This article is from WeChat official account:Tencent Research Institute (ID: cyberlawrc) , author: Wang Rong, Huang Nan, from the title figure: vision China
Foreword
Since the commercialization of the Internet in the 1990s, digital advertising has gone through 30 years of development. In the current high-level protection model of personal data protection legislation, personalized digital advertising based on user behavior is facing changes and adjustments.
In June 2020, Apple announced the launch of a new privacy policy. Developers need to obtain explicit consent from users in advance when tracking users with ads. Affected by this new regulation, the revenue of digital advertising business will likely drop significantly, triggering a rebound in the industry, and thus launching a confrontation between different business models of the Internet.
App developers represented by Facebook(Facebook) obtain traffic through free services and realize monetization through advertising business, that is, advertising + free Service model; and Apple earns income through the commission of the app charging services in the system(15% to 30% commission, commonly known as “Apple tax”) Encourage App to reduce dependence on advertising revenue and adopt a charging model. Facebook has placed full-page ads in the New York Times, Wall Street Journal and other media, criticizing Apple’s use of data privacy protection measures to implement anti-competitive business practices, which will cause long-term damage to small App developers.
For users, the transformation of digital advertising seems to have become a zero-sum choice: Either accept advertising and enjoy free services, or refuse advertising, but you may need to pay for more services in the future. Is there a third path for the future of digital advertising?
Digital advertising: the cornerstone of the Internet’s free model
Digital advertising gave birth to the early commercial development of the Internet. The business model of free to the majority of users and charging to advertisers allowsThis major technological invention of the 20th century quickly spread to the general public and started the digitalization process of human society.
From Netscape, Yahoo, and Google in the United States, to the four major portals in China, the advertising business provides effective monetization methods for Internet companies and also provides a foundation for their development. So far, digital advertising is still an important part of the income of Internet companies. In 2020, the annual revenue of Internet advertising in mainland China will reach 497.161 billion [1]. It is on this basis that users can enjoy high-quality and convenient digital services for free.
Google Chief Economist Hal Wari once pointed out in the book “Information Rules”: “The production cost of information products is high, but the cost of copying is extremely low. Regardless of whether the information products are ultimately successful, most of the costs are It is an irreversible sunk cost; on the contrary, the amount of copying is not limited by natural ability. According to the laws of economics, information products will theoretically be sold at a price that is almost free.” For Internet companies, providing universal free services is an important way for them to gain market competitive advantage. This means that Internet companies will not be able to directly obtain income from the user-oriented main business, but need to turn to other businesses to obtain income. Advertising becomes a suitable choice.
Therefore, since the first commercial online advertisement came out in 1994, the advertisement is no longer just the advertisement itself, but a set of complete and reasonable market logic choices behind it-free services based on advertisements. The free model of the Internet is determined by the endogenous characteristics of its business model and the laws of market economy.
Advertising has nurtured the digital industry and has deeply transformed the marketing model of the business world. From the most traditional webpage banner advertising to the core business model of search engines-bidding advertising, from programmatic buying advertising to information flow advertising, especially the development of personalized advertising technology, greatly improving the efficiency of advertising reach, digital advertising Form a unique competitive advantage in the advertising market. The “2020-2021 Global Advertising Industry Status Trend Report” shows that global online advertising expenditures in 2020 will be 303.3 billion US dollars, accounting for 54.4% of global advertising expenditures. >[2], has become half of the country.
Personalized advertising also promotes the formation of a digital advertising ecosystem, and obtains market development opportunities for small and medium-sized enterprises. For SMEs, Targeted digital advertising that can be charged according to the advertising effect greatly reduces marketing costs and is a more reasonable marketing plan choice. The personalized presentation of product information breaks the “two-eight law” in the traditional market, fully activates the long-tail market, and allows a large number of small and medium businesses to gain room for development. Small businesses can thus achieve the goal of promoting their products and services to millions of people. Especially in the era of the epidemic, this is crucial to the recovery and growth of small businesses.
