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I Ruined the Internet and I'm Sorry, by Ethan Zuckerman in The Atlantic

The Internet's Original Sin - The Atlantic

Stashed in: Advertising, The Web, @timberners_lee, Monetization, Advertising, You are the product., Privacy does not exist., Interest Graph!, Facebook!, Reddit!, Twitter!, internet, Open Web

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The fiasco I want to talk about is the World Wide Web, specifically, the advertising-supported, “free as in beer” constellation of social networks, services, and content that represents so much of the present day web industry. I’ve been thinking of this world, one I’ve worked in for over 20 years, as a fiasco since reading a lecture by Maciej Cegłowski, delivered at the Beyond Tellerrand web design conference.  Cegłowski is an important and influential programmer and an enviably talented writer. His talk is a patient explanation of how we’ve ended up with surveillance as the default, if not sole, internet business model.

The talk is hilarious and insightful, and poignant precisely for the reasons Carlson’s story is. The internet spies at us at every twist and turn not because Zuckerberg, Brin, and Page are scheming, sinister masterminds, but due to good intentions gone awry. With apologies to Carlson:

What we wanted to do was to build a tool that made it easy for everyone, everywhere to share knowledge, opinions, ideas and photos of cute cats. As everyone knows, we had some problems, primarily business model problems, that prevented us from doing what we wanted to do the way we hoped to do it. What we’re asking for today is a conversation about how we could do this better, since we screwed up pretty badly the first time around.

I use the first personal plural advisedly. From 1994 to 1999, I worked for, helping to architect, design, and implement a website that marketed content and services to recent college graduates. When that business failed to catch on, we became a webpage-hosting provider and proto-social network. Over the course of five years, we tried dozens of revenue models, printing out shiny new business plans to sell each one. We’d run as a subscription service! Take a share of revenue when our users bought mutual funds after reading our investment advice! Get paid to bundle a magazine with textbook publishers! Sell T-shirts and other branded merch!

At the end of the day, the business model that got us funded was advertising. The model that got us acquired was analyzing users’ personal homepages so we could better target ads to them. Along the way, we ended up creating one of the most hated tools in the advertiser’s toolkit: the pop-up ad. It was a way to associate an ad with a user’s page without putting it directly on the page, which advertisers worried would imply an association between their brand and the page’s content. Specifically, we came up with it when a major car company freaked out that they’d bought a banner ad on a page that celebrated anal sex. I wrote the code to launch the window and run an ad in it. I’m sorry. Our intentions were good.

This was a GREAT article. Very thoughtful and thought provoking.

I will have to think about what makes a service so good that users will pay for it.

Eye opening:

A back of the envelope analysis from Felix Stalder gives a sense of how little these ads are worth. Last quarter, Facebook reported that it had 1.32 billion users, collected $2.91 billion in revenue and made a profit of $791 million, for a profit margin of 27 percent. Facebook is clearly doing a great job making money from ads. But the profit per user is just under $0.60. That’s a fascinating figure, because Facebook reports that users spend 40 minutes per day on the site, or roughly 60 hours per quarter.

Stalder is interested in the idea that users are working for Facebook, generating content that the company profits from without getting compensated. But even if we ignore the important idea of “free cultural labor” that makes a business like Facebook (or Tripod!) possible, it’s striking that our attention, as viewers, is worth only a penny an hour to Facebook’s advertisers.

Demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance.Don Marti uses the same set of Facebook earning numbers to demonstrate that print newspapers make roughly four times as much money in advertising as Facebook does in the United States. Print advertising generates these enviable, if shrinking, numbers despite capturing only about 14 minutes a day of Americans’ attention. This “print dollars, digital dimes” problem is an apparent paradox: Why are targeted digital ads worth an order of magnitude less than untargeted print ads, in terms of “attention minutes”? Marti argues that advertising in a public place, like a newspapers, builds brands in a way that private, targeted ads can’t. (I’ve argued that this is a legacy effect and that print ads will fall in price once there are efficient digital ways to reach the majority of consumers in a market.)

Cegłowski tells us that it doesn’t matter.

The poor performance of digital ads just makes investor storytime more compelling. After showing how poor YouTube’s targeted ads are in understanding him as a consumer, he explains, “Of course, for ad sellers, the crappiness of targeted ads is a feature! It means there’s vast room for improvement. So many stories to tell the investors.”

