privacy

Online advertising tied to privacy concerns

Some of the issues in the debate over whether targeted ads are so much more valuable that they might increase net ad spending are coming to a head around the privacy legislation being proposed. Some online advocacy groups are opposed to explicit privacy regulation because they believe the regulation might make it impossible for improved ad targeting to increase online ad value.

Today, online ads are about a fifth as valuable as conventional ads at best, which means that the transition from a legacy ad strategy to an online ad strategy could reduce ad-spend by that proportion.

The goal of the targeting process, say proponents of a regulation-free market, is to push that value up. Besides the obvious question of whether such a push justifies loss of privacy, the position flies in the face of advertiser comments. Better targeting, advertisers say, is a way to spend less overall. Thus, they never expect ad value to grow as fast as number of targeted users would shrink.

It’s becoming increasingly obvious that funding content in a pure online world will be difficult because of the reduction in available ad dollars that online will necessarily create.

EU tackles social networking privacy regulations

European regulators have often been more aggressive and pro-consumer than those in the U.S., and now they’re looking at the privacy implications of open social network platforms like Facebook’s. Social network companies have been pushing open platforms that give third-party firms access to their users’ data. This is a revenue stream for Facebook, but regulators fear it’s a surrendering of user privacy, often without full knowledge and disclosure.

So far, the recommendations for further protection are just a part of a draft document that hasn’t been presented to the EC, but regulatory trends have been showing a significant pro-consumer, pro-privacy shift. The result may be increased difficulty in monetizing not only social networks but also other online trends like video. In the U.S., the House is also closing in on privacy legislation that may well impact social networks and behavioral targeting.