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Is the surveillance-based ad model setting itself up for a fall?

By Tom Standage, deputy editor

July 10, 2015 | 3 min read

As targeting becomes ever more precise, is the surveillance-based ad model setting itself up for a fall? The Economist’s Tom Standage looks at shifting attitudes towards ‘discounts for data’.

As the advertising industry expands rapidly on digital platforms, it is taking a risk. A popular online nostrum is that the business model of the internet is surveillance: you get to use web-based services without paying, in return for allowing advertisers to target ads at you, based on the personal information you provide. Most people seem to be happy with that deal. But will this state of affairs last?

The ad industry’s model is based on two assumptions: on the one hand, that more precise targeting will make online advertising more valuable to media owners and more effective for advertisers; and on the other, that consumers will not mind as this targeting becomes increasingly spooky.

But there’s a contradiction here: the better you make the targeting, the more likely people are to notice it, and start to worry about it.

Already we see growing numbers of people (particularly the young people advertisers most want to reach) installing ad blockers. According to a study by the Reuters Institute, 47 per cent of Americans and 39 per cent of Britons are using ad-blocking software; among 18-24 year-olds the figures are even higher (55 per cent and 56 per cent respectively). In addition, my teenage daughter only ever browses in Incognito mode, which makes tracking her even more difficult.

The idea, prevalent a decade ago, that teenagers were happy sharing every moment of their lives online has been thoroughly debunked. They like ephemeralmessaging apps because they leave behind no digital footprints. The most privacyconscious are also installing browser plug-ins like Ghostery, which reveal the extent to which their internet use is tracked.

Marketers claim that consumers will welcome more precise ad targeting because it will mean that they see more relevant messages. That may be true for some people. But attitudes may be shifting in the other direction: a recent study by the Annenberg School for Communication at the University of Pennsylvania found that “most Americans do not believe that ‘data for discounts’ is a square deal”. And imagine if there’s a catastrophic privacy breach at a big internet company, which releases lots of really personal information into the wild. Even more internet users might start behaving like my daughter.

The business model of surveillance-based advertising seems to me to rest on a worryingly brittle foundation – one which could suddenly and unexpectedly crack. I wouldn’t build my company on it, let alone an entire industry.

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