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Online Advertising: The price of a 'free' online world

  • Artigo
image With the advent of the Internet, the cost of providing news, information and entertainment to the public has reduced considerably. Today, literally anyone with a computer can be a journalist, a publisher or an entertainer. What’s more, the market for these services is no longer limited by traditional distribution models. The reader, the consumer and the audience are truly global. But, despite these reductions in providing content and distribution, there is nothing revolutionary about consumers obtaining news, information and entertainment for free. Much of the commercial media industry is premised on providing just such an offer. The only trade-off for the consumer and the public is the advertising that underwrites the provision of these services.

So, while the Internet has truly democratised information and levelled the playing field of access, it has yet to liberate the one constant that has driven media services for the last century – the need to pay for it. More than ever, advertising is the fuel that is driving the information economy with the millions of Web sites, large and small, relying on advertising to pay their way. Unlike the traditional media, though, one of the true benefits of the online model is that consumers are now enjoying much more tailored and immediate experiences with greater relevance than offline media.

This is thanks to the technologies that better connect the buyer with the seller, the reader with the publisher and the entertainer with the audience. One of the reasons for this growth is the ability to target online advertisements to users based on a comprehensive profile of an individual’s activities and preferences through their Internet usage. The more information an advertiser can collect, the better able they are to ‘serve’ advertisements likely to appeal and generate sales. It’s no surprise that two people looking at the same Web site on different computers will see very different advertisements based on their historical behaviour online.

To some, the ability of online advertisers to profile consumers though their online experiences is concerning, as there is little understanding of the mechanics of how all this works and what new ‘trade‑offs’ consumers are making for these ‘free’ services. Even though consumers benefit from more targeted and relevant advertising, there is a sense that the collection of personal information is being undertaken too often without the informed consent of the individual. This has energised consumer groups and policy makers alike and just this month the Australian Law Reform Commission released its review into the Commonwealth Privacy Act. Their review is about modernising the Act to make it more relevant and responsive to the digital age. This report can be found at www.alrc.gov.au

In this environment, there is a natural and unavoidable clash between the commercial advantages that can arise from access to more information and the respect for an individual’s privacy. This is particularly so when individual consumers or users demonstrate indifference to or ignorance of the consequences of others knowing what they do online.

As aggregation continues to occur in the online advertising market, there is a risk that the privacy of individuals could be given less attention as providers seek to drive commercial advantage or the technology advances allow for increasingly bespoke marketing through ‘data mining’. Advertising networks and online search providers can obtain a competitive advantage if they know more about an individual’s online behaviour and preferences than does their competitor. This data is the new currency of the online services world. There is an implicit incentive and potential for those who seek to benefit from the delivery of online advertising to undervalue the privacy of individuals in order to justify collecting and commercialising greater and ever-more-sensitive private information.

Even as a small player in this market, Microsoft confronts the same pressures that are bearing on every provider of online advertising and search. Microsoft’s response has been to commit to and apply a set of privacy principles that focus on bringing the benefits of transparency, consumer control and security to the protection of consumers’ data and privacy online. Later this month, Microsoft’s Chief Privacy Strategist, Peter Cullen, will be in Australia to talk about the growing concerns of many that the online advertising market may yet overwhelm individual privacy. His visit will be covered in our next newsletter.

The online environment is based on certain core tenets; namely; access, choice, relevance, transparency and security. Privacy is increasingly the key driver influencing how these tenets are honoured. The role for policy makers, consumer groups, advertisers and the online industry is to provide a trustworthy experience to consumers and the general public through a workable regulation, industry cooperation and a commitment to ensuring that the price of ‘free’ is eternal vigilance.

For Microsoft’s privacy principles, go to www.microsoft.com/privacy and to review Microsoft’s submission to the Privacy Act review, go to www.microsoft.com.au/publicaffairs

John Galligan, Director, Corporate Affairs

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