Targeted Marketing Considered Harmful

I’m concerned that the trend of monetization on the Web and in the Android ecosystem is overwhelmingly based on marketing revenue for free services. In these transactions, the product is not the app or website. You are the product being sold. The product you use is the bait to aggregate a lot of attention on the advertising that is sold and displayed through the app or website. The more information the tech company that is offering the free service knows about you, the more precisely they can target advertisements and the larger fee they can command for impressions.

This is bad for us as users.

I’m not particularly concerned about privacy today. Not yet. There may come a day when passive data about your online behavior informs things like what insurance or jobs you are eligible for. That’s not the problem I’m talking about. I’m concerned about something more insidious. What if the marketing works?

In fact, I’m sure that it does work. In order for this model of free services with advertising to work out financially, the cost of the service must be vastly smaller than the cost of the products you buy because of the marketing. Otherwise, the companies doing the marketing would not see a return on investment (ROI) commensurate with the cost of placing the advertising. The fact is, ad-supported services exist because the value of what you purchase due to being exposed to the advertising is far, far greater than the cost of the service in the first place.

The basic premise of advertising is to sell you something that you would not otherwise have purchased. It works by making you feel want something you didn’t want before. In other words, it affects your well-being and happiness. Because you want this new thing, you are less happy until you buy it.

The basic transaction of a free, ad-supported service is not trading “your attention for a free service” as suggested by Leo Laporte. The transaction is that you are trading your sense well-being and (in aggregate) your money – indirectly – for a free service. In aggregate, this is a significant effect but we don’t notice because we are constantly bombarded with advertising. The better and more targeted the advertising, the worse it is. The assertion that more targeted advertising is better for both advertiser and recipient is totally wrong. Its better for the advertiser and worse for the recipient because it is more effective at making you want the thing and therefore less happy with what you have and who you are today.

I noticed this for the first time when I returned to the US from Africa after Peace Corps where I was exposed to essentially zero advertising. I have found that I have been able to greatly reduce stress and anxiety in my own life by doing simple things to limit my exposure to advertising – the most basic was deciding to eliminate cable and broadcast television 12 years ago. We still enjoy TV shows but we buy them on DVD or Amazon streaming which are both essentially ad-free platforms. In general, I prefer freemium services like Flickr or outright pay-for services and apps because the relationship that I want is to be the customer and not the product. With the exception of digital periodicals like the Economist and NY Times apps, pay-for services are almost exclusively ad-free. That makes sense because the user is the customer not the product.

I think its high time the Internet business community comes up with some new and better strategies for monetization than tracking and ever more targeted advertising. Ad-supported is not purely benign. It’s a strategy that turns your users into your product. It puts internet companies in the business of ever more invasive profiling of their users. The pressure to aggregate data about users inevitably leads to breaches of trust and repeated bad press. After a sufficient kerfuffle, governments get involved and will start imposing regulations. Ultimately, it’s a very dangerous game.

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Facebook is utterly untrustworthy

Here are a few things to consider before putting any of your data into Facebook:

  1. Under the aegis of “we’re making some changes to give you more control,” Facebook is taking advantage of standard user click-though terms of service behavior to make your profile data public. (via Jason Calicanis)
  2. Whenever you take a Facebook quiz or use a Facebook plugin game, everything in your profile is available to the publisher of the quiz or game. Further, everything in the private profiles of all your friends is available to the widget publisher as well. The data collected by the publisher can be sold, resold or released in any way the publisher of the quiz or widget chooses. (via ACLU)
  3. The privacy controls in Facebook are deceptive and there is no way to opt out of sharing private data with Facebook apps. (via Electronic Frontier Foundation) Also, there is no screening process required for app developers. Anyone with a Facebook account can be an app developer.

Why would Facebook leak its users private data in this way? Well, they may be incompetent but it is not a compelling argument since they have built the worlds largest social network. The other possibility is that they want to convert the data in their systems into money. The leaking of private profile data to app publishers makes Facebook a wonderful platform for targeted marketing. It is particularly insidious because your data can be leaked even if you yourself are very careful but any of your friends uses any Facebook app.

Similarly, Jason Calicanis points out that the more data that is public on Facebook, the more it can be indexed by Google, Bing and Yahoo! to drive search traffic to Facebook. That traffic is monetized by selling ads.

Facebook shows an astonishing disregard for the privacy of its users. It appears to believe that its membership is too stupid to notice or care about the way that it is abusing their private data. It is amazing because the original value proposition of Facebook over MySpace was that Facebook had privacy controls. Clearly Facebook is not concerned with keeping its users data private. They are concerned with monetizing Facebook in advance of their IPO.

Perhaps it is time to send Facebook a message and delete your account.

Of course, you still have to trust Facebook to actually delete your data and they are utterly untrustworthy.

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