Advertising and the “Free” Internet

The internet is one of the most marvelous inventions ever conceived. The value of connecting electronic devices to share information and computation across vast distances is incalculable. Not only has it led to improved global relations, communications and trade, it has also enabled the development of technologies barely imaginable in the 1980s.

The internet that most consumers are familiar with is the World Wide Web: access to websites across the world through a standard web browser. Need a recipe to make a spice cake? — www.allrecipes.com has everything you could ever need. Have a question about sharks? — www.google.com can find you the information you’re looking for. Having trouble deciding what college to attend after high school? — www.petersons.com will help you make an informed decision.

That is the internet in a nutshell. It’s simple. It’s helpful. It’s convenient. And it’s free? That seems ridiculous, how could something this vital be completely free to use?

It’s all because of advertising. With some exceptions, every free website on the internet is paid for by advertising. The internet as we know it is literally powered and provided by ads. Websites afford their hosting (and sometimes even employee salaries) from the money they receive by selling page space to advertisers. This is a fairly straightforward process, as websites sell advertising space to fund their operations, and advertisers buy space to reach the users that visit those websites — hoping to turn them into paying customers.

This system works to keep most of the internet free for consumers thanks to the massive scale of online advertising. It’s an immense industry with worldwide spending exceeding $209 billion in 2017, and that number is only expected to grow rapidly in the next decade. Online advertising continues to expand with the internet itself simply because it offers something other forms of advertising don’t — online ads are distinctly measurable and highly sophisticated in regard to those they target.

Not only is it possible to target a very particular demographic or audience with specific ads for more effective marketing, but one can also calculate the value and return on investment for each of those ads. This means that businesses can determine the long- and short-term returns for how much revenue resulted from all website traffic that was influenced by their online advertisements. While print, radio and TV ads offer similar forms of targeting and measurement — they simply don’t compare to what is possible online.

But this attractive advantage has led to a problem. Now that almost every business is advertising online, many are doing it badly. While the ability to reach the right consumers with targeted ads has increased exponentially, it doesn’t mean that the quality of those engagements has improved. Numerous studies reveal that most internet users don’t like online ads, finding a majority of the internet advertisements they experience annoying or distracting.

In recent years, a number of approaches have solved this problem. Some internet services have simply moved to a subscription model to limit or avoid a reliance on ads, like Netflix and The Wall Street Journal. A number of web browsers themselves, including Google Chrome, have taken on the onus of culling excessively bad or aggressive ads and banning them from the platform. And millions of consumers have taken matters into their own hands to avoid unwanted marketing by using ad-blocker technology.

Though blocking advertisements seems to be the most popular solution (with rapid consumer adoption), it isn’t a viable one for the “free” internet we’ve been accustomed to. Most online websites will need to enact a subscription paywall to survive in an ad-free internet, which would perhaps be an even more unpleasant online experience for consumers than one plagued by poor ads.

In order to keep the online ecosystem as we’ve always known it, better solutions are needed to ensure that advertisers get their worth from their online spending — while also protecting consumers from appalling or bothersome experiences.

Look forward to hearing your thoughts on this situation.  Shioupyn Shen President & CEO