Understanding these structural weaknesses requires a dive deep into the financial underpinnings of the web, a journey into the vast global plumbing that we infrequently think about but that is at the very core of why the internet is the way it is. What we discover, when we get there, is less a picture of modern, data-driven wizards of consumer persuasion, and more a murky story of perverse incentives, outright fraud, and a web economy on the brink.
Introduction
Though we frequently forget about it nowadays, the idea that the internet would give rise to some of the largest and most profitable businesses in the world was not at all obvious at the outset. In 1996, Viacom’s CEO, Ed Horowitz, was able to remark dismissively that “the Internet has yet to fulfill its promise of commercial success. Why? Because there is no business model.”1
The answer to the question of how to make boatloads of money on the internet has been, resoundingly, advertising. From the biggest technology giants to the smallest startups, advertising remains the critical economic engine underwriting many of the core services that we depend on every day. In 2017, advertising constituted 87 percent of Google’s total revenue and 98 percent of Facebook’s total revenue. Advertising funds the production of online content. From long-standing publications like The New York Times to more recent outlets like BuzzFeed, advertising remains the core business model for online media despite massive technological changes over the decades.
Digital advertising is highly consolidated. It is dominated by a few major types of advertising and a few major companies. Search advertising, in which ads are placed alongside search engine results, accounts for about 46 percent of overall digital ad revenue.2 Google, not surprisingly, dominates this segment, accounting for 78 percent of the overall revenue from online searches.3 Display advertising—where the ads are delivered through image “banners” or similar media on a website—accounts for another 32 percent of overall digital ad revenue.4 Facebook is the biggest player in this segment, capturing about 39 percent of ad dollars spent in this format.5 Advertising delivered through formats other than search and display (such as video, audio, or other media) makes up a far smaller part of the revenue pie.6 Google controls around 37.2 percent of the overall U.S. digital ad spend, accounting for around $40 billion.7 Facebook controls another $21 billion of this market, accounting for another 19.6 percent of the U.S. market.8
This path for funding the web has had major implications on the development of the technology itself. Core services like online search and social media are available free of charge in large part because advertisers underwrite the costs of developing them. The basic building blocks of our present-day experience of the web—from the “user profile” to the “like”—allow advertisers to more effectively target messages to users.
While advertising has made services online more accessible, numerous voices have long pointed out that advertising has generated its own fair share of negative impacts as well. In The Attention Merchants, the law professor Tim Wu argues that the ever-expanding reach of advertising is responsible for the “widespread sense of attentional crisis” produced by the modern technological environment.9 The researcher Zeynep Tufekci has noted that the “deep surveillance-based profiling” and “bias toward inflammatory content” that are endemic online are natural outcomes of an advertising-based business model.10 Investigations into Russian meddling in the 2016 U.S. presidential election have underscored the degree to which advertising channels can be leveraged to enable state-sponsored campaigns of propaganda and disinformation.11
These concerns are even shared by the creators of the services that have come to dominate the web. Infamously, Google’s cofounders, Larry Page and Sergey Brin, worried about the perverse incentives of advertising in their seminal 1998 paper laying out the rudiments of the core algorithm behind web search. “The goals of the advertising business model do not always correspond to providing quality search to users,” they wrote. “We expect that advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.”12
In the midst of all this criticism, it’s worth taking a moment to think about what precisely advertising is. Media buyers—whether they are a global company, a mom-and-pop shop, or a nefarious band of trolls seeking to influence an election—are all looking to get their message in front of people. Online platforms—whether they are a billion-user social media platform or a small neighborhood newsletter—offer ways to get that message to those people. The platforms sell access to their users, and the buyers pay to acquire that access to distribute their message.
Buyers and sellers. At its core, advertising is a marketplace for attention. When your eyes breeze over an advertisement as you scroll through your news feeds or read an article, a transaction has occurred. Your attention has been sold by the platform and bought by the advertiser.
Even though all markets involve some kind of buying and selling, not all markets are made equal. The kinds of buying and selling that take place in a rural farmers market, for instance, are vastly different from what takes place every day on the New York Stock Exchange. We can distinguish between different types of markets in lots of different ways. Are people trading for their own livelihoods, or are they speculators looking for opportunities for profit? Are there a lot of buyers and a small number of sellers in the market? The opposite? What is being sold? How much of it is there? How easy is it to close a transaction?
Markets come in many shapes and sizes. They also are entwined with
