The current European Commission has a strong digital agenda and has made Internet regulation one of its key priorities. Sofia Calabrese, Senior Consultant in Grayling Brussels’ New Technologies practice assesses what this might mean for targeted advertising.

“We are building a dystopia just to make people click on ads.” said sociologist Zeynep Tufekci in a popular TED talk, echoing concerns from policymakers, academics and civil society. It was 2017. Four years later, we still have not answered the question of whether should regulate online advertising – and if yes, how? This remains one of the essential questions around Internet regulation, particularly in the EU’s Digital Services Act and Artificial Intelligence Act proposals, encompassing issues ranging from data protection to Artificial Intelligence and from disinformation to democracy.

Since the adoption of the EU’s General Data Protection Regulation in 2016, targeted advertising has been a shadow looming over EU policy discussions. The current European Commission has a strong digital agenda and has made Internet regulation one of its key priorities. Although there is no legislation solely dedicated to targeted advertising (yet), some of the most political digital files would attempt to address such issues. In particular, the Digital Services Act will introduce new transparency obligations to inform users if, and why, they are targeted by each ad and who paid for it. Some policymakers went further and asked for an outright ban on targeted advertising. This could happen if EU policymakers do not manage to find effective rules to tackle the matter, despite the subsequent negative consequences on the advertising industry and the online ecosystem. But why is targeted advertising such a delicate issue for Internet regulation?

Digital advertising is a form of advertising which uses the Internet to deliver promotional marketing messages to consumers. Targeted advertising is a form of online advertising that exploits users’ data to recommend products or services it expects the user will like. It is said to be more efficient for companies, as it minimises advertisement to non-interested consumers, and more beneficial for consumers as they will only receive advertisements for products they are interested in.

To be effective, targeted advertising requires huge amounts of data. According to David Hansson, cofounder of web software company Basecamp, targeted advertising is one of the main causes for privacy concerns online. If companies could not use data to target ads, they would not need to obtain the data in the first place and misuse it later. If this sounds extreme, think about the Facebook hearing by the US Senate at the peak of the Cambridge Analytica data scandal. Facebook’s CEO Mark Zuckerberg was asked how Facebook could make money by offering a free service: “Senator, we run ads,” Zuckerberg simply replied.

Regulating targeted advertising: is it possible?

Privacy is the first issue posed by targeted ads that has been addressed by EU policymakers, notably with the General Data Protection Regulation (GDPR) and the e-Privacy Regulation; the latter contains rules on cookies and is still under discussion. IAB Europe, representing the advertising industry, argues that such rules are sufficient, if properly enforced. Some policymakers, however, are pushing to include additional rules on targeted advertising in the Digital Service Act, the new EU legislation to regulate online content. Such rules would not only be limited to privacy, but also include transparency obligations and codes of conduct.

Furthermore, targeted advertising is managed by algorithms and algorithms are known to pick up and perpetuate existing biases. It is common knowledge that women tend to see more ads for lower paid jobs, while people of certain ethnicities are more likely to see ads on legal advice for petty crimes. This reinforces stereotypes and increases inequality. Artificial Intelligence regulation is one of the top priorities in the EU with the recent proposal on an Artificial Intelligence Act. This legislation will attempt to avoid discrimination and ensure high-quality datasets for certain high-risk AI applications. Such applications do not include targeted advertising – yet. More discussions on the issue are still to come.

Finally, many think that issues related to the effect of disinformation on democracy are exclusively linked to political ads, but this is wrong. Algorithms favour news with controversial headlines and tendentious material, as users are more likely to click on the link and get access to the page containing the ads. This eventually favours one-sided, polemical and fallacious content leading to more disinformation around all sort of topics, including on politics. Judging from the severe consequences of disinformation in real life, such as the events of Capitol Hill or the anti-vax movements, policymakers are finding it hard to fight disinformation online. Attempts such as the EU Code of Practice on Disinformation, transparency measures and promoting the role of fact-checkers do not seem to have succeeded yet.

Banning targeted advertising: is it worth it?

Currently, effective policies to address targeted advertising have not yet been found. Given the serious concerns around ads, it is therefore not surprising to hear requests for a more radical solution: an outright ban on targeted advertising. Some also argue that the benefits of targeted advertising are not as significant as they are presented, and that contextualized advertising would be a valid alternative to address some of the issues described above while maintaining equal profits for companies.

Is this the end of targeted advertising? There is no straightforward answer. At this stage, most policymakers are trying to find new rules that would not ban targeted advertising completely. Should that not work, banning targeted advertising altogether could represent the last resort. However, if policymakers manage to work with relevant stakeholders towards establishing efficient rules to address the main concerns – data protection, algorithmic discrimination and disinformation – it will be possible to make the Internet a safe environment for users while preserving the opportunities offered by targeted advertising.

Interested in further updates on the EU’s digital policies? Get in touch with our tech experts in Brussels: NewTechnologies@grayling.com.