Advertising: The Price of 'Free' Media

Publishers Need a New Contract With Consumers

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Omar Tawakol
Omar Tawakol

The march of technology has disrupted the implicit contract that has driven the media business for a hundred years or more: Publishers/programmers provide quality content; advertisers help subsidize the content and, in return, get to show commercial messages to audiences; and consumers enjoy the content and accept the ads that subsidize all or some of the cost.

Consuming media has historically been a passive activity where viewers and readers had little choice but to be exposed to ads. For example, the term "soap opera" originated from the dramatic series on radio that were sponsored by soap manufacturers such as P&G. Clearly, enough listeners acted on the commercials to keep sponsors buying more. But new technology has given advertisers and consumers the tools to break the implicit contract.

On one side, technologies such as DVRs and ad-blocking software on the internet give consumers the tools to block ads while still enjoying free content. This is an unfair trade and if everyone does it, no one will get free content. On the other side, some advertisers and their proxies have traded consumer information in the shadows without giving consumers the ability to see what they are giving up. That, too, breaks the implicit contract, because a trade requires that both sides know and understand what they are giving and what they are getting. That is especially true for online advertising but will increasingly become an issue for broadcasters that seek to deploy harvested user data in their advertising targeting.

Online targeting makes it attractive for an advertiser to sponsor the free content consumers want. If you visit a travel site, your interest in travel may be stored for use by an advertiser. That advertiser knows only that a person using your computer is interested in travel (it doesn't know your name or address or anything else too personal about you). The next day, when you visit a newspaper site, that advertiser serves you a travel ad and also pays the newspaper site on your behalf. As long as consumers can control the data they create, this is a fair trade. You can determine whether free news content is worth allowing the advertiser to target you based on your interest.

A consumer can always opt out of targeting, but if everyone does, the advertiser can also opt-out of subsidizing the content. Untargeted ads simply don't have enough value to support quality content creation. The TV business is about to learn that the hard way.

Being targeted online based on their interests makes some folks uncomfortable because a majority of them are under the false impression that personal or sensitive information is being collected about them. For the most part, it is not (and shouldn't be). I think consumers would be relieved if they could see and control what kind of data underlies the ads being served to them. The beauty of transparency is that it gives people the right to determine what they think should be stored about them and what shouldn't. Every site that collects or shares anonymous data should allow consumers to inspect and control their own data (if they care to do so). That transparency is a key missing ingredient in today's advertising ecosystem, and it is necessary to make the value exchange a fair one.

By making consumers part of the process, I think we can reinvent an acceptable implicit contract: Publishers provide content that is, by default, free for consumers but paid for by advertisers; advertisers get to fund the content in return for targeting the right consumers. Why would they pay for an ad that isn't targeted?

Consumers get free content in return for allowing advertisers to show ads that are targeted to them. In addition, consumers get to monitor the data being used to target them. In order to make this a fair trade, publishers and advertisers that want to use the targeting data need to disclose their data practices on every page and every ad that uses the data (through a link to a data-transparency page).

The real question in the privacy debate is: What is the default? Is targeting allowed by default, and is content free by default? The key trade-off: Just as consumers can opt out of targeting, advertisers can opt-out of sponsoring our content.

Here are our options:

Consumers pay for content by default. We turn targeting off by default and make consumers pay for content (for example, through subscriptions or micropayments). If they turn targeting on, they get it free.


Content is free and advertisers pay because they can target by default. If consumers choose to turn targeting off, they can pay or forgo the content.

We can't ask for free content while asking advertisers to serve untargeted ads. In the long run the economics just don't work for the advertisers that sponsor the content. We have to be honest with each other about the real trade-off. We have to stop asking consumers if they "prefer being tracked in return for relevant ads." That's the wrong trade-off. The right question is: If you could control what is tracked, would you allow it in return for free content? That's the actual trade. But to make this a fair and practical trade, the industry would need to improve by providing simple visual controls for consumers that are easily accessible on every page and every ad.

The advertising industry does a great service to consumers by paying the bills for professionally produced content, but it's hurt by its lack of transparency. The solution is fair, simple and attainable and must be pursued in order for us to put the balance between consumers, publishers and advertisers back on track.

As CEO at BlueKai, Omar Tawakol is responsible for the overall management, growth and vision of the company's exchange business. Mr. Tawakol has also worked at firms that specialize in mobile search and behavioral targeting.
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