In this episode, we explore the history of Internet advertising as it relates to Terms & Conditions agreements. Is advertising a necessary evil, or the Internet’s original sin?

Follow the show on Twitter for updates: @TermsCondPod

Interested in learning more about Ethan Zuckerman’s research group at the MIT Media Lab? Learn more here:  https://www.media.mit.edu/people/ethanz/projects/

To see Phyllis Weber’s advertising director skills in action, visit https://www.roanoke.com/

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Transcript

The concept of advertising is as old as business itself. This is intuitive, of course, since you can’t make money selling a product or service unless other people know you are selling it. However, advertising has taken many forms over the years of human civilization. Ancient Egyptians used papyrus to create signs, many civilizations relied on wall painting to convey messages, and oral advertising was common across most cultures.

Fast forward to the Middle Ages, and tradespeople began using images to represent their businesses: think an anvil for a blacksmith, or a shoe for a cobbler. When farmers brought their wares to market, they would hire town criers to spread the word.

All of these ancient forms of advertising are still around in some form today, but innovations in technology have produced many other types of ads over the years. Brands would become household names thanks to print ads in newspapers and eventually spoken word ads on the radio, which were often creative and involved music and slogans. Take this one, for example, which begins one way and takes an unexpected turn.

[Arid deodorant ad]

I suppose if I ever have trouble writing transitions, I should seek help from those writers. Anyhow, we all know what happened next. Television changed the nature of advertising yet again. Famous slogans, jingles, and mascots became even more popular. Every new television program offered companies new avenues to advertise their products. Print ads were also popular, given the large circulation of magazines throughout the 20th century.

But all of the sudden in the early 1990s, the rise of the World Wide Web created a brand-new medium for advertising. We know this- you can hardly go two clicks after opening a browser window before seeing some sort of advertising. These may be audio, video, links, text, or images. It’s as if all of the historic forms of advertising now came together in one place.

All of the sudden, the Web now became a place of booming business, despite concerns in the mid-1990s about how or if mass adoption of the Internet would occur. I mean, people did have to put up with this every time they connected.

Dial up modem sound effect

Nevertheless, the sound of a 56k modem going online was magic for adults and children alike. (Oh, and it still is for many rural communities in the United States, so go encourage your local governments to expand broadband access). Anyhow, during the dot-com boom, websites sprang to life about almost any topic imaginable. Advertising was right at the center of all of this, albeit not in the way you might imagine. Internet startups poured millions of dollars into traditional advertising to drive traffic to their sites. From 1998 to 2000 alone, websites spent over $10 billion in today’s dollars on TV ad spots and other forms of traditional advertising.

Following the burst of the dot com bubble, advertising went through a reorganization. TV ads maintained their momentum, but as more and more people gained access to the Web, a shift away from magazines and newspapers occurred. Online ads began to take off. But here’s the key shift. Publishers and TV network owners could only surmise so much about their audiences. They might have known their customers ages and addresses, and to some extent viewing habits thanks to Nielson ratings. But what if they could know more, or perhaps, much more? Internet advertising offered a solution- one that would create an industry unlike anything before.

Intro

In 1997, Internet advertising revenue was just over $1 billion in today’s dollars. Over the past 20 years, that number has surged astronomically, with total revenue topping $100 billion in 2018. Advertising is the very lifeblood of the online ecosystem. Think about it. Unless you’re using an ad blocking extension in your desktop browser, it’s hard to find a website that doesn’t have some sort of banner ad, video ad, or, worst of all, one of those ads that literally blocks you from seeing the content you’re reading until you dismiss it.

Of course, the methods of Web advertising had to start somewhere.

[Ethan Zuckerman speaks]

That’s Ethan Zuckerman. When the World Wide Web began gaining popularity in the early 1990s, Ethan got involved in building a website called Tripod.

[Ethan Zuckerman speaks]

Tripod became a website that allowed its users to create their own space online, similar to Geocities or eventually MySpace, if you recall either of those services. Thousands of new users began pouring onto the platform, so naturally, in 1994, Ethan and the Tripod development team began looking for ways to monetize across all of these users’ webpages that didn’t involve charging a subscription fee. That’s when Ethan pioneered one of the Web’s most infamous forms of advertising.