Digital advertising: the embarrassment of “informed consent”
The pursuit of personalization and efficiency in the digital age is based on the collection and processing of personal information. “Personalization” and “Privacy Protection” have become a long-standing contradiction, and the field of digital advertising is no exception. As the global personal information protection legislation improves the level of protection, the digital industry has gradually increased the transparency of personal information processing activities. Digital services that directly reach users, such as online shopping, social networking, travel, education, medical care, etc., require the user’s informed consent for the processing of users’ personal information through privacy policies and service agreements. In contrast, digital advertising is embarrassing in this compliance campaign to obtain user consent.
Ads are not just needed by users, but they are everywhere. Rational economics tells us that advertising is a consideration for users to obtain many free services. But perceptually, the vast majority of users have instinctive resistance to advertising. After the EU’s General Data Protection Regulation (GDPR) came into effect in 2018, a Dutch company prompts all visitors to its website in a clear and direct way. Visitors, “whether you choose to share data with advertisers”, 90% of them opted out. For this company, it is equivalent to actually giving up the customized advertising revenue completely, and it needs to open up a new source of revenue.[3].
This was almost rehearsed two years later, the huge controversy triggered by Apple’s new privacy regulations.
Apple VS Facebook: The battle between different business models
In June 2020, Apple proposed new privacy rules, which caused a shock in the digital advertising ecosystem. The two protagonists of this dispute, Apple and Facebook, represent two different business models of the digital industry.
The first model(Apple model: users refuse behavioral advertising beforehand, but it may eventually promote the transformation of digital services to a paid model)
Apple’s new iOS14 privacy regulations: App developers need to obtain user consent through the application tracking transparent framework (App Tracking Transparency, referred to as ATT) , In order to use the device IDFA(Apple Advertising Identifier) to track users with ads[4]. This modification is equivalent to changing the “implicit consent, express withdrawal” mechanism to the “express consent” mechanism. From previous experiments, most users will opt out of behavioral advertising.
The second mode(Facebook mode: All parties in the digital advertising ecosystem can continue to implement behavioral advertising to users in a default way to obtain advertising revenue, and Users will continue to be able to obtain digital services for free, of course, users can also opt out of behavioral advertising afterwards.)
Facebook believes that: Apple’s new regulations will guide users to opt out of tracking, which will have an important impact on advertising target positioning, optimization and measurement of the effectiveness of advertising campaigns, and advertising effectiveness will be greatly reduced. It also means that tools such as Audience Network that collect user data for advertising purposes will have to be discontinued, which will make it more difficult for small developers to earn revenue from advertising, which may force them to try to open up other types of revenue sources, such as paid subscriptions. , And Apple will draw [5] from it.
In order to put further pressure on Apple, Facebook even considered filing an antitrust lawsuit against Apple, accusing Apple of abusing its power in the smartphone market. Zack Burke pointed out: “Apple said they are helping people, but these measures clearly point to their competing interests.” [6]
The dispute between Apple and Facebook clearly shows that the choice of advertising policy is not simply the advertisement itself, but the intersection of privacy and competition in the digital market. In February 2021, Margaret Vestag, the head of European antitrust affairs, issued a warning asking Apple to treat all apps in its app store fairly[7]. After all, Apple does not allow developers to obtain IDFA by default, and if advertisers and developers continue to want to use personalized advertising technology, they can only use Apple’s SKAdnetwork to obtain and analyze data. This further deepens the dependence of advertisers and advertising platforms on Apple. As some comments pointed out: Apple’s current adjustments to the behavioral advertising model have strengthened its position as a system developer in controlling traffic to some extent. Unless the system developer’s rules are accepted for cooperation, the disadvantaged developers who rely heavily on the advertising business will face the risk of being squeezed out[8 ].
Digital advertising revolution: Is there a third way
Either choose ads and get free services, or choose to reject ads, but at the same timeServices are paid. In addition to the choices at both ends of the pendulum, is there a third way to transform digital advertising?
The answer is of course yes.
As a bridge between the supply side and the consumer side, advertising itself is a reasonable existence. In the digital age of information explosion, it is obvious that all kinds of personalized customization including advertising can overcome information overload and more effectively match supply and demand. Has unparalleled advantages.
The digital advertising industry is not changing for the sake of change. The core goal of the change is to solve the problem of user privacy protection while providing more efficient information access methods. Personalized advertising and user privacy should be able to coexist, but the premise is that we need to find solutions for coexistence.
