three reasons privacy regulations and tools will result in an economic boom
16 February 2020
Just popping up for a quick look at the big picture before digging into the details of advertising markets. Realistically, privacy regulations and tools are going to have a bunch of positive impacts on the economy as a whole.
Reallocation of information and communications technology (ICT) investments and skills. As investment shifts out of surveilance marketing, available financial and human capital in ICT will end up moving to positive-sum interactions. We saw something similar in the early 2000s, when the Digital Millennium Copyright Act drove investments away from many kinds of infotainment startups, and into surveillance marketing.
Today, the pressure is in the other direction. Not all of the shift will be away from marketing in general. While no-consent surveillance gets harder, other investments in marketing technology will show greater returns. For example, a mapping service will be able to add fuel, restroom, and food stops to planned trips—based just on express intent and on information supplied by businesses.
Important to understand the extent to which different "Big Tech" companies are exposed to different aspects of the transition. (Search and map ad revenue is less at risk than audience-based ads tied to poorly understood practices where voters will keep supporting laws and initiatives until the creepy headlines stop.)
- Increased market power for news and cultural industries, resulting in a news and culture boom. This is not just because of context-based targeting, but because limitations on tracking users across contexts will remove some of the so-called "infinite inventory" that tends to drive down ad rates everywhere.
- Lower expected returns to some kinds of crime. User-targeted ad placements give a persistent structural advantage to deceptive sellers. Limits on targeting will reduce may opportunities for fraud against both legit advertisers and against end users. A stronger news and cultural industry will also be better funded to deliver trustworthy product reviews.
Rapid deployment of privacy regulations and technology is likely to result in a privacy dividend for investors, and a potential risk of an "overheated" economy in general. Much of the boom will hit the news and creative industries, but there's probably some good news here for small businesses relieved from the pressures of fraud and bidding up the price of access to audiences.