[Ethan Zuckerman speaks]

Pop up ads dominated websites for many years, and they got so bad that often so many pop ups would load in that users would abandon browsing the site altogether. Keep in mind that browser tabs were not a thing in the 1990s, so every time a pop up ad occurred, it opened a new browser window. Just a few of these could quickly slow down the average computer, so it makes sense that people became frustrated, especially since many ads featured fake close buttons that just linked to another ad. By the late 1990s, browsers Opera and Mozilla Firefox came with a pre-installed pop-up blocker, and finally in 2004, Microsoft joined in by including one in its Internet Explorer browser. All major browsers today block these ads, so we’ve seen a shift toward other types of ads since the mid-2000s.

I mentioned earlier that online ad revenue increased one hundredfold between 1997 and 2018, so that means online advertising must be extremely effective, right? As it turns out, this may not be true. But before we discuss the effectiveness of online ads, I want to take a moment to connect this back to the title of this series. Terms and Conditions Apply, because that’s what this is supposed to be about, right? One of the key reasons large and cumbersome Terms & Conditions agreements even exist is so companies can communicate how they are collecting your data and what they are going to use it for. So why is it that online companies and websites desire to know as much about you as possible?

It’s important to reflect on the purpose of advertising in general again here. If your business has a product, you want to connect with potential buyers, and while there are some products that have general appeal to all of humanity, most of the time that’s not the case. Businesses want to advertise to people who they feel are more likely to purchase their products. Their target audience. I’m reminded of a great example of this from my childhood, when I would spend time at my grandmother’s house, at 11:00 sharp, we’d turn on the television to The Price is Right, which for those of you unfamiliar, is a daytime TV game show in the United States where contestants play pricing-based games in order to win prizes. As a kid, my brother and I would always note that the ads during commercial breaks were almost all for prescription drugs, medication insurance, life insurance, and in-home services. We couldn’t have cared less about any of these things, but at a certain point I realized those ads weren’t targeting me, they were targeting my grandmother.

Senior citizens, are in fact, more likely to purchase medications, life insurance, and the like, and you don’t have to dive too deep into viewer data and ratings to surmise that the most likely demographic to be watching daytime television during the week is, well, senior citizens. Hence all of the ads, which were targeting their specific age group. I mentioned Nielson ratings earlier, and for television advertisements, these ratings have traditionally been very valuable to networks and their potential advertisers.

However, there are still limitations when you only know information about someone’s age group. While TV networks can also generally narrow down targeted advertisements to geographic regions, it’s more difficult to get any more specific. This is virtually the same for print publications like newspapers and magazines also. But with the inception of the Web, things began to change. What if you could convince an advertiser that you could always show her ads to the targeted audience?

When you visit a webpage, certain details about you are recorded with that web page. The biggest one is your IP address, which contains information about your geographic location, but the website also sees the operating system and browser you’re using to visit the page. If you think about it, location data have typically been known by print media companies as well. You have to give a newspaper company or magazine publisher your address if you want to receive their publication, after all.

So let’s take a moment to examine the history of online advertising as it relates to print media, because it may help us understand how media companies arrived at the current levels of data collection.

When the Web began to grow into the late 1990s and early 2000s and more people began browsing websites online, suddenly there was a demand for news. Early Internet pioneers like Yahoo jumped at this opportunity, and made a decision that still had massive implications on the way we consume media- they offered their news stories for free.

[Phyllis Weber speaks]

The voice you just heard is Phyllis Weber. She’s currently the director of advertising at my local newspaper, The Roanoke Times, and she’s had a successful career in the newspaper business, working in advertising at the San Jose Mercury News, The San Francisco Chronicle, and the Charlotte Observer. The publishers she’s talking about here aren’t online publishers, but rather the large newspaper publishers that existed during the rise of the Web. The problem of free news online wasn’t going away.

Insert pweber2.mp3 – in the middle of the clip: I’ll note here that while Phyllis was working for the San Jose Mercury News, it was owned by Knight-Ridder, which owned 31 other newspapers across the US, making it one of the largest newspaper publishers at the time.

This presented a problem for the newspaper industry, which had enjoyed robust readership and dominated the print advertising in most markets. And it makes sense. People suddenly had free access to information and resources they had grown accustomed to assigning monetary value to.

[Phyllis Weber speaks]

Initially, large publishers formed an alliance to cement their online presence in the form of classified ads, through websites such as cars.com, apartments.com, and realtor.com. These websites featured services that users could pay for, so there was still a direct path to revenue. However, once newspapers began posting all of their articles online, they had to look elsewhere.

And here’s where things get interesting.

Everything I’ve discussed so far might have you thinking that targeted advertising is an idea that couldn’t exist without the Internet, but this is only partially true.

