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Left Coast / Right Coast: The on-line world – Part 2

Mike Gold living the dream in the Pacific Northwest. Photo credit: Katie Stearns.
Mike Gold using a smart horse instead of a smart car to get around. Photo credit: Katie Stearns.

By Mike Gold, A retired entrepreneur living the dream in the Pacific Northwest.

Last week I wrote about how the Internet is fundamentally changing how we live and work today. This week I’ll cover some of the ways that the commercial side of the Internet works and how and why you’ll never have the privacy that we all once had.

Let’s start with what advertisers are looking for. In the past, advertisers took ad space – either in print media or in broadcast media – radio and television. Now if you read a newspaper, you’d see ads throughout the paper. Same with magazines. On radio and TV, the broadcasters make money by selling ads to commercial enterprises. The Internet changes that in total.

First, the Internet is not a broadcasting medium. It is solely a one-to-one medium. In the past, a newspaper (although there were and are some “edition” specific parts of the paper that are different in each part of a major metropolitan area) was basically the same as delivered to each household.

The only “customization” you would see is if an advertiser wanted their ad to be “near” a specific set of topics in the paper – example the sports section. So you’d see ads for skis primarily in the sports section. Likewise, on broadcast medium, (radio and TV) advertisers would advertise on programming that was somewhat relevant to their ad. For example, they would advertise travel packages on any program covering the travel industry.

Unlike the past, each of us looks at web pages at whatever individual moment happens to bring us there. Perhaps it is the result of a search. Perhaps one web page contains a URL, which you click on to get to another web page that interests you. For the time, let’s look at smart phones as just another electronic communications vehicle that can also bring you to the identical places that you might visit on a PC. In fact, more and more e-commerce is migrating to smart phones from traditional desktop PCs.

Because we are looking at web pages individually, each user is looking, alone, at whatever interests them. Since this is different from print or broadcast media, we need to change our definition of “advertising” and the relevant question is: “How does the advertiser adapt to this ‘one-to-one’ world from what used to be mass reach out to viewers?”

The first thing an advertiser needs is to understand how to reach a web viewer who might be interested in what they have to sell. This is a very sophisticated and complex topic. For now, we’ll highlight how it works.

What we need is some sort of database telling advertisers what any specific web viewer is interested in. In other words, if I want to sell cars, it is necessary for me to reach viewers who are interested in cars.

Well, it's not a surprise that in our great free market system many companies have developed databases that track web viewers and provide advertisers exactly that type of information.

Perhaps the most obvious ones are giant web presences like Google and Facebook. Each of these companies has tremendous databases of what viewers have looking at. They build a history of not only what you’ve actually looked at (using cookies, little electronic fingerprints generated by your own computer), but through very high level logic, artificial intelligence, and heuristics; they figure out what you are probably interested in in the future.

So this very valuable information is sold to advertisers, promising them that if you purchase an ad with them (at a cost based on number of viewers – ex: $0.09/thousand page views) they will serve up your ad to viewers whose profile suggests they are a prospective customer.

Here are a couple of web sites what describe how this works:

  1. Using Facebook ads to reach customers.
  2. Using Google ads to reach customers.

So the relevant question is: “Does this work?” The answer is “extremely well” as you see both these juggernauts sucking up a lot of the advertising that traditionally ran in print media. Newspapers have seen ad revenue decline from over $50 billion about 15 years ago to under $20 billion last year. Almost all of this revenue has migrated to on-line ads.

To further “customize” how this all works, these databases also use GPS location information to further refine what ads are shown to what viewers. Today, I’ve noticed that on my smart phone, whenever I enter a business establishment, I get a notification about the place I’m in along with ads promoting their “specials.”

This data collection has intruded on our privacy to the point where government regulation is beginning to exert control over abuses here. For example, suppose a database tracks your car and where it goes every hour of the day and night (along with your smart phone – which further pinpoints exactly where you are at every second).

Are you really comfortable with that great “invisible force” out there knowing just about everything about you? I’m not. In fact, I’ve turned off the camera on all our smart TVs as well as all our computers. I am really not comfortable knowing that some anonymous person or persons is watching me as well as what I’m looking at. That is simply unacceptably intrusive. It makes the famous novel "1984" seem like child’s play.

Now we can all appreciate what these modern tools can bring to us. As for me, I still want to be in total control over what I am offered. I guess I’ll have to get rid of all my intelligent devices and move back into a cave. Send me a postcard from time to time, will you?

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