“Enhance Your Penis!”

Arnold Kling
May 1, 2018 · 3 min read

Companies are collecting data about people. We shouldn’t let them do that. The data that is collected will be abused. That’s not an absolute certainty, but it’s a practical, extreme likelihood, which is enough to make collection a problem.

— Richard Stallman

I agree that collecting data on people can have unintended bad consequences. However, banning the practice of data collection would effectively ban targeted advertising. This would have unintended consequences as well.

Twenty-two years ago, there weren’t large Internet companies tracking your every move and serving targeted advertising. But that does not mean that life was perfect for Internet users. Those were also the days when we were deluged with emails with the subject line Enhance Your Penis!. The emails were sent indiscriminately. There was no interest in penis-enhancement products on the part of the vast majority of recipients, quite a number of whom did not even have penises.

A ban on targeted advertising could lead to the return of indiscriminate advertising, taking us back to the days of “enhance your penis.” This would not necessarily be better for consumers.

Keep in mind that the reason that advertising exists is because it works. Some folks were buying those penis-enhancement products, or those emails would not have been sent. The ads are not being sent just to annoy you. In fact, advertisers would rather that you be enticed by ads than ignore them.

Without targeting, advertising would be ignored more often. This would make each ad less effective, so that content providers would receive less revenue per ad. Content would require more total ads in order to be supported, if it could be supported at all.

The fundamental problem

Here is the fundamental problem in a nutshell:

  1. We do not like to pay for content on a per-item basis. See Mental Transaction Costs. Similarly, we have only limited willingness to contribute to a patronage model.
  2. We do not like to pay subscription fees for content.
  3. We do not like having to wade through a lot of irrelevant, annoying advertisements.
  4. We do not like the feeling that we are being tracked in order to be served fewer, targeted advertisements.
  5. People and firms that supply content typically should be paid.

We cannot satisfy all five of these desires. We have to give up at least one of them. We have to compromise.

My own preference would be to forego (2). I would prefer to pay subscription fees to firms that bundle a lot of content. I call this the Spotify model.

But it seems that the most successful model as of 2018 is the one where we give up (4). We allow ourselves to be tracked in order to enjoy free content without having to wade through an inordinate amount of irrelevant advertising.

The unintended abuses of the data impose costs that firms may not properly factor in when they collect the data. Stallman sees abuses as inevitable. In principle, then, the firms that collect data should have to pay out tort claims or fines if and when information gets mis-used. This might change the calculation that firms make in deciding which revenue model to employ.

But I would be wary of trying to regulate targeted advertising out of existence. By doing so, you are forcing one of the other models on the rest of society. You are over-riding the preferences of most other people in order to impose your own.

I cannot support such a regulatory diktat. I think that we should be trying to win over people to other approaches. That is why I wrote Let’s Compete with Facebook.

Anyone can complain about a given revenue model. The challenge is to come up with a better model that can win in the marketplace.

HackerNoon.com

how hackers start their afternoons.

Arnold Kling

Written by

Author of nonfiction books, primarily in the area of political economy. In a previous life, I started one of the first commercial web sites. Ph.D in economics

HackerNoon.com

how hackers start their afternoons.

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