The Unintended Consequences of Ending the Internet’s Grand Bargain

 

Is the Facebook kerfuffle really about privacy? Or is there something more fundamental happening here? I’ve written previously about my skepticism that people really value digital privacy as much as the media or activist groups suggest they do. And if Facebook doesn’t see an exodus of users after the Cambridge Analytica maelstrom, that will be a powerful bit of evidence my instincts are correct.

Another bit of evidence is the study “How Consumers Value Digital Privacy: New Survey Evidence, Program on Economics & Privacy” by Caleb Fuller, assistant professor of economics at Grove City College and a faculty affiliate at George Mason University Law School’s Program on Economics and Privacy. After conducting a survey of 1,579 internet users, Fuller found that “85% are unwilling to pay anything for privacy on Google.” And of the 15% of Google users willing to pay, the median was around “a paltry $20 per year.”

Overall, there still seems to be great satisfaction with “the internet’s grand bargain: the exchange of free or subsidized content for personalized advertising,” as Larry Downes, project director at the Georgetown Center for Business and Public Policy, writes in Harvard Business Review. And what would the internet look like if this bargain collapses due to new government data privacy regulation? Downes:

The grand bargain has been the fuel of digital growth for over two decades. But search engines, social media providers, and e-commerce platforms, along with user forums, news sites, and emerging internet-of-things service providers large and small, may rationally conclude that the new costs and potential penalties associated with collecting, analyzing, and marketing user-provided information have become unsustainable, requiring a new business model altogether.

That may also mean the end of customized recommendations from Amazon, streamlined searches from Google, tailored music from Pandora, and other services that use “private” information to give each user a personalized online experience. Again, the risks of collecting such information may be too great for services providers to stomach, despite the obvious value to users. . . .

The age of the free and open internet may come to an end, and quickly. That may have been the true goal of many calling for “regulation” of tech companies in the first place. If so, the unintended impact on average consumers will be severe and, perhaps for many, decidedly worse than today’s admittedly messy and often leaky online experience.

If the grand bargain unravels, entrepreneurs will no doubt innovate new ways to make money and continue developing disruptive products and services. The easiest solutions, which have evolved in parallel with the free internet, include subscription-based access behind paywalls, supplemented by generic advertising. That’s been part of the longstanding business model of print newspapers, of course, and it’s increasingly favored by their online equivalents.

We may also see more tiered pricing, with teaser or particular kinds of content available for free or for a limited period, or, as with most cloud-based software, free access to a basic product with premium features available only to paying customers — the approach of companies as varied as Dropbox, Spotify, and Harvard Business Review. . . . The transition will be chaotic and even traumatic for users weaned on free stuff, many of whom will be unable to pay for services that are no longer ad-supported and are less personalized. Our great global conversation may become both quieter and more insular.

There are 14 comments.

Become a member to join the conversation. Or sign in if you're already a member.
  1. Guruforhire Member
    Guruforhire
    @Guruforhire

    I think the fact that digital marketing doesn’t actually meaningfully work for many large brands is the larger problem, and some are reducing their digital marketing expenditures.  This was happening before the big liberal freakout that “literally hitler” got their data.

    • #1
  2. Stad Coolidge
    Stad
    @Stad

    James Pethokoukis: The age of the free and open internet may come to an end, and quickly.

    Downes’ statement reminds me of the the “promise” of cable TV: no commercials because you’re paying for it.  My guess is even if Google, Amazon, et al. develop a pay-for-privacy option, there will be some 2 pixel high fine print giving them a loophole in certain areas . . .

    • #2
  3. Ekosj Member
    Ekosj
    @Ekosj

    James has the question backwards.   We shouldn’t be paying internet companies for our privacy.    Privacy should be the default position.    Rather they should pay us for using our data just the same way an oil company would pay to install an oil well in my back yard.

    James makes it seem like ‘the grand bargain’ of the internet is the business model of AM or FM radio writ large.    We get free music and sports and talk in exchange for listening to advertising pitches.    But that’s not the half of it.    Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car?   And your address or car’s position and speed? And who was with you?

    • #3
  4. Stad Coolidge
    Stad
    @Stad

    Ekosj (View Comment):

    James has the question backwards. We shouldn’t be paying internet companies for our privacy. Privacy should be the default position. Rather they should pay us for using our data just the same way an oil company would pay to install an oil well in my back yard.

    James makes it seem like ‘the grand bargain’ of the internet is the business model of AM or FM radio writ large. We get free music and sports and talk in exchange for listening to advertising pitches. But that’s not the half of it. Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car? And your address or car’s position and speed? And who was with you?

    Good points in both paragraphs!

