Tech companies often go on about 'relevant ads', what does that mean for users?
The internet is built on advertising. All of our favourite sites show ads, and almost all collect user data to improve targeted ads. The economics of the internet were developed before the ethics had been discussed so we are stuck in a world where the surveillance capitalism system is already deeply rooted. Internet firms often justify their invasive data collection with the language of user friendliness. ’We use cookies to enhance your experience and provide you with ads which are more relevant to your interests’ they say. Which begs the question, is more relevant ads really in the users’ interests?
When people have a limited budget their consumption choices are necessarily trade-offs. The role of advertising is to influence consumers to pick the product they’re advertising instead of substitutes or other product categories. Generally, advertisers do this in one of two ways: informing consumers or inducing demand.
Informing consumers is the most straight-forward type of advertising, and the type which can be genuinely useful to the consumer. No one knew what a vacuum cleaner was before advertisers told them and explained how useful it is. Many people’s lives were improved by buying their first vacuum cleaner so the exchange was mutually beneficial; the producer gains by selling products, the consumer gains by having a product which makes their life easier, and the advertiser facilitated the exchange.
Inducing demand on the other hand is not a mutually beneficial exchange, it’s s form of zero-sum competition within a product category. If a consumer has a limited budget for buying a new vacuum after their previous one broke then inducing demand is the process of getting the consumer to pick a specific product by making it seem luxury or otherwise more desirable when another product exists at the same level of price and quality.
With people spending plenty of time on the internet there is plenty of data to harvest about their preferences which is useful for advertisers. However, induced demand is in contention with consumers’ interests as they want to hold on to their money. In essence then, websites claims that their use of cookies is in your interests are false. It’s easy to think that ads are a small prices to pay for the convenience of websites, and in many ways it is. But it is not in the economic interest of consumers to see ads, and ‘more relevant ads’ are worse for consumers trying to save money than less relevant ads. The word relevant is relative; the important question is relevant for whom?
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I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.
Written by Karl Johansson
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