Online Gambling

Over at the EconLog, David Henderson has an interesting post that allows me to come back to some themes I used to carp on quite a bit, but haven’t returned to in a while now. In a nutshell, it is the story of antiwar.com, a website that, naturally enough, illustrates its message with some graphic imagery. Google concluded that the images contravened its policies, and withdrew the ads it placed on the website, causing the website to lose revenue on which they had relied. Apparently, Google does not want its ads to appear next to any picture that would not be “okay for a child in any region of the world to see,” which would disqualify many iconic pictures taken in wars past ― and not just wars, one might surmise.

Prof. Henderson points out that this is not “censorship,” since Google is a private firm acting in a purely commercial capacity here. But, he argues, this is still a “gamble” on Google’s part:

Google faces a tradeoff. On the one hand, there are probably many advertisers, possibly the vast majority, who don’t want their ads to appear alongside pictures of blood and gore, people being tortured, etc. So by being careful that web sites where ads appear do not have such pictures, Google gets more ad revenue than otherwise. On the other hand, Google is upsetting a lot of people who see it as dictating content. This will cause some people to shun Google. … [I]f the upset spreads, there could be a role for another competitor.

Perhaps so, although as I noted before, Google’s competitors ― such as Apple, with its iTunes store ― also seem to be choosing to use their own platforms to present sanitized versions of reality.

And as I also pointed out in the past, Google’s position with respect to freedom of expression is inherently conflicted. On the one hand, Google sees itself as engaged in the business of expression, arguing that its search algorithms reflect choices of an editorial nature that deserve constitutional protection. On the other, when it exercises control over its various platforms (whether the search engine itself or YouTube, the ad service, etc.), it can, and is frequently asked to, act as an agent for governments ― and not only democratic governments either ― who seek to censor expression they dislike. There is a danger that Google will choose to sacrifice some of its users’ freedom in order to protect its own by ingratiating itself with these governments. Furthermore, Google may be coming under pressure, not only from governments, but also from commercial partners it needs to keep on board ― or at bay ― and, possibly, from various “civil society” actors too, in exercising control over its platforms. The antiwar.com story is only one small part of this broader trend.

This is, or should be, well understood ― which makes me think that Google is not the only party in this story who took a gamble. Antiwar.com did too, as does anyone else who comes to rely on Google or other similar platforms, despite knowing the pressures, commercial and otherwise, that these platforms will come under. If anything, it is remarkable how successful this gamble usually turns out to be. Still, it is a bet, and will sometimes turn out badly.

I blogged last year about an argument by Ethan Zuckerman to the effect that the ad-based business model was the internet’s “original sin.” Mr. Zuckerman made his case from the perspective of the users, who must accept privacy losses resulting from tracking and profiling by advertisers in exchange for free access to ad-supported content. The antiwar.com story suggests that, for some content-producers at least, accepting the revenue and, as prof. Henderson points out, the convenience that come with the current business model and its major players was also a Faustian bargain. And yet, as for users, it is not quite clear what alternative arrangement would be viable.

In the face of what some may well be tempted to interpret as a market failure, it seems reasonable to expect calls for regulation, despite what libertarian types such prof. Henderson or the antiwar.com people themselves may say. There will be, and indeed, as I noted in the post about Apple linked to above, there already are, people calling for the regulation of online platforms, in order to make their behaviour conform to the regulators’ ideas about freedom of expression. Yet we should not forget that, on the whole, the net contribution of Google and the rest of them to our ability to express ourselves and to find and access the thoughts of others has clearly been positive ― and certainly much more positive than that of governments. While attempts at making a good thing even better would be understandable, they too would be gamble, and a risky one.

Felix Peccatum

There was an interesting piece in The Atlantic a couple of weeks ago, in which Ethan Zuckerman argued that we should, as the subtitle would have it, “ditch the [internet’s] ad-based business model and build a better web.” Accepting internet content should be free to access, online services free to use, and that the costs of hosting the contents and providing the services can be paid for by tying them to advertising was, Mr. Zuckerman says, “the original sin of the web.” It sounded like a good idea at time, but turned out badly. It is time to repent, and to mend our ways. But is it?

