannah Jane Parkinson

12, Aug, 2018 @5:59 AM

Article image
Theresa May thinks Facebook will police itself? Some hope
The PM has joined the social media ‘techlash’, but only new laws, not pious aspirations, will make a difference

John Naughton

11, Feb, 2018 @7:00 AM

Article image
More choice on privacy just means more chances to do what’s best for big tech | John Naughton
A study of how Facebook, Google and Microsoft have applied the EU’s new GDPR rules shows users are being manipulated

John Naughton

08, Jul, 2018 @6:00 AM

Article image
As a new year dawns expect a fresh assault on big tech | John Naughton
Democracies have finally begun to confront the internet giants and their unrivalled and untrammelled power

John Naughton

01, Jan, 2022 @4:00 PM

Article image
Let a jury decide what content should appear on social media
As we can’t trust the bosses of the digital giants, why not ask ordinary people to evaluate ads?

John Naughton

11, Jul, 2020 @3:00 PM