[Phyllis Weber speaks]

Phyllis Weber again, this time with the revelation that newspapers have been performing research on their customers to woo advertisers for years. So the concept isn’t new. However, the method definitely is. It’s one thing for the newspaper to periodically send out a paper survey to its subscribers. They can choose to fill it out and provide the information freely to the company or they could toss in the recycling bin. But somewhere amid the rise of online ads and marketing, even traditional print publications would need to change their methods to stay relevant. More on that, right after this.

Ad break

Welcome back. Sometime after mailed paper surveys and telemarketer calls, online tracking tools were invented. I could probably do an entire episode on the technologies used to collect online data, but for now, we’ll focus on just two- cookies and tracking pixels. These are some of the most useful tracking tools available to online marketers today, and here’s how they work.

Every website you visit is built primarily with three coding languages: HTML, CSS, and Javascript. HTML provides the backbone of the page- it defines where things appear. CSS defines how things look, for example, what colors or fonts appear, and Javascript is for more advanced site features. If you aren’t familiar with these, just right click on any page you have open in a browser and select “View Page Source.” You’ll immediately see the code that results in the website you’re viewing.

Think of your web browser as a translator. It reads the code, processes it, and displays the readable page for you. Cookies are part of this process that were designed to make repeat visits to the same website go more smoothly. For example, on a typical website that uses cookies, small amounts of information about you like your IP address, computer operating system, and Internet browser are collected and stored in the cookie. The cookie would be stored on your computer, and if you were to close your browser and then visit the same web page the next day, the cookie would let the website know that you are a repeat visitor.

Some common applications of cookies are online shopping carts. The cookie stores information about the items you’ve added so that they are still in the cart if you navigate away. Cookies can also be useful if you are filling out a form online and your connection is interrupted- simply reload the page, and the cookie recalls where you were, so the information you entered isn’t completely lost.

Cookies can be a very helpful tool for you as a user, however, when abused, they can also be used to track single users across multiple websites. This is the reason when you are searching for a new pair of shoes on a shopping website and then you leave to play a game of Words with Friends, you’ll see an ad appear for the shoes you had just been looking at. Your device’s cookies had stored information that told both the shoe website and the ad network within Words with Friends that you were the same user, so the ad provider took it from there.

Many browsers block tracking cookies by default now, and many websites have alerts or banners that give notice of their use of cookies, so if you don’t want any more shoe ads to appear when you’re just trying to score that triple word, try exploring the settings in your browser or on your mobile phone.

Of course with cookies on the decline, advertisers had to come up with another way to observe and track user behavior. Enter tracking pixels.

A tracking pixel is simply an invisible image on a webpage. They load in just like regular images, except that when your browser reads and processes the code for these pixels, a message is sent to whomever coded the tracking pixel. Think of it as an activity log. Therefore, the entity that placed the tracking pixel now knows that you’ve accessed a specific page, and not just that- a specific spot on the page. Each pixel can be mapped.

Here’s an example:

That same shoe website you were on earlier that sent you the ad in your game- they weren’t just using cookies. They had tracking pixels as well. So they not only know that you looked at a specific type of shoes. They know where you navigated on each page, as well as how much time you spent looking at the shoe because there were tracking pixels on every part of the website. Now they can determine whether you were just glancing at the shoes, or perhaps you are getting serious about them because you spent a bit of extra time on the page. Now the ads for the shoes are appearing on your Twitter, Facebook, and Instagram feeds.

Tracking pixels are more useful for advertisers because they aren’t as easily blocked, and are arguably more effective since they may provide more information about a user. Needless to say, cookies and tracking pixels on webpages are far more effective at gaining information about users than an optional telephone survey or mailer from the newspaper.

And now, after all that, we’ve come back to the newspaper. In contrast to methods used in the past to gain information about print subscribers, here’s how Phyllis described modern methods the newspaper uses online:

[Phyllis Weber speaks]

We can all agree that suggesting a useful newsletter about your favorite sports team is probably the best possible use of tracking pixels online, especially when signing up for the newsletter is optional, and it comes from a trusted source like your local newspaper. However, the vast ad networks across the Web began collecting and using these types of data long before the local newspapers had even considered it.

[Phyllis Weber speaks]

She’s right. It’s the norm now, so it was only natural for print publications to catch up and utilize data collection techniques. And as they caught up, so did their privacy policies.

