A Path Forward for Privacy and Online Advertising

By Erin Egan, VP and Chief Privacy Officer, Public Policy and Steve Satterfield, Director of Public Policy

On Wednesday, September 23, 2020, Facebook joined a virtual discussion hosted by The Atlantic as part of The Atlantic Ideas Festival. We shared how we’re building new tools to give people more control over their information and addressed how privacy and personalized advertising are not at odds. Below is a selection of our opening remarks.

Erin Egan’s Remarks

It’s hard to believe that the consumer Internet has entered its fourth decade. The Internet in 2020 includes a huge range of services, many of which have been critical during this pandemic. 

These services – from search and social networking, to video calls and private messaging – are all available to people for free. And they’re free because they’re supported by advertising. It’s not a stretch to say that much of today’s Internet has been brought to us by ads. 

Just to set some context, many of us will remember that online ads in the 1990s were spammy. I certainly remember having content blocked or overlaid with flashing, annoying ads. Businesses were skeptical too: For a long time, advertisers didn’t believe online ads could be as valuable as TV and print ads. 

But over the years, many of these spammy experiences have subsided. And we know that businesses are now finding real value in online ads. 

So what changed? 

I think the key change has been the rise of personalization. Online ad platforms found ways to use data to show better, more relevant ads – to make ads personalized. This made it easier for businesses to reach people likely to be interested in their products. It created huge efficiencies for businesses of all sizes. 

Personalization also made it easier to show ads without disrupting the user experience: once platforms made ads personalized, we didn’t need to show those flashing banners to get people’s attention. We could make ads interesting to people by making them relevant. 

The rise of personalized advertising has brought its own controversies, of course. Many of those have focused on privacy and data use, which is the area I cover at Facebook. And, as you know, the past few years have seen other concerns emerge, especially around particular kinds of ads, like political ads. 

These concerns are serious, and it’s become increasingly common for folks to ask us, why don’t you just stop showing personalized ads?  

The answer is that we believe that personalized advertising provides the best experience for people and the best value for businesses – particularly small businesses, which make up the vast majority of Facebook’s nine million active advertisers across our services. 

The benefits for people are real. Personalized ads help people access services, discover new products, and receive deals from the brands they care about. 

Personalized ads also help businesses. Retailers have been increasing their reliance on online channels for years. But estimates say that the pandemic has accelerated the shift to selling goods and services online by as much as five years. 

This shift means different things for businesses of different sizes. Large advertisers might be able to afford expensive massive online marketing campaigns. But smaller businesses usually have smaller budgets. For those budgets to yield value, the business has to advertise to people who are likely to be interested in its products. This is why personalized ads are so valuable; they can connect businesses and people in ways that simply aren’t possible with other kinds of ads. 

This ability to connect has major real world consequences. We partnered with the World Bank and the OECD to survey more than 25,000 small business leaders in more than 50 countries, and learned that, in May, 26 percent of small businesses had closed because of the pandemic, with more than half closing down in some countries. During this pandemic, reaching customers has been the difference for many between staying afloat or going under. 

There are also, of course, millions of apps and websites that sustain themselves by showing people ads. In a recent study we ran in connection with our ad network, the Facebook Audience Network, we saw a greater than fifty percent drop in revenue for mobile app ad install campaigns, when we removed personalization from the ads we deliver on other companies’ sites.

This is consistent with findings from Google, which ran a similar study last year – and with another study from Professor Deighton of Harvard Business School, which found that personalization contributes billions of dollars to publisher revenue. 

But these days – particularly in policy circles – you’re far more likely to hear concerns about personalized ads than you are to hear about their benefits. Some people believe that services that rely on personalized ads are inherently harmful. They believe these services collect more data than they need to provide value to people. And they believe these services use that data in ways people do not understand and cannot control. 

This criticism is influencing policy proposals to limit personalized ads by restricting business-to-business data sharing and the use of decades-old web technologies, like cookies. 

