The Cost of Privacy

May 25th, 2018

The last few days have brought an inundation of emails asking me to confirm participation in online newsletters or sending me updated privacy policies.  The emails are courtesy of the new European online privacy laws, which go into effect today.  The impacts on ad-supported content could be substantial, I'm afraid, with the broad-based general-interest outlets being hit the hardest.  

Here's a quick explanation.  Basically, the new privacy laws will make it more difficult for websites to collect and store your personal information.  While this can have many benefits to consumers, the costs are substantial and less well-understood.  Website like nytimes.com collect personal data to better target advertising to its readers, which is actually a win-win-win for them, the advertisers, and the readers.  Nytimes.com likes to serve ads that readers will click on because that's what their advertisers are willing to pay for.  Readers also like targeted ads.  They would much rather have potentially useful ads---ones they might actually click on and purchase from---than a bunch of irrelevant ads for Viagra clogging up the websites they visit.  It has, in fact, been documented that consumers, on average, do prefer targeted advertising, despite the occasional creepiness.  (By the way, if you think that a website knowing that you recently googled "porch furniture" is creepy, just imagine a world where platforms could neither target advertising nor discriminate on the basis of the advertising's content, another policy proposal on the table in the US.  My prediction is that 80% of the online ads in that world would be for pornography.)  

So not being able to target as effectively will hurt the websites, the advertisers, and the readers using them.  But it won't hurt all ad-supported websites equally.  Think, for instance, about a (fictional) website designed specifically for owners of labradoodles, labradoodlers.com.  Even if that website collects no personal information from its visitors at all, it will still do a pretty decent job of targeting advertising to them.  They probably own a labradoodle, which means that they buy dog food, dog medicine, and dog accessories.  They may also like labradoodle t-shirts and socks and tote bags.  So merchants selling those things already have a very targeted audience, essentially for free.  Contrast that with users of CNN.com or merriam-webster.com or any general-interest website.  Without personal information, advertisers know very little about them.  So advertisers will be less willing to buy ads that support those sites.  One can imagine a future internet populated with the niche and special interest and void of the mainstream and general interest.    

So the EU, in a well-intentioned attempt to protect the privacy of consumers, may be leading us towards a more fragmented and fractured (and polarized?) online experience than we already have.