Welcome to the new era of deregulation.
Earlier this week, the House of Representatives approved a bill that overturned Federal Communications Commission privacy protections. If President Trump signs the legislation, internet-service providers will be able to monitor and sell consumer data without having to get consumer permission. These rules could affect publishers by making cross-device matching easier, making audience data less exclusive and by making it less likely that platforms like Facebook and Google will ever be forced to obtain consent for the consumer data that fuels their businesses.
“The only thing the internet consistently generates aside from trolls is data,” said Fred Lane, an attorney who specializes in emerging technology. “Big data is sort of the next big oil, and Congress essentially opened up the oil field to ISPs.”
First-party data includes information like email addresses and browsing history that advertisers and publishers get directly from users. Third-party data is obtained indirectly from users, and it makes inferences on characteristics like demographics and interests.
Because third-party data relies on so many inferences, it is full of many errors, and cross-device matching often goes awry. Opening up the first-party data from ISPs could improve this matching. With improved matching, addressable TV ads could increase their scale and publishers could better target users across multiple devices, said independent marketing consultant Matt Rosenberg.
Improved matching could help publishers more easily reach their intended targets, but it could also come at a cost if increased demand for ISP data leads to price gouging.
“If publishers can plug into this data, it can be a benefit,” Rosenberg said. “But it can also become a ‘pay me for the good stuff or fall by the wayside’ thing.”
If a publisher’s audience data becomes widely available, it can devalue inventory because retargeters use audience data from premium publishers to target users while they’re visiting websites with lower CPMs. For example, you might be able to reach the same politically engaged user on a niche blog rather than running a banner on nytimes.com.
Mark Bartholomew, a SUNY-Buffalo law professor who specializes in advertising law, said that with more options for advertisers to obtain first-party data to identify particular users, the value of the audience data that publishers rely on to attract ad dollars could decline.
Web platforms like Google and Facebook are regulated by the Federal Trade Commission and they face less strict standards when it comes to user data than do ISPs, which are regulated by the FCC. Now that FCC rules are being rolled back, there has been speculation that the ISPs will now be in a position to compete with the duopoly if they can sell consumer data that is valuable to marketers. The rule change does expand the marketplace for data, but this won’t necessarily cut into the duopoly. After all, in October Google lobbied the FCC to adopt the FTC’s less stringent standards.
“I don’t see ISPs competing with Google and Facebook in a significant way in terms of the microdata that those platforms access from their services,” Lane said. “ISPs will compete with broad demographic data, but if you want to be more particular with behavioral data, you still have to go to a duopoly.”
Lane, who has advocated for consumer privacy in his books, added that privacy rollbacks indirectly benefit the duopoly because the they make it less likely that web platforms will ever have to require user consent for obtaining user data. If ISPs aren’t required to opt in, then why should Google or Facebook ever have to, the logic goes.
Matt Prohaska, CEO of Prohaska Consulting, noted that even if ISPs were able to cut into Facebook and Google’s large share of digital ad spend, that won’t automatically benefit publishers because it is possible that the ISPs could become closed ad platforms themselves.
“The ISPs could become walled gardens three through seven,” he said. “The business incentives for sharing haven’t yet outweighed the incentives for keeping the control to yourself.”