    • #4
  5. HankMorgan Coolidge
    HankMorgan
    @HankMorgan

    Stad (View Comment):

    Ekosj (View Comment):

    James has the question backwards. We shouldn’t be paying internet companies for our privacy. Privacy should be the default position. Rather they should pay us for using our data just the same way an oil company would pay to install an oil well in my back yard.

    James makes it seem like ‘the grand bargain’ of the internet is the business model of AM or FM radio writ large. We get free music and sports and talk in exchange for listening to advertising pitches. But that’s not the half of it. Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car? And your address or car’s position and speed? And who was with you?

    Good points in both paragraphs!

    Take a look at the Brave browser. Eventually they intend to replace site ads that have tracking with randomized ads, no ads and microtransactions of cryptocurrencies, or simply ad block. Currently I’m not sure any of it works except the ad blocking.

    • #5
  6. Stad Coolidge
    Stad
    @Stad

    HankMorgan (View Comment):

    Stad (View Comment):

    Ekosj (View Comment):

    James has the question backwards. We shouldn’t be paying internet companies for our privacy. Privacy should be the default position. Rather they should pay us for using our data just the same way an oil company would pay to install an oil well in my back yard.

    James makes it seem like ‘the grand bargain’ of the internet is the business model of AM or FM radio writ large. We get free music and sports and talk in exchange for listening to advertising pitches. But that’s not the half of it. Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car? And your address or car’s position and speed? And who was with you?

    Good points in both paragraphs!

    Take a look at the Brave browser. Eventually they intend to replace site ads that have tracking with randomized ads, no ads and microtransactions of cryptocurrencies, or simply ad block. Currently I’m not sure any of it works except the ad blocking.

    I’m seriously looking at a new browser, maybe Kim Komando has some advice.  I like Internet Explorer 11, but I can’t stand Edge, Firefox, or Chrome (tried all three).  More and more web sites are telling me my IE11 sucks, but the heck with them.  If they want my business, they should make sure their web sites accommodate my browser, not what they want me to use.  The guys at the auto parts store don’t say they won’t do business with me because my 2009 Toyota Tacoma pickup is “outdated”, so why should these pajama-boy web designers tell me how I should access the web?

    Is it obvious I’m working on my “Get off my lawn!” quals?  Hehe . . .

    • #6
  7. GFHandle Member
    GFHandle
    @GFHandle

    Ekosj (View Comment):
    Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car?

    Whelp, I do own an Amazon Echo. And James has the fact that people don’t seem to mind as much as you do. Bottom line: no government interference, or as little as possible.

    Define a privacy crime and then enforce it, but create no regulatory board making endless regulations.

    • #7
  8. Ekosj Member
    Ekosj
    @Ekosj

    GFHandle (View Comment):

    Ekosj (View Comment):
    Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car?

    Whelp, I do own an Amazon Echo. And James has the fact that people don’t seem to mind as much as you do. Bottom line: no government interference, or as little as possible.

    Define a privacy crime and then enforce it, but create no regulatory board making endless regulations.

    You are, of course, free to give away whatever you want.   I just don’t know why you would.    

    • #8
  9. HankMorgan Coolidge
    HankMorgan
    @HankMorgan

    Stad (View Comment):

    HankMorgan (View Comment):

    Stad (View Comment):

    Ekosj (View Comment):

    James has the question backwards. We shouldn’t be paying internet companies for our privacy. Privacy should be the default position. Rather they should pay us for using our data just the same way an oil company would pay to install an oil well in my back yard.

    James makes it seem like ‘the grand bargain’ of the internet is the business model of AM or FM radio writ large. We get free music and sports and talk in exchange for listening to advertising pitches. But that’s not the half of it. Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car? And your address or car’s position and speed? And who was with you?

    Good points in both paragraphs!

    Take a look at the Brave browser. Eventually they intend to replace site ads that have tracking with randomized ads, no ads and microtransactions of cryptocurrencies, or simply ad block. Currently I’m not sure any of it works except the ad blocking.

    I’m seriously looking at a new browser, maybe Kim Komando has some advice. I like Internet Explorer 11, but I can’t stand Edge, Firefox, or Chrome (tried all three). More and more web sites are telling me my IE11 sucks, but the heck with them. If they want my business, they should make sure their web sites accommodate my browser, not what they want me to use. The guys at the auto parts store don’t say they won’t do business with me because my 2009 Toyota Tacoma pickup is “outdated”, so why should these pajama-boy web designers tell me how I should access the web?

    Is it obvious I’m working on my “Get off my lawn!” quals? Hehe . . .

    Well I find Brave to have the best and most user friendly ad/script blocking. I would like to be able to turn off all ads and make payments directly to the websites instead. I think straight up ad blocking with no payments is counter to my interests long term as it starves the sites I visit and enjoy of revenue.

