The future of Data Privacy, or: The Business Model that Could Kill Online Advertising

The future of Data Privacy, or: The Business Model that Could Kill Online Advertising

There’s a popular saying in Silicon Valley: If you can use a product for free, then you’re probably the product. Nowhere is this more truly illustrated than by the business models of Google and Facebook, two of the most valuable companies in the world and two of the most powerful vehicles for consumption in human history.

Google and Facebook scaled at unimaginable speed by offering their web services to users for free. As their user bases exploded, they monetized their platforms by building the most sophisticated ad targeting capabilities ever created – all on the back of data supplied willingly (so they claim) by their users. This brings us to the present day: the two companies combine to account for over 50% of digital advertising spend in the United States, to the tune of roughly $60 billion.

One could surmise that upsetting this cash cow would require some sort of truly seismic event…but the growth of worldwide data regulation policy might be just that. It has taken legislators some time to catch up with the pace of technology, but since the 2016 U.S. presidential election, the way these companies collect, store, and utilize consumer data has been squarely in the crosshairs of public opinion. Our discomfort with the sheer volume of data these companies have amassed, and the ways in which that data has been exploited, is palpable. The result? Increasingly strong calls for tough regulation.

In Europe, both companies have already run afoul of the GDPR and hit with hefty fines. Facebook at present faces an inquiry into a data breach that could result in a bill of multiple billions of dollars. As the rest of the world moves to institute similarly comprehensive data regulation, it’s not crazy to think the cost of doing business through a user data-driven model may look less and less appetizing to Google and Facebook.

Furthermore, there’s a case to be made that the average user would be willing to pay more to use Google and Facebook services than the amount of revenue they generate as a set of eyeballs for viewing digital ads. The latest estimate puts that figure at $2 per month. Would you pay $5 a month for an ad-free Google and Facebook experience, secure in the knowledge that your data wasn’t being sold to the highest bidder? It’s worth considering!

While a pay-to-play subscription model is admittedly still a point on the horizon, it’s important to note that the winds of public and regulatory opinion are pushing us closer to that destination. And it’s impossible to understate the industry upheaval that would occur if it did come to pass. Overnight, brands would be deprived of their primary source of digital eyeballs, and Facebook and Google could stop trying to strike that delicate balance between user experience and advertiser results. In essence, this move would restore the traditional, pre-digital relationship between customer and producer, with the marketing middleman cut out. Far-fetched? Possibly. But if you’re not thinking ahead of the data curve, you end up, inevitably, behind it.