The criticism is also informing changes that large platforms are making: Apple’s new iOS 14 policy is actually focused mainly on the use and sharing of data for personalized ads. 

We understand people have real questions about how online advertising works, but we fundamentally disagree with the underlying assumption that you cannot provide free, ad-supported services in a way that respects privacy. We believe it is possible to have privacy and a thriving, free, ad-supported Internet. 

Now, I recognize that this might be a tough message to hear from Facebook in light of the controversies we’ve faced. We’ve learned a lot from these controversies, and we’ve made meaningful changes in response to them. But we continue to believe personalized ads and privacy can coexist

To make this possible, transparency and control are the starting point. People should understand how their data is used and should have meaningful controls. That’s why we’ve built tools like Off-Facebook Activity, which lets people see a summary of the information other apps and websites send to Facebook and gives them the option to disconnect it from their account. This tool was unprecedented when it was launched, and I believe it remains unmatched today.

We’re going to continue investing in transparency and control, and we know the rest of the industry will – and should – continue to regard those principles as the foundation of its approach to privacy. But we also recognize that transparency and control aren’t enough. 

That’s why we’re investing in research and development of privacy-enhancing technologies. These technologies will help us achieve the value of personalized ads while using and sharing data securely in de-identified form

We’re also working on ways to process data off of Facebook’s servers, for example in a secure and encrypted environment, so that Facebook itself never even sees the data. In many cases we are collaborating with the open source community to advance these technologies. We want our solutions to be available for anyone to see, verify, build on, and use. 

We believe that these technologies are only a part of the solution – that we need to continue to evaluate the ways our products collect and use data with core privacy principles, like data minimization, as our guide. But we believe privacy-enhancing technologies offer solutions that will help build a sustainable, ad-supported Internet.

This is the future of personalized advertising, and we hope to work collaboratively with policymakers, regulators, and others in the industry on policy regimes that ensure strong privacy protections and broad access to online services. 

Let’s focus on building the next generation of privacy-enhancing technologies so that we can sustain the ad-supported Internet so it continues to provide massive value to people and businesses. 

I’d be remiss if I didn’t mention, in closing, that keeping the internet open and accessible also means ensuring that businesses and other organizations are able to safely, securely and legally transfer data across national borders

Steve Satterfield’s Remarks

I want to pick up briefly on something Erin said about the role of policymakers and regulators in this space. Erin mentioned that we’re seeing regulation that will make it harder for companies to monetize their services through ads.

But I think it’s important to add that this regulation is being intensely debated by a range of stakeholders – which is what you’d expect for proposals that could have a significant effect on people’s online experiences and on the economy. 

I think about the proposed ePrivacy Regulation in Europe, which is the piece of legislation most clearly targeted at ad-supported business models. That proposal has been debated literally for years at this point because, while people rightly argue that there’s more that the industry should be doing to protect privacy in connection with personalized advertising, there’s also a recognition that imposing tight restrictions on these kinds of ads could create real costs for society. 

What we’re seeing in these debates is the democratic process play out. There should be debate about these things; we should be able to assess the impact to different stakeholders before we impose new restrictions. 

This is why it’s concerning that some of the most significant restrictions on personalized advertising aren’t coming from policymakers or regulators – but from private companies that control app stores and operating systems.  

Should any one company decide for us where the balancing of equities should land when considering the pro-consumer and pro-competitive benefits of personalized advertising?  And further, what if a company decides that balance in its own favor because it has a horse in the race?  There’s no democratic process around these changes, no debate or consultation with affected stakeholders. And, given the stakes here, I think we should be concerned about that. 

This is why Facebook supports comprehensive privacy legislation. We don’t think any one company should make the rules for the Internet in crucial areas like this. But what we’re seeing play out right now is exactly that. So I’d just conclude by saying that we’re committed to working with policymakers and regulators on developing laws that keep the Internet open and thriving. 

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