Publishers are getting screwed in the data-tracking era

It’s 2014, and we’re living in a data hungry online industry with almost no privacy considerations. The media industry continues to feed a myth to consumers that foregoing privacy is a necessary cost of the free content on the Web. It also trumpets the value of benevolent first-party data enabling personalization by the sites and products consumers choose to use, which is all valid. But it does this while ignoring third-party tracking that often involves rapid collection and selling of personal data as you browse the Web by companies consumers have no idea even exist.

The industry has convinced publishers this data-tracking is necessary to grow revenues. It promises a mythical golden goose of data and advertising that doesn’t cannibalize the revenue from their existing trusted relationships. The much-hyped automation of advertising is incredibly promising, but right now, it’s being used almost entirely to collect and bid on data to re-target audience using tracking cookies. This data is driving immaterial growth in ad revenue to publishers small and large. It is also feeding a frothy and endless market for ad tech companies: Evidon’s company directory lists over 400 IAB-affiliated companies in the ad tech business. Over half of them are full voting members in our industry’s future.

The digital pie is rapidly shifting away from sites and services being consumed to the companies that track consumption. As digital continues to gobble up advertising share from its offline ancestors, it does so at the direct expense of brand advertising. The industry touts record ad revenues but ignores that more than 65 cents out of every online ad dollar is being spent on performance media fueled by data tracking. The current ecosystem heavily favors companies that use tracking cookies to collect the most data. This data is then used to serve laser-targeted ads wherever a cookie can be matched most cheaply.

Due to lack of constraints on the collection and use of data targeting by third parties, the Internet in the U.S. will continue to grow as a direct-response medium funded by click tactics. The industry has had publishers running worried about the click by less than .1 percent of users while collecting data on the other 99.9 percent. This is our Internet today.

Media companies invest in content and build trusted relationships with their consumers — which can then be shared openly with marketers. Readily available data and limitless lowest-common-denominator inventory on the Web has been a significant factor in a race to the bottom in content production, content investment and the type of advertising to support it. The industry has spawned a complex web of intermediaries that, much like high-frequency traders, move dollars towards third parties arbitraging on supply and demand of inventory, which, in this case, is the consumers’ data.

So what’s to be done? Regulation of third-party data will not decrease the diversity or quality of content on the Web. Conversely, it will begin to mend the trust relationship between consumers, marketers and publishers allowing quality to thrive once again. The industry is right to not want this regulation to come from Washington. It would be much more effective if our digital media stakeholders would step up and honor consumer choice to not be tracked. Those who abuse our trust would be sent packing.

This is critical if we want to protect the future of an Internet with quality free content. So next time you read an industry report touting the growth of ad revenues, pay attention to where it’s going before you think King Content can relax on his throne.

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