    • #9
  10. dnewlander Coolidge
    dnewlander
    @dnewlander

    Guruforhire (View Comment):

    I think the fact that digital marketing doesn’t actually meaningfully work for many large brands is the larger problem, and some are reducing their digital marketing expenditures. This was happening before the big liberal freakout that “literally hitler” got their data.

    You know, I’ve been saying this for years. (I know that’s true about many things, but bear with me…)

    Back in the halcyon days of the Web, I worked for a startup that provided free services to college students (free email with integrated voicemail, free website, discounts at brick and mortar stores… the company actually ended up being described as “a well-funded Heaven’s Gate” in Wired after I left for their “dehiring” practices. Which was funny because it certainly wasn’t well-funded when I worked there, and it was my business plan that changed that.).

    Anyway, a lot of my colleagues were really excited when we got Toyota as a customer. But I wasn’t. Because Toyota could and still can spend big bucks on TV commercials, radio commercials, and all that traditional stuff. Like Facebook today, I thought the real value we had was in knowing a lot about the demographics of our users, and I thought we should be able to make at least as much money in much smaller chunks by microtargeting, and actually building communities around small businesses.

    Now, since this was the mid-90s, very few of the small companies we called had any idea what the “WorldWide Web” was, let alone were willing to give us even $25 a month to put banner ads in front of college students on it, no matter how microtargeted we were.

    But I still stand by my beliefs. Budweiser and Lexus don’t really need to build a community with their users (no matter what their Marketeers say) because one’s a commodity and the other is a once-every-five-years purchase. Sam’s bar or Sally’s auto repair shop? They could use it, but instead all they get are Google adwords and Facebook fake news. It’s a shame.

    • #10
  11. Duane Oyen Member
    Duane Oyen
    @DuaneOyen

    HankMorgan (View Comment):

    Stad (View Comment):

    HankMorgan (View Comment):

    Stad (View Comment):

    Ekosj (View Comment):

    James has the question backwards. We shouldn’t be paying internet companies for our privacy. Privacy should be the default position. Rather they should pay us for using our data just the same way an oil company would pay to install an oil well in my back yard.

    James makes it seem like ‘the grand bargain’ of the internet is the business model of AM or FM radio writ large. We get free music and sports and talk in exchange for listening to advertising pitches. But that’s not the half of it. Would you ever turn on the radio if it listened to and transmitted back to the station all conversations in the room or car? And your address or car’s position and speed? And who was with you?

    Good points in both paragraphs!

    Take a look at the Brave browser. Eventually they intend to replace site ads that have tracking with randomized ads, no ads and microtransactions of cryptocurrencies, or simply ad block. Currently I’m not sure any of it works except the ad blocking.

    I’m seriously looking at a new browser, maybe Kim Komando has some advice. I like Internet Explorer 11, but I can’t stand Edge, Firefox, or Chrome (tried all three). More and more web sites are telling me my IE11 sucks, but the heck with them. If they want my business, they should make sure their web sites accommodate my browser, not what they want me to use. The guys at the auto parts store don’t say they won’t do business with me because my 2009 Toyota Tacoma pickup is “outdated”, so why should these pajama-boy web designers tell me how I should access the web?

    Is it obvious I’m working on my “Get off my lawn!” quals? Hehe . . .

    Well I find Brave to have the best and most user friendly ad/script blocking. I would like to be able to turn off all ads and make payments directly to the websites instead. I think straight up ad blocking with no payments is counter to my interests long term as it starves the sites I visit and enjoy of revenue.

    I keep a version of K-meleon installed for when I need to turn off images and flash; I still want a visible menu (file, edit, bookmarks, tools, etc.) in the upper left corner.

    • #11
  12. Duane Oyen Member
    Duane Oyen
    @DuaneOyen

    I wonder why Congress doesn’t simply allow us to control our data- Andy Kessler proposes a five word law: “Users own their own data.”  Facebook, Google, etc. can then simply ask for consent for using non-aggregated data, just as medical personnel must for use of individualized HIPAA information.

    • #12
  13. GFHandle Member
    GFHandle
    @GFHandle

    Ekosj (View Comment):
    You are, of course, free to give away whatever you want. I just don’t know why you would.

    Because the Echo is a very useful tool. Again, define a CRIME and then and only then do I want the government involved.  What is your plan?

    • #13
  14. GFHandle Member
    GFHandle
    @GFHandle

    dnewlander (View Comment):
    Sam’s bar or Sally’s auto repair shop? They could use it, but instead all they get are Google adwords and Facebook fake news. It’s a shame.

    As a consumer, I have to agree. Many times the absence of a web presence makes it hard for me to find local businesses to patronize.  Still caveat emptor should apply to users of Google, Facebook, etc.

    • #14

Comments are closed because this post is more than six months old. Please write a new post if you would like to continue this conversation.