The Roanoke Times is owned by BH Media Group, which currently owns and operates 30 daily newspapers across the United States. If the BH sounds familiar, think Berkshire Hathaway, and you’ll realize Warren Buffett might own your local newspaper. Anyhow, if you scroll to the bottom of Roanoke.com, you’ll see links to Terms and Conditions as well as a Privacy Policy. The Privacy Policy, which is one developed by BH Media, specifically describes the types of data collection that Phyllis mentioned a few moments ago. It mentions that the website collects data on you, that it may ask you to voluntarily offer information about yourself occasionally, and that it will make use of cookies. It goes on to state that the information collected will be used for Internal research such as how and where to make improvements on the website, to customize a user’s experience when using the website, and to tailor advertising efforts.

It goes on to say that “In order to continue providing services free of charge, the Web site sells advertising. Advertisers prefer to target their communication toward audiences who are most likely to be interested in their products.” This is important to remember in the context of this show. The Roanoke Times’ website is available freely. There isn’t a paywall, so they must rely on advertising to create revenue. By using the website, you are agreeing to the collection of your data in exchange for free access to the content. This is the same as when you use Google or Facebook’s services. You agree to the terms in order to access the content.

It’s this model of online revenue that Ethan Zuckerman now regrets contributing to, a position he made clear in a 2014 piece in the Atlantic titled “The Internet’s Original Sin,” and I encourage you to read it from the link in the show notes. It’s still incredibly relevant and almost prophetic now five years later. In my conversation with him, one of his key points had to do with the effectiveness of online advertising, and he offered this analogy:

[Ethan Zuckerman speaks]

The cost for advertisers is clear. When Facebook went public in 2012, the company reported quarterly revenue of around $1 billion. For the second quarter of 2019, that number was $16.9 billion. 16.4 of that was from advertising. The story is similar for Google. In 2001, ad revenue brought in $70 million. Last year, that number was $161 billion.

The cost to the rest of us who browse online- that’s right. It’s your privacy. So what exactly is the dollar value of your data to these companies? This is where things get tricky. Because Google operates a gigantic ad network across the entire Web, most anyone who has ever opened a browser and visited any website could be a potential audience for advertisers on the network. Certainly Google uses data on individual users as well, but to get a better idea of what your data is worth, and this shouldn’t come as a surprise, we turn to Facebook.

When Facebook launched its initial public offering in 2012, it valued each of its users at $1.21 per quarter. This means Facebook anticipated that for each user of its platform, it could obtain a little less than $5 a year from advertisers and other revenue sources. None of this money would come from the user directly. Fast forward to 2019, and Facebook reported that each of its users worldwide, on average, brought in $6.94, or about $28 annually- an increase of 575%. But if you live in the US & Canada, your data was worth even more to Facebook- try $32.60 per quarter. Over $120 a year. As an aside, should you see one of those chain messages going around again about Facebook ceasing to be free, you can see here that Facebook doesn’t need your money, they just need your data, so just disregard the message, or better yet, comment with a link to this podcast. Anyhow, this information isn’t a secret. These numbers came from Facebook’s 2nd quarter 2019 results, which are available freely on its investor relations website. I’ll even share the report in the show notes if you want to see for yourself.

It’s rather remarkable to think that Facebook has taken a concept like targeted advertising and turned it into such a profitable business by continuing to offer its users a free service. Of course, many free-to-play games seem this way also, except the cost is straightforward each time you approve a microtransaction. The cost of using Facebook isn’t so easily seen or understood. Sure, it’s buried in the Terms & Conditions, but that’s much harder to read and understand than a set amount of money leaving your bank account.

While you’re processing this, let’s take a moment to reconsider one of the statements Professor Zuckerman made a moment ago.

[Ethan Zuckerman speaks]

This certainly makes sense when you consider that generally, online users are giving up privacy in order for Facebook to tell its advertisers it’s able to slightly increase the chance that a given user will click on their ad, and this has ultimately resulted in low quality, omnipresent advertising across the Web.

However, it turns out that on the local scale, targeted advertising may actually have its advantages, especially when word-of-mouth, print, and online advertising intersect.

[Phyllis Weber speaks]

And Phyllis Weber sees the partnership with big data organizations as a great thing for the newspaper, especially when it comes to serving ads for local businesses on the paper’s website. And local news is important. The presence of a journalist at a local town gathering or board meeting lowers the likelihood of bureaucratic corruption. And so therefore, as I’ve discovered, we find ourselves at this strange point in history where print publications are now using the same or similar data collection techniques as large online advertisers.

