Reputation, signaling, and targeted ads
11 April 2023
Three recent developments that I'm still trying to figure out.
The FBI Says You Need to Use an Ad Blocker on Google and Bing. According to the Internet Crime Complaint Center, criminals are using ads in search engine results like Google and Bing to impersonate brands. These ads send unsuspecting users off to phony websites that look identical to the pages people are actually searching for, where they are then be subjected to ransomware or phishing attacks. The Bureau says an ad blocker can help.
FTC Issues Orders to Social Media and Video Streaming Platforms Regarding Efforts to Address Surge in Advertising for Fraudulent Products and Scams. With fraud on social media surging, the Federal Trade Commission has issued orders to eight social media and video streaming platforms seeking information on how these companies scrutinize and restrict paid commercial advertising that is deceptive or exposes consumers to fraudulent health-care products, financial scams, counterfeit and fake goods, or other fraud.
(also, from the FTC last year: Social media a gold mine for scammers in 2021. With fraud on social media surging, the Federal Trade Commission has issued orders to eight social media and video streaming platforms seeking information on how these companies scrutinize and restrict paid commercial advertising that is deceptive or exposes consumers to fraudulent health-care products, financial scams, counterfeit and fake goods, or other fraud.
)
And now: Behavioral Advertising and Consumer Welfare: An Empirical Investigation. [W]e find that [behaviorally targeted] ads are more likely to be associated with lower quality vendors, and higher prices (for identical products), compared to competing alternatives found in search results.
Or, as Julia Angwin put it, Online Ads Are Serving Us Lousy, Overpriced Goods. What is going on?
The old-school view of advertising is that it helps you tell
legit sellers and deceptive sellers apart. It's an economic
signal.
Rory Sutherland
said,
You could argue that advertising is a display of commercial
fitness, that if you were intending purely to make short term,
quick bucks, you’d simply sell via other means, and it only
pays to advertise if you’re planning to establish a long term
reputation for quality and probity.
For example, legit sellers and deceptive sellers are equally good at cold calls,
so a cold call is not a good way to tell a legit seller and a
deceptive seller apart. Someone who studies the behavioral economics
of advertising would probably say that a cold call carries no signal,
so it's not worth your time to take it. Ignore cold calls, but pay
attention to ad media that can carry an economic signal.
So, can we divide ad media into signal-carrying ads—usually the ones that make it easy for enforcers of laws and business norms to see the same ads that less well-informed users get—and ads that don't carry signal, which are safe to ignore? Maybe not. Now it's becoming clear that the money spent on surveillance advertising displaces investments in other areas. So seeing a surveillance ad means that it's less likely to be a win-win offer than a product you discover in some other way.
I'm not sure what to do with this info other than take it into account in customer research. Is the absence of an search or social ad, probably in combination with other information, becoming part of a useful heuristic for selecting a quality product for some buyers?
Related
Is Microtargeting Giving the Digital Advertising Sector a Bad Rap? by Susie Stulz. It’s a problem when journalists at prominent publications warn consumers not to purchase items they see advertised online because the products are likely to be overpriced and kind of suck.
Bonus links
Protect Elders! Ban Television!!
We've Teamed Up With Mullvad VPN to Launch the Mullvad Browser
Europe led the world in heat pump sales growth in 2022
Google Fiber Returns From The Dead To Deliver Actual Broadband Competition To Iowa
Facebook Tracking Pixels are the basis for a new wave of privacy class action litigation
The Tor Project’s new privacy-focused browser doesn’t use the Tor network
Big Tech is making its stuff slower and stupider — on purpose
