A Practical Navigator for the Internet Economy

Executive Summary

During 2015, advertising on mobile networks has come to be seen as such a gold mine that, according to an October 1 story in the New York Times, ads electronically delivered were costing users more in connect time than the network content for which they were paying in the first place.   ARCH ECON members surveyed this scene and complained of an economic feudalism where companies like Google, Apple, Facebook, and Microsoft had developed ecosystems that users were forced to declare their allegiance to in a manner similar to having to pick a feudal overlord. Bruce Schneier first used the feudalism metaphor in a commentary for Wired in 2012.

These companies were offering free services, in exchange for user’s data trails, while in many cases, the argument was made that users did not realize the value of what they were giving up. Doc Searles and Matt Larsen  strongly agreed with and complained about the feudal metaphor.   Jeff Michka noted the way in which user activities were gathered  and criticized the outcome as the government permitting uncompensated “taking”.   Bob Atkinson agreed with Jeff and together the two came up with a strategy, with a strategy similar to network neutrality by means of which the public might be educated in such a manner as to insist on real monetary compensation for its data.

Automating the selling process through varied algorithms and tracking mechanisms has helped to create an entire industry referred to as “adtech” where judging the quality - if any - of what was going on was very difficult. Again people were asked to trust black box algorithms.   And, as with email, the use of the technology on the Internet seems to be almost cost free.  Only it wasn’t really because no one seemed willing to deal with the fact that there was probably only a finite amount of money out there to be spent either for surveillance marketing or for the better thought-out and more graceful forms of brand marketing that companies like Apple became expert at.

In 2014-2015 with the convergence of mobile data and ubiquitous applications tied to GPS systems, the drumbeat was raised to indicate that a whole new level of advertising approach had to be adopted for: the goal of reaching people in real-time on their cell phones.  As the New York Times October 1 feature explained, in the context of dealing with the pressure for quarterly results, ignoring the situation that ads tied directly to user’s mobile phones had its own problems. Namely, if these ads were not completely re-crafted to deal with smaller screen sizes and load times, the players involved would likely face situations where major content sites could make strategic mistakes like that was made by boston.com. In this  case, the cost that the user would have to pay to load advertising and, worst of all, tracking scripts was significantly greater than the cost of the content that presumably was the reason for the user being on the site in the first place. The result was a new kind of pollution somewhat similar to email spam where it became a natural defense of the user’s monetary interests to install blocking software to render merchant attempts at surveillance marketing worthless.

In an interview, Don Martí explains how a standards free-for-all enabled a situation where, with one-pixel cookies, tracking of a user’s web visits became virtually cost free and extraordinarily easy. This created a wild West kind of situation where third parties could come in and say to the more legitimate predecessors “you better buy ads from us as well or we will trash your claims to veracity.”  In the absence of any kind of policing mechanism, it seems that the whole advertising universe on which Internet profits depend has become unreliable.  By unreliable we mean not verifiable.  The sheer numbers of ad-tech companies claiming their own secret sauce, given the overall size of advertising budgets, indicate an unsustainable mechanism. Yet: when and where and what will trigger the inevitable collapse seems to be anyone’s guess.

Finally, during the last two years, as pay walls have gone up around the content of everything except the homepage of the world's major newspapers and most important magazines, industry players have noted that there are a lot more page views that can be made subject to advertising. With the new technology, the question has become how to convince players whose experience has been in the form of print media to invest in the immediacy of the online space.   The result has been an explosion in what is known as the Ad Tech market. The funding needed to put together companies that can promise advertisers, via black box algorithms, a secret sauce for the success of their advertising is not very great.  As a result, in part three, we take a very superficial look at a few of the hundreds of new companies making up this space. In doing so, we leave it to our readers to decide whether they would put any faith in the Rube Goldberg design of IBM's Big Data Distillery.

The patience of the industry’s customers is being abused.  This is not a good way to build a sustainable future business model. Ad blockers are said to be relatively easy to write and there is beginning to be some evidence that the numbers of them in use are approaching the numbers of spam filters. This is not a healthy situation.



Executive summary                                p. 3

Introduction                                        p. 5

Welcome to Feudalism                                 p. 7
The Cloud as the WalMartization of Data                p. 9

Computer Scientists Find Bias in Algorithms            p.11

What if the Advertising Bubble Bursts?                p. 13

Computer Scientists Find Bias in Algorithms             p. 14

Internet Advertising Based Business Model Is in
Trouble in View of these Privacy Issues                p. 28

Part 2: Interview with Don Marti                    p. 35

Browsers Handling of HTTP Cookies                    p. 36

Part 3: AdTech Developments                        p. 42

Conclusion                                        p. 44