Mr. Zuckerman argues that the ad-based business model created an “internet [that] spies at us at every twist and turn.” In order to persuade potential investors to support a nascent website, its creators must convince them that the ads on that site “will be worth more than everyone else’s ads.” And even if the ads are not actually worth very much, the potential for improvement is in itself something that can be marketed to investors. The way to make the ads on a website worth more than those on others ― say, on Facebook ― requires “target[ing] more and better than Facebook.” And that, in turn, “requires moving deeper into the world of surveillance,” to learn ever more information about the users, so as to make the targeting of ads to them ever more precise.

Over the years, the progressive creep of online tracking and surveillance has

 trained Internet users to expect that everything they say and do online will be aggregated into profiles (which they cannot review, challenge, or change) that shape both what ads and what content they see.

Despite occasional episodes of unease over what is going on, even outright manipulation by the providers of online services is not enough to turn their users off. As with private service providers, says Mr. Zuckerman, so with governments:

[u]sers have been so well trained to expect surveillance that even when widespread, clandestine government surveillance was revealed by a whistleblower, there has been little organized, public demand for reform and change.

Trust in government generally has never been lower, yet it seems that online, anything goes.

Mr. Zuckerman points out that the ad-based business model had ― and still has ― upsides too. When it took off, it was pretty much the only way “to offer people free webpage hosting and make money.” Initially at least, most people lacked the means ― the technical means, never mind financial resources ― to pay for online services. Offering them “free” ― that is to say, by relying on advertising instead of user fees to pay for them ― allowed people to starting using them who would never have done so otherwise:

[t]he great benefit of an ad supported web is that it’s a web open to everyone. It supports free riders well, which has been key in opening the web to young people and those in the developing world. Ad support makes it very easy for users to “try before they buy.”

Indeed,

[i]n theory, an ad-supported system is more protective of privacy than a transactional one. Subscriptions or micropayments resolved via credit card create a strong link between online and real-world identity, while ads have traditionally been targeted to the content they appear with, not to the demo/psychographic identity of the user.

In practice, well, we know how that worked out.

Besides, says Mr. Zuckerman, not only did the ad-based internet do away with our privacy, it also produces “clickbait” that nobody really wants to read, is increasingly centralized, and breaks down into interest-based echo chambers.

The solution on which Mr. Zuckerman rests most of his hopes for a redemption of the web is a move from ad-based to subscription based business models. He points out that Google already offers companies and universities the possibility of paying for its products in exchange for not offering their employees or students the ads that support its free Gmail service. And he is confident that “[u]sers will pay for services that they love,” even if a shift to subscription-based business models would also mean that users would simply abandon those for which they have no deep affection. This, in turn, would produce “more competition, less centralization and more competitive innovation.” A shift to subscription-based web service would require new means of payment ― something with lower transaction costs than credit-card systems or PayPal. Such technologies do not yet exist, or at least are not yet fully ready, but Mr. Zuckerman is hopeful that they will come along, and allow us to move away from the “fallen” ad-based internet.

But even if a return to the online garden of Eden ― which, much like “real” one, never actually existed ― were technically possible, would it be desirable? Mr. Zuckerman acknowledges that whatever business model we turn to, “there are bound to be unintended consequences.” Unintended, perhaps, but not entirely unforeseeable. Even if transaction costs can be lowered, a subscription-based internet would be less accessible for many people, in particular those in the less well-off countries, the young, and the economically disadvantaged. Those who, in many way, need it most. Besides, it seems doubtful to me that a subscription-based internet would generate more innovation than the current version. As Mr. Zuckerman points out, the ad-based model has the virtue of letting users try new services easily. It also means that abandoning a service does not mean throwing away the money paid to subscribe to it. It is thus friendlier to newcomers, and less favourable to incumbents, than a subscription-based model. (Just think of the number of new media sources that developed online in the last 15 years ― and compare it with, say, the number of new newspapers that appeared in the previous decades.)

The tracked, surveilled ad-based web has its downsides. But it lowered barriers to entry and allowed the emergence of new voices which, I strongly suspect, could not have been heard without it. (By way of anecdote, I had enough doubt about this blogging thing to begin with that I’m pretty sure I wouldn’t have started if I had to pay for it too. Alternatively, I don’t suppose anyone reading this now would have been willing to pay me!) If embracing ads was indeed the internet’s original sin, then I believe that it was, as Augustine suggested of the original original one, felix peccatum ― a fortunate one.