Zuboff v. Hwang, or: are targeted ads a bubble?

The Internet runs on ads. Ads pay for the operations of Google and Facebook, and a lot of other stuff, including journalism. You might dislike them, but they’re really important. However, what if they’re just one, huge bubble; a scam waiting to fall apart like the subprime mortgage derivatives back in 2008?

tl;dr: Read Tim Hwang’s Subprime Attention Crisis: Advertising and the Time Bomb at the Heart of the Internet, or at least listen to this podcast with him.

Advertising is the prime source of revenue for big tech companies like Google or Facebook. It is also the cornerstone of the “Grand Bargain” — you get access to services and content for free, but we get to collect data about you and use it to personalize the ads you see. Even though everyone’s (correctly) upset about all this data collection and threats to privacy, one must admit: the consumption of the Internet’s perks is still extremely egalitarian. One might be unable to afford a dentist appointment or a daily healthy dinner, but with a smartphone and internet access, everyone can “afford” to use Instagram, Google Maps, Gmail, Whatsapp, YouTube, and everything else. Ads subsidize all this.

Now, there are two narratives about online ads that seldom meet. On the one hand, academics and privacy/digital rights advocates tell the story of how personalized ads influence our minds and behavior, stripping us of autonomy. Because ads are based on data about us and millions of others, their timing/content/context, etc. can be so good as to influence purchasing behavior to a degree threatening human freedom. This, also, provides an incentive to keep collecting all this data.

The most well-known elaboration of this critique has been Shoshana Zuboff’s 2019 “The Age of Surveillance Capitalism.” Zuboff not only described the phenomenon of data-driven marketing; she also provided a conceptual framework to talk about it, and a theory explaining it. In her view (admittedly criticized by some academics), the mechanisms behind online ads are so reliable that corporations now trade in so-called “behavioral futures.” The idea is this: if I’m a marketer, I am so good and sophisticated that I can guarantee that if you spend X on my services, I will increase your sales by Y in the Z period of time. Of course, we don’t know who exactly will buy your product – this is just statical certainty – but we know that someone will. Because of this certainty, you can already now sell this future profit, or use it as collateral in some other transaction. A complex web of financial products surrounds online ads.

Scary isn’t it? Or exciting, if you want to make money.

The second narrative about online ads is somehow contradictory: they suck. How many times has it happened to you that you already bought something, and yet keep receiving the ads for the same/similar product? How many times have you seen an ad and thought “how can they be so dumb?” Lately, a colleague of mine, who’s a law professor at an American law school got an ad suggesting to them a part-time law degree program at the same law school. A Google ad, the best on the market! This is just an anecdote, I know, but I’m sure you have your own.

A tremendous book I just read (well, listened to on Audible) is Tim Hwang’s “Subprime Attention Crisis.” Hwang analyses lots of data available about the efficacy of online ads and makes a case that they’re just one, huge bubble. Many corporations think they are valuable and actually work, but it might soon turn out that they don’t. Once this happens, the whole financial ecosystem funding the operation of the internet will collapse. How could that happen?

One option is that the companies will simply realize they’re overpaying and limit their ad spending with programmatic ads. This could lead to some sort of “Internet recession” but not necessarily a crisis. The other option, however – and here we get back to Zuboff’s claim that “behavioral futures” already serve as collateral – is that at some point we’ll realize that all this promised value, value already reinvested, does not exists. That’s when the bubble bursts.

Now, whether this is actually the case – that behavioral futures are packed together and sold to a degree threatening the stability of the internet ecosystem – or who’s betting on this future value – is beyond my ability to know. But the idea is so intriguing it got me back to blogging after a couple of years of a pause.

All this to say: a “shock” enabling policymakers to radically remake the Internet as we know it might be around the corner. And to follow Naomi Klein’s reading of Milton Friedman: our job is to keep ideas on how a better world could look like alive.

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