The Center for Data Innovation spoke with Eric Seufert, media strategist and expert in quantitative marketing. Mr. Seufert runs Mobile development memoa blog specializing in mobile advertising and freemium monetization, and QuantMar, a knowledge sharing platform for quantitative marketers. He discussed common misconceptions about online advertising, the damage caused by restrictive regulation, especially on small businesses, and gave an overview of the ongoing debate on prohibit certain forms of targeted advertising in the European Union’s Digital Services Act.
Benjamin Muller: What do you think are the main misconceptions among policymakers in the debate about restricting targeted advertising?
Eric Seufert: There are two, the most fundamental of which is: advertising technology does not provide real value, and therefore regulating it, or severely crippling it, will not impact the economics of the Internet and is the thing obvious and sensible to do. This is patently wrong: we can see through ARPU (average revenue per unit) and general growth metrics for ad tech platforms, given that their advertisers lean towards smaller businesses, that ad tech helps businesses reach relevant audiences and drives growth for the open Internet. Adopting privacy regulations and restricting the data that can be shared between advertisers and ad platforms involves a trade-off: the less data available to ad platforms, the less they will be in able to expose relevant advertisements to consumers, the less effective advertisers’ campaigns will generate revenue. Reasonable people may disagree about where on the graph of “data transparency” plotted against “effectiveness of commercial advertising” a line should be drawn in order to protect life. consumer privacy. But it is factually incorrect to claim that these two properties are neither related nor correlated – that revoking any flow of user data between advertisers and advertising platforms would have no impact on the Internet economy. We’ve seen the impact Apple’s privacy measures have had on the digital advertising ecosystem and the businesses that depend on it for growth.
The second misconception is that consumers generally don’t like ads. There is a tremendous amount of research to refute this. What consumers don’t like are irrelevant and untargeted ads. Advertising is the economic engine of the Internet economy, and in particular of the mobile economy. If consumers hated ads, the freemium model wouldn’t dominate on mobile: Developers would have found another business model to use to 1) reach users and 2) monetize their properties. It is obvious that, however much consumers are hostile to advertising, they are all the more enamored with “free” because it is impossible to have one without the other.
Muller: The EU is set to discuss a ban on online ads targeting minors. What are the potential unintended consequences of such a move?
Seufer: If a regulation imposes penalties on companies for not knowing very specific things about their users – for example, knowing with absolute certainty that they are adults – then the platforms with the most data on their users will benefit on a basis relating to this regulation. The targeting of advertisements to children is a practice that absolutely must be stopped by regulation. But the extent to which a developer, outside of very large online platforms, can know that a person is who they claim to be is limited. Developers should be required to prevent ads from being targeted to children to the best of their abilities, but require a developer to know with absolute certainty that a user is not a minor before targeting ads to them will simply destroy the ability of smaller platforms and publishers to target all ads, while giving larger platforms the ability to do so undisturbed. Once again, I want to repeat: advertisements must not knowingly target children. Any regulation should introduce a framework that developers can follow to determine whether a user is an adult or not, and that framework should not favor the biggest platforms that collect the most data on their users. Paradoxically, instituting a very hard line on age-related targeting will simply encourage developers to extract even more data from users. Instead, a common framework should be proposed that puts all developers on an equal footing.
Muller: What technical developments are taking place in the targeted advertising space that might render concerns about “surveillance advertising” redundant?
Seufer: There are a number of exciting initiatives underway that help keep advertising effective while protecting consumer privacy. Many of these approaches require that all user data used in ad targeting be kept “on-device” or in the custody of the user at all times, so that their data cannot be siphoned off by third parties. advertising technology intermediaries. This on-device paradigm is often paired with techniques such as federated learning that push ad targeting models onto devices, rather than pulling that data from devices onto ad servers as in the current paradigm, to ensure that user data cannot be disclosed. Multi-party computing is another innovative approach that combines encryption techniques with a clear separation between proprietary and third-party contexts, so that no party in the multi-party constellation of ad technology services and advertisers has transparency. on the data of any other party.
Muller: How could Europe’s digital economy be affected by an overly restrictive ban on targeted advertising?
Seufer: Ultimately, small and medium-sized enterprises (SMEs) have benefited the most from advances in digital advertising technology over the past few years, which is evident in the makeup of advertiser pools across platforms. like Google and Meta (formerly Facebook). I think the pendulum has swung too far in the direction of near-total transparency of consumer data and regulation is needed to correct that, if only to restore consumer trust in digital platforms. But overly draconian and punitive regulation will be felt disproportionately by small businesses that have thrived on the proliferation of effective tech-targeted ads. Smaller businesses will have a more obstructed path to reach relevant customers and wilt accordingly – this is the nature of “direct response” advertising, whereby advertisers optimize their campaigns against specific outcome goals such as purchases and registrations, compared to “branded” advertising, which is mainly the domain of very large companies.
Muller: Do you think targeted advertising has a future, and if not, what will replace the ad-supported business models that many sites rely on?
Seufer: I think personalized advertising should have a future given the economic value it brings to society. Personalized advertising empowers small businesses and gives them the agency needed to foster growth; it is potentially the smallest-d democratic commercial apparatus that has ever existed, given the ease of use of the largest digital advertising platforms. And personalized advertising is a public good: it allows publishers to monetize their properties without needing to extract explicit purchases from consumers, it provides free access to content to consumers, and it offers advertisers a direct path to adoption. of the product.