So is it worth it? Is advertising really the Internet’s original sin? I’ll leave that for you to decide. But let’s take a moment to think about what we’ve discussed so far.

Advertising has taken many forms over the years, from outdoor signs to street corner criers all the way to radio and television, and then the pop-up ad and now targeted advertising. Think about the reach of each of these, though. The potential audience became larger and larger as technology progressed, but now advertisers have realized that a larger audience isn’t necessarily better. Which leads us to our current system. You agree to give up certain details about yourself to a company in exchange for an online service.

It all comes back to the Terms & Conditions agreements and Privacy Policies. These are the contracts you’re agreeing to by using the services. But the word contract is inherently a legal term, so how did companies just decide on what to include in the agreements, and why have we ended up with agreements spanning thousands of words? Oh, and what happens when these agreements intersect with local and federal law? That’s next time on Terms & Conditions Apply.

Terms & Conditions Apply is written and produced by Ethan D. Smith. Special thanks to my guests for this episode. First, Phyllis Weber. If you’d like to learn more about The Roanoke Times and see Phyllis’s work in action on its website, visit Roanoke.com for more information, and if you happen to live in Southwest Virginia, consider advertising with the paper or purchasing a digital subscription. Special thanks also to Ethan Zuckerman. If you’d like to learn more about Professor Zuckerman’s research at the MIT Media Lab, visit the link in the show notes to read about his most recent projects, including ones that examine how high-profile trends on social media impact our lives in the physical world.

Thanks so much for listening. If you enjoyed this episode, share it with your friends. If you want to learn more about the topics covered in this episode, check out the links in the show notes or open a browser and start your own research. There’s way too much information to cover in just a few episodes of a podcast, and the privacy and online landscape is constantly changing, so I encourage you to get out there and do your own research.

References and Further Reading

“The Internet’s Original Sin” -Ethan Zuckerman, writing in The Atlantic, August 2014 https://www.theatlantic.com/technology/archive/2014/08/advertising-is-the-internets-original-sin/376041/

“Internet Advertising Sees Breakthrough Year in 1997” IAB https://www.iab.com/news/internet-advertising-sees-breakthrough-year-1997/

“Windows XP SP2 Turns ‘On’ Pop-up Blocking” http://www.internetnews.com/dev-news/article.php/3327991

Internet advertising revenue reports: https://www.iab.com/insights/iab-internet-advertising-revenue-report-conducted-by-pricewaterhousecoopers-pwc-2/#year2000

FB 2019 2Q results: https://s21.q4cdn.com/399680738/files/doc_financials/2019/Q2/Q2-2019-Earnings-Presentation-07.24.2019.pdf

E. Zuckerman on MIT Media Lab Website: https://www.media.mit.edu/people/ethanz/overview/

“Weber named Roanoke Times ad director” https://www.roanoke.com/business/weber-named-roanoke-times-ad-director/article_c0f77fed-5acf-5224-87d2-6abf8315931b.html

Tracking Pixels: https://en.ryte.com/wiki/Tracking_Pixel

Cookies: https://en.ryte.com/wiki/Cookie

Google’s ad revenue: 2001-2018: https://www.statista.com/statistics/266249/advertising-revenue-of-google/

“You’re only worth $1.21 to Facebook” CNN Money https://money.cnn.com/2012/05/16/technology/facebook-arpu/index.htm

BH Media Group Terms & Conditions: https://www.roanoke.com/site/terms.html

BH Media Group Privacy Policy: https://www.roanoke.com/site/terms.html/#privacy

Music from https://filmmusic.io

“Hard Boiled” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

“George Street Shuffle” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

“Martini Sunset” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

“Cool Vibes” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

“Sneaky Snitch” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

“Bossa Antigua” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

“Kool Kats” by Kevin MacLeod (https://incompetech.com) License: CC BY (http://creativecommons.org/licenses/by/4.0/)

Other music:

“Let That Sink In,” composed by Lee Rosevere. https://leerosevere.bandcamp.com/

Used under a Creative Commons Attribution 4.0 International License https://creativecommons.org/licenses/by/4.0/

“Southside,” composed by Lee Rosevere. https://leerosevere.bandcamp.com/

Used under a Creative Commons Attribution 4.0 International License https://creativecommons.org/licenses/by/4.0/

“Royale,” performed by Josh Lippi & the Overtimers https://joshlippi.bandcamp.com/