Privacy regulation and the “free” Internet
Adam Thierer is a senior research fellow at the Mercatus Center at George Mason University. The views expressed are his own.
Would you like to pay $20 a month for Facebook, or a dime every time you did a search on Google or Bing? That’s potentially what is at stake if the Obama administration and advocates of stepped-up regulation of online advertising get their way.
The Internet feels like the ultimate free lunch. Once we pay for basic access, a cornucopia of seemingly free services and content is at our fingertips. But those services don’t just fall to Earth like manna from heaven. What powers the “free” Internet are data collection and advertising. In essence, the relationship between consumers and online content and service providers isn’t governed by any formal contract, but rather by an unwritten quid pro quo: tolerate some ads or we’ll be forced to charge you for service. Most consumers gladly take that deal—even if many of them gripe about annoying or intrusive ads, at times.
Nonetheless, calls for regulation persist, especially as advertising grows more sophisticated. More targeted forms of online advertising hold the promise of better ads more closely tailored to consumers’ interests. But that also raises anxieties among some Web surfers who fear their privacy might be undermined by increased data collection or “tracking.”
The stakes in the debate are significant since regulation could fundamentally alter the nature of online commerce and the future of how digital content and services are provided. Curtailing data collection and online advertising could be killing the goose that lays the Internet’s golden eggs. Such regulation will likely have a particularly deleterious impact on small publishers and service providers, who depend almost entirely upon online advertising. In turn, this could curtail new entry and innovation—and new forms of speech and culture.
Some regulatory advocates don’t hide their desire to move the U.S. in the direction the European Union has charted with its “data directives” and more stringent forms of privacy regulation. But America’s refusal thus far to walk down that more regulatory path offers scholars the chance to evaluate Europe’s more restrictive approach and study whether America’s lead in the global digital marketplace might be tied to its more “hands-off” approach to online regulation. A recent study by Avi Goldfarb and Catherine Tucker found that “after the [European Union’s] Privacy Directive was passed [in 2002], advertising effectiveness decreased on average by around 65 percent in Europe relative to the rest of the world.” They argue that because regulation decreases ad effectiveness, “this may change the number and types of businesses sustained by the advertising-supporting Internet.” Regulation of advertising and data collection for privacy purposes, it seems, can affect the global competitiveness of online firms.
Regulatory efforts will be complicated by the fact that privacy is a highly subjective condition and definitions of consumer “harm” vary widely. Many of us don’t much worry about data collection or advertising online; we merrily go along our way surfing free sites, services, and content. But a handful of vocal pro-regulatory privacy advocates and organizations have successfully convinced many policymakers that the hyper-sensitive concerns of a small minority should trump all other considerations.
Ironically, many of those privacy advocates bash copyright law and claim it is an information control regime, yet privacy regulation would constitute a stronger information control regime by creating the equivalent of copyright for personal information (which would, in turn, conflict mightily with the First Amendment). In essence, privacy regulations limit the right of people to talk about other people, or communicate facts about them. This raises serious free speech concerns and has particularly troubling ramifications for press freedoms. Restrictions on advertising could also have an effect on non-commercial speech, such as political ads or non-profit communication.
Some proposed privacy regulations, such as a “Do Not Track” mandate, would also require a re-architecting of the Internet and the potential regulation of every Web browser to ensure compliance. If our experience with attempting to eradicate email spam through regulation proves anything, it’s that such schemes are unlikely to work given the Net’s borderless nature.
There is a better path to balancing privacy interests and economic growth than through an onerous privacy regulatory regime. Educating and empowering consumers with more, and better, privacy-enhancing tools can help alleviate much of the concern about data collection or advertising intrusiveness. The most-downloaded add-on for both the Firefox and Chrome web browsers is AdBlock Plus, which blocks advertising on most sites. A host of other tools are available to block or limit various types of data collection, and every major browser has privacy control tools and anonymous surfing modes to help users limit data collection.
Again, because privacy is a subjective condition, not everyone takes advantage of these empowerment tools. The crucial point, however, is that the tools exist and they need not be perfect to be preferable to government regulation, which, in this case, could decimate the “free” Internet as we know it.