MARKETERS FOR AN OPEN WEB

Open Web, Opinion

Funding the Web

A criticism levelled at the defenders of an open, ad-funded web is that they are clinging to a dying business model. Their argument goes that advertising is insufficient to support a vibrant media ecosystem, as evidenced by the growth of paywalls used by major publishers. Proponents also argue that the issues with transparency in digital advertising are evidence that reliance on ads alone leads to a degradation of consumer privacy.

These arguments are misleading. There is a place for subscription-based “paywall” services online. But paywalls are not an option for all publishers or for all people, especially the economically disadvantaged. The Open Web needs to be funded by other revenue models including a vibrant, privacy-supporting advertising.

Enabling a diversity of revenue models

Media, in all its forms, has always been funded by a mix of subscription and advertising revenues. Away from state-funded organizations, newspapers, television, and radio have always had some businesses operating via a cash-payment model (e.g., cover price or subscription) alongside those funded via advertising. There is no reason that the internet should be any different.

The paywall is a valid business model for established brands with the history, reputation, and scaled audience to support them, but it cannot be a universal model for a vibrant media industry. Publishers must have the choice to operate the model that best works for them, their content and especially their audience. Seeing the benefits of a variety of voices in public debate, and the critical value of a free press to support accountability in a democracy, nearly all democracies have consistently created a legislative framework to support a plurality of the media.

Accessibility for all requires low barriers to entry

From a consumer perspective, newspapers and publications of all types are well known examples of “experience goods”. Businesses with a paywall or subscription model need to gain new users; but without prior knowledge of the experience, users don’t know whether they value the content more than the cost. Being hidden behind a paywall isn’t the best recruiting method for acquiring new users.

A second challenge with paywalls is that, given that the financially disadvantaged cannot necessarily afford access, they do not support the democratic goal of a free press. Moreover, cash-payment models presuppose a legacy of brand and distribution that new players do not have. This model is thus unavailable for new publishers, Given the lower production costs of online publishing relative to their physical counterparts, the web has been a wonderful media to better represent minority voices and supply niche content that makes the current web so valuable to society. Multiple methods have been created to overcome this issue – freemium offers, trial periods, and ad-funded versions and ad-funded articles are often provided to appeal to the widest quantity of people as possible.

Many start-up media businesses looking to break into the industry would never thrive or scale if they could only monetize through paywalls. Local newspapers have traditionally struggled to operate relying solely on subscription-based access; and even the largest publishers, such as the New York Times or Verizon Media, subsidize their subscription models with ad funding.

Advertising helps overcome accessibility and also helps new players compete and continue to grow over time. It can thus also increase market penetration and create or enhance brand awareness and influence. Shorn of these capabilities, the web publishing ecosystem will be unable to compete dynamically and effectively. A media without a message that is freely accessible to all cannot contribute to the health of a democracy.

Society needs a variety of voices and a choice of business models to underpin them if freedom of the press and freedom of speech is to have practical meaning in our digital world.

Unless we accept that a viable media industry should cater only to the wealthy, a vibrant democracy necessitates a business model that supports cash-free access to a diversity of viewpoints. Advertising has for centuries provided just such a funding model.

Giants

MOW argues that the largest challenge facing advertising is not a inherent flaw in the model, but instead the increasing dominance of the big tech giants who are leveraging their monopoly power to disenfranchise independent players on the open web.  It is the fact that the tech giants now take in excess of 80% of digital advertising revenue that has reduced competition for the ad-funded business model – not that the model itself is wrong.

The issue at stake is not that independent web publishers want a level playing field, that relies on their choice of supply chain partners, but that Apple and Google are manoeuvring themselves into a position to replace the open web with the original, closed model of Compuserve, Prodigy and AOL, one which gated access behind a subscription even if they also sold advertising. Thus no one is arguing advertising revenues overall will diminish, only whether it will be a viable revenue stream available to all publishers or only the largest monopolistic players.

Independent news and media players also want the freedom to choose their business models. Both Apple and Google offer the largest of these access to their readership via their own apps or to transition away from the Open Web and instead offer their content within their app stores. A question raised in this case is whether our free press will remain really free if it is dependent solely on policies and income from the digital gatekeepers, whose motivations are profit rather than social welfare?

A fair, competitive advertising market based on a level playing field has played an important role in the media industry and in supporting the plurality of the media. The free press and free speech that have been recognized for hundreds of years as so important for society should not be privatized merely because a handful of corporations have the technical means to do so. The market has become distorted and requires regulatory intervention in order to restore its competitive equilibrium.

The need for change

A defence of an ad-funded open web is not a defence of the status quo. Advertising is a valid model that can fund independent media and online businesses, but that’s not to say that we should not improve particular aspects of the current advertising market.

The most often quoted issue with regard to digital advertising models is the third-party cookie (TPC). For many privacy advocates the TPC is emblematic of everything that is wrong with the ad funded web but a deeper analysis would reveal that this pseudonymous identifier is a lesser privacy threat in the online world than other alternatives.

People have real privacy concerns, namely that their online activity will be used to embarrass or discriminate against them. This risk is far more significant when people’s personally identifiable information (like name, mobile number, email address or physical address) are used by the big tech giants than it is with pseudonymous data like random, easily resettable numbers used in independent digital advertising supply chains.

MOW supports these important privacy rights of individuals and believes they should have alternatives to the dominant platforms that associate their online activity with their identity. This is why MOW fully supports the CMA’s proposed remedy that the industry should provide enhanced transparency and interoperability of pseudonymous identifiers, which by definition have appropriate processes in place to keep them separate from people’s identifiable information.

Privacy regulations recognize pseudonymization as an important safeguard against the privacy harms that can occur with more sensitive personal data, such as identity. Moreover, by improving the transparency of the supply chains that enable small publishers to operate their business and compete with big tech, we can help identify bad actors and bring them to justice.

Privatizing the Web

Those, like Google with its Privacy Sandbox, who champion the removal of the interoperable data web publishers require to work with their supply chain partners are advocating for centralizing more control in the hands of fewer organizations.

The discussion around Privacy Sandbox in particular has focused on its impact on advertising, but the 23 changes proposed within it go far beyond just the removal of TPC. Perhaps most notably, the introduction of WebID – which would create a single sign-on through the (Google-owned) Browser – threatens to impair the relationships even the largest publishers have with their audience by controlling the very logins that support their paywall business models.  

Supporting the open web by rejecting the anticompetitive proposals of the tech giants isn’t just about saving the ad-funded web, it is more importantly about defending the independent and free media from the largest existential threat of our time.

In defence of an Open Web

Supporting a vibrant, open ad funded web is not mutually exclusive to supporting privacy or even paywall models.

There should be room in the market for multiple options, providing greater consumer choice, a more competitive market and greater freedom for publishers to choose how to operate their business. We should improve the transparency and accountability of advertising by introducing better interoperable data that can easily identify bad actors and be used as evidence to bring them to justice. Moreover, we should ensure people have the option to navigate across the web, without forcing them to disclose their identity.

The enemy of the subscription model is not the ad-funded web – it is the dominant market players who are distorting the online media economy and forcing these false choices on the rest of the world. On the other hand, an online media landscape reliant on only a subscription payment models or one controlled by walled gardens may truly be the “enemy of the people”. Existing players need to grow, new entrants need a more level playing field, a vibrant and competitive media is needed, which supports the range and plurality of media that contribute to our cherished freedoms of expression – and a truly free press.