Most investors know your company won’t grow to have a billion users, as Facebook does. So you’ve got to prove that your ads will be worth more than Facebook’s. In 1997, I argued that Tripod’s users were more valuable to advertisers than the average web user because I could use algorithms to analyze the home pages they posted and target ads to their interests and demographic data. Facebook makes a vastly more sophisticated version of that argument, and faces problems much like those we faced almost two decades ago. Targeting to intent (as Google’s search ads do) works well, while targeting to demographics, psychographics or stated interests (as Facebook does) works marginally better than not targeting at all.

Demonstrating that you’re going to target more and better than Facebook requires moving deeper into the world of surveillance—tracking users' mobile devices as they move through the physical world, assembling more complex user profiles by trading information between data brokers.

Very perceptive:

There are businesses, Cegłowski notes, that make money from advertising, like Yahoo and Gawker. But most businesses use advertising in a different way. Their revenue source is investor storytime:

Investor storytime is when someone pays you to tell them how rich they’ll get when you finally put ads on your site.

Pinterest is a site that runs on investor storytime. Most startups run on investor storytime.

Investor storytime is not exactly advertising, but it is related to advertising. Think of it as an advertising future, or perhaps the world’s most targeted ad.

Both business models involve persuasion. In one of them, you’re asking millions of listeners to hand over a little bit of money. In the other, you’re persuading one or two listeners to hand over millions of money.

The key part of investor storytime is persuading investors that your ads will be worth more than everyone else’s ads. That’s because most online ads aren’t worth very much. As a rule, the ads that are worth the most money are those that appear when you’re ready to make a purchase—the ads that appear on Google when you’re searching for a new car or for someone to repair your roof can be sold for dollars per click because advertisers know you’re already interested in the services they are offering and that you’re likely to make an expensive purchase. But most online advertising doesn’t follow your interest; it competes for your attention. It’s a barrier you have to overcome (minimizing windows, clicking it out of the way, ignoring it) to get to the article or interaction you want.

Advertising is the original sin of the Web:

I have come to believe that advertising is the original sin of the web. The fallen state of our Internet is a direct, if unintentional, consequence of choosing advertising as the default model to support online content and services. Through successive rounds of innovation and investor storytime, we’ve 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. Outrage over experimental manipulation of these profiles by social networks and dating companies has led to heated debates amongst the technologically savvy, but hasn’t shrunk the user bases of these services, as users now accept that this sort of manipulation is an integral part of the online experience.

Users 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. As a result, the Obama administration has been slightly more transparent about government surveillance requests, but has ignored most of the recommendations made by his own review panel and suffered few political consequences. Only half of Americans believe that Snowden’s leaks served the public interest and the majority of Americans favor criminal prosecution for the whistleblower. It’s unlikely that our willingness to accept online surveillance reflects our trust in the American government, which is at historic lows. More likely, we’ve been taught that this is simply how the Internet works: If we open ourselves to ever-increasing surveillance—whether from corporations or governments—the tools and content we want will remain free of cost.

At this point in the story, it’s probably worth reminding you that our intentions were good.

The solution is services people are willing to pay for, like Reddit and Imgur.

Users will pay for services that they love. Reddit, the lively recommendation and discussion community, sells Reddit Gold subscriptions that give users special privileges and the ability to turn off ads. (Those ads, by the way, are a lot less intrusive than those on most social networks.) Reddit advertises Gold both by detailing benefits of membership and setting “daily goals” for gold subscriptions, telling readers, “We believe the more reddit can be user-supported, the freer we will be to make reddit the best it can be.” A culture has developed of giving a month’s Reddit gold membership to someone whose comments or content you’ve especially appreciated, rewarding both the individual and the community as a whole. It would be interesting to see if Facebook could support a premium model. I suspect many people use Facebook because they feel they have to, not because they love it, as they love Reddit.

There are numerous consequences, not all intended, not all good, to using fee for service as a default model on the web. Many users would abandon services that weren’t worth paying for—we’d see usage numbers for sites shrink as well as growing inexorably. Most sites would have much smaller userbases. This likely means we’d have a harder time finding our exes on Facebook, but might mean we’d see more competition, less centralization and more competitive innovation.

If we want to build a web that’s really global, we need to rethink online payment systems. Visa and Mastercard may never become pervasive in India and sub-Saharan Africa as mobile money already has a strong market share. Still, systems like M-Pesa suffer the same problems as credit cards and PayPal: high transaction costs. The model Ted Nelson dreamed of with Xanadu, where hyperlinks would ensure authors were cited and compensated for their work, required a micropayment system with low transaction costs.

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