Digital advertising - how to tame an angry bear

‘Exit, pursued by a bear’ runs the famous stage direction in Shakespeare’s ‘A Winter’s Tale’. Substitute ‘advert’ for ‘bear’ and it’s a good description of how some consumers feel about online advertising: many of us exit platforms pursued by relentless, aggressive campaigns, with no means of escaping them. As a result, a relationship dies offstage, mauled into a bloody heap by some companies’ determination to grab a dollar by any means necessary.

It’s hard to avoid the impression that some platforms are testing the highest level of advertising that visitors can possibly tolerate, which overlooks the possibility that some consumers are being beaten into submission – by an onslaught that has more to do with machine-readable metrics than it does with designing a good experience for humans.

There are few available defences. Anyone using an ad blocker may be forced to switch it off or be locked out of content, suggesting that some in the industry regard even people who are cowering in a bunker as fair game. ‘Look at this advert or get lost!’ is not a sophisticated relationship-building strategy.

Of course, advertising is the lifeblood of many sites that have yet to develop alternative revenue streams, while for companies like Google and Facebook, it’s their core business and most organisations plug into them.

Meanwhile, advertisers face challenges of their own. The problem of high-grade campaigns appearing alongside low-grade or illegal content – or low-quality ads popping up in upscale videos – has made some advertisers uneasy about who, or what, their brands may be associated with by platforms that are too big to ignore.

All of the above provided a strong context for the second half of a recent Westminster eForum event on regulation and competition in the wake of the UK’s Furman Review. That government-commissioned report explored how to foster a culture of innovation and competition among digital businesses, while protecting consumers from harm: local concerns, perhaps, but debating universal themes in a global digital economy.

Advertising was the focus of the second half of the debate, which attracted speakers and delegates from government, industry, media, law, and the regulators. Lord Gilbert of Panteg, Chairman of the House of Lords’ Communications Select Committee, oversaw proceedings, observing that a lack of competition and the covert sharing of consumer data with third parties has undermined public trust in the platforms they use. Restoring that trust is essential.

The digital economy and the creative industries have “total inter-dependence”, he said. As a result, advertising is crucial to the success of those industries and there is a huge range of shared public policy issues.

In a post-Artificial Intelligence world, he added that it’s vital for platforms and content to remain open and accessible to people from all backgrounds. This hinted at the fast-emerging challenge of bias and lack of transparency in some AI-enabled applications, due to flaws in training data and/or organisations automating institutional biases.

Regulation can’t keep pace with innovation in the tech industry, he said, and this aspect of public policy demands a detailed response. Arguably, it also demands an entirely new approach:

Critically, one overarching theme is this mismatch in pace between regulation and innovation and our static, certainly analog, regulatory processes. I’m not just talking about regulation of the digital economy; it’s about the whole of regulation in the digital era.We call not for another regulator [...] but for much more effective coordination of the existing regulatory landscape through what’s called a digital authority, bringing together the senior people from the existing regulators, with some external people and an external Chair.

This would provide real-time advice to government and the third sector on tech development, and compete with the fantastic brains in the industry. The aim is to have a really strong relationship with that industry, so we can look forward to the challenges of the future and come up with solutions that don’t always have to include statutory regulation.

Bureaucracy

The Furman Review underlined this recommendation. However, as our previous report from the conference explained, there are risks in creating a separate digital authority when all markets are now essentially digital. Does any country need yet another layer of bureaucracy to link their regulators, simply because those organisations lack expertise in digital markets?

Chris Heaton, Head of Digital Markets at the Department for Digital, Culture, Media, and Sport (DCMS) appeared as an exemplar of an organisation that has too broad a brief to oversee any of those issues effectively, and too narrow a remit in other ways. Factor in constant political upheaval, and you can begin to see that it is not just a matter of innovation outpacing regulation, but also of government constantly morphing into new, unsuitable shapes:

This subject sits across my department, DCMS, as the lead on the tech sector, data policy, online advertising, and online harms, and the Department for Business, Energy, and Industrial Strategy [BEIS] as the lead on competition policy. It’s worth emphasising upfront that, of course, we now have another new set of ministers, so our priorities on this work will continue to evolve.