Google’s attempt is to introduce a “privacy sandbox” into the advertising business.
Due to the competition between the iOS and Android ecosystems, Apple has also indirectly promoted Google to continuously strengthen the privacy protection of the Android system. Compared with the radical measures taken by Apple, Google adopts technical solutions to solve the privacy protection problem in the digital advertising business. One of them is the “Privacy Sandbox(Privacy Sandbox)” plan.
In August 2019, Google disclosed its “Privacy Sandbox” plan for the first time. The “Privacy Sandbox” realizes privacy protection by hiding “specific people” in the “crowd”. Use machine learning to set people with similar interests as a “group” and allow advertisers to place ads on the “group”[9]. Cohort joint learning (Federated Learning of Cohorts, FLoC) advertising technology is to complete the main advertising data analysis activities on the user terminal, not It will be disclosed to a third party to better ensure the privacy of user data[10]. The Google advertising team’s test of the Chrome-based FloC solution shows that personalized advertising based on FloC can achieve 95% of cookie-based advertising.Report conversion can be used as an effective alternative to third-party cookies.
In 2020, Google Chrome launched TURTLEDOVE. Websites can require browsers to store interest groups locally, including information about bids and advertisements, and advertising buyers can bid based on the interest groups. In addition, Google has introduced a variety of privacy protection technologies in the Chrome browser, including measures such as aggregating information, adding noise, and limiting the amount of data sent from the device. These technologies enable marketers to measure advertising effects without third-party cookies. .
In fact, it is precisely driven by the demand for privacy protection that various privacy and secure computing technologies are developing rapidly. Just like in the fields of finance, medical care, and government affairs, the digital advertising industry is also an excellent scenario for the application of privacy and secure computing technologies. , Under the premise of privacy protection, it has great potential to realize the use of data value.
Conclusion
In addition to Google, we also see digital advertising solutions from different perspectives, such as some comprehensive media. For example, Verizon Media launched ConnectID as an alternative to cookies.[11], as well as the industry digital advertising identifier that the my country Advertising Association intends to establish and a matching user privacy protection self-discipline system.
On December 10, 2020, the China Advertising Association released the “Technical Specifications for Mobile Internet Advertising Signs”, aiming to form a set of China Advertising Association Internet Advertising Signs Program (CAID) to regulate Internet advertising activities and promote the orderly development of the Internet advertising industry. The CAID identification is generated through a certain algorithm through multiple parameters and random numbers. In order to protect user privacy, CAID requires limited uniqueness, phase consistency, connectivity, switchability, resetability, anonymity, and stability. Among them, the switchability requires that the CAID should be enabled or closed by the user in an effective way; the resetability requires that the logo should be in an effective and compliant manner, allowing the user to reset, and the reset logo cannot be Related to the logo before reset; anonymity requires that the logo should not be associated with any personal information, including generation parameters, service process, etc.https://www.reuters.com/article/us-facebook-advertising-apple/facebook-says-apples-new-privacy-rules-could-hurt-smaller -app-companies-idUSKBN25M2BO
[6]Facebook goes to war with Apple over ad privacy,
https://www.axios.com/facebook-war-apple-ad-privacy-cf90d171-9eed-4751-bb9e-fd0ca444f7cb.html p>
[7]https://www.chinaipo.com/usstock/141300.html
[8] After Facebook accuses Apple, the European Union: Apple’s new privacy regulations need to treat all apps fairly,
https://m.mp.oeeee.com/a/BAAFRD000020210209438043.html
[9] “Can technology giants reshape the digital advertising industry if they give up “tracking users”? “,
https://mp.weixin.qq.com/s/I4OjaBH8JWs3vJce-9MjUw
[10]Building a privacy-first future forweb advertising,
https://blog.google/products/ads-commerce/2021-01-privacy-sandbox/
[11](Building a privacy-first future for web advertising,
https://blog.google/products/ads-commerce/2021-01-privacy-sandbox/)
[12]https://www.mediapost.com/publications/article/358243/verizon-media-unveils-cookieless-id-to-replace-t.html< /span>
This article is from WeChat official account:Tencent Research Institute (ID: cyberlawrc) , author: Rong Wang, Huang Nan