Heaton added that “We are at risk of becoming the child with the hammer” [to whom everything looks like a nail] in over-regulating a diverse and innovative digital sector. Fair point, but this begs the question of why the government keeps creating big hammers, such as DCMS, in a misguided effort to knock bureaucratic complexity on the head.

The result is more complexity, of course, as the government then has to create dozens of smaller, more focused organisations to try to link departmental briefs that are too broad to begin with. (What has sport got to do with digital competition policy?)

Arguably, the current UK government is also more focused on boosting competition than on protecting consumers, from an ideological standpoint at least. Heaton accepted that any interventions could introduce disruptions and distortions, so there is a need to establish an evidential case for intervention.

The government has certainly been carrying out a number of complementary analytical studies and developing new ‘theories of harm’ – via the online harms white paper, the smart data review, the Cairncross Review, and so on: all respectable attempts to gather hard evidence.

For panel member Aastha Mantri, Senior Consultant at specialist consultancy Economics Insight, there is a widespread lack of understanding of how online platforms work, particularly with regard to the advertising value chain.

She made two important observations: We don’t know, a priori, who the winners will be in any digital market; and the features of those markets change quickly – for example, Facebook introduces new features every year. As a result, competition policy and regulation are forced onto the back foot. Arguably, making policy more forward-looking (via scenario planning) may be necessary, but that risks creating a political – rather than regulatory – approach.

For Sarah MacDonald, who leads the advertising, marketing, and sponsorship group at media and technology law firm Wiggin, the core issues are that consumer data has a value that must be better understood. Advertising needs to be better managed, and content that purports to be ‘news’ raises issues of trust when digital advertising is able to target people directly.

Political adverts are outside of the regulatory remit, she observed, and so do not have to be honest or transparent – an issue that needs urgent redress. With Facebook able to access 95% of the adult audience (according to Wiggin) and Google 99%, there is potential for serious distortions – especially as those platforms own much of the underlying advertising technology.

For Matt Rogerson, Head of Public Policy at The Guardian Media Group – one of countless publishers who are struggling as traditional revenue streams are turned on their heads – digital advertising is the most powerful medium on earth and yet also the least regulated, certainly when it comes to political campaigns.

Within the workings of the industry itself, automation is meant to drive efficiency, yet as much as 70 percent of the value to publishers is lost to the enabling tech players, with their fees rising exponentially. “We are a huge advocate of self regulation,” he added, but admitted that this means little when the giant platforms have no interest in that process.

Will Hayter, Senior Director Policy and International at the Competition and Markets Authority (CMA), set the UK’s exploration of these issues in the wider context of other studies, such as those in Germany, the EU, the US, Canada, and elsewhere.

There is much common ground between these various reports, he said, highlighting as they do the benefits of new technologies and noting that while the individual features of digital markets are not new, their cumulative effect is. Consumer behaviour means these markets can tip very quickly – Google and Facebook are examples of this – and this creates a ‘winner takes all’ problem in competition terms.

According to Hayter, EU reports tend to build on current regulations, such as GDPR, in terms of enhancing competition enforcement. However, the CMA’s view is that a new balance between “sharpened tools and thoughtful pro-competition regulation” is needed. Regulation may stop markets from tipping, or protect a market once it has tipped, but any intervention comes with a cost. On the flip side, personal data does need to be protected under GDPR, he said.

The core challenge is that no ready-made model of regulation exists for the digital advertising world – there is no option for ‘lift and shift’ from open banking, for example, because such rules are context specific. The reality, he said, is that we need more – and more effective – international collaboration.

My take

This, of course, is the ultimate irony as the UK is poised on the brink of a divisive, acrimonious divorce from Europe.

Far from being the helpless victim of unelected bureaucrats on the continent, the UK has been a leading member of an alliance of nations driving new regulations and helping to draw up the details of most of them. It now finds itself sidelined out of choice, weighing up diverging from European rules, mirroring them with no direct influence on them, or trying to persuade its allies that a new British approach is better.

But whichever route turns out to be the right one, international cooperation will be essential. If the UK can draw up the most forward-looking competition regulations in the world and persuade others to follow them, then that will be a great achievement. But the option of being a small island offshore from the rest of the world is not viable in a global digital market – unless the UK plans to be a deregulated free-for-all, in which case consumers will pay a heavy price.

Either way, creating more layers of bureaucracy to compensate for its own failures in administrative design may not be the best approach.