Does Facebook reorganization signal trouble for its targeted advertising?

New data privacy laws and international data regulations are attacking Facebook's primary business advantage in targeted advertising. The writing is on the wall, and Facebook needed desperately to diversify.
Written by Tom Foremski, Contributor

A change of strategy at Facebook -- with its transformation into Meta -- was inevitable. Its targeted advertising business is coming under ever greater scrutiny from lawmakers, but there's still time to transition its business model.

I had hopes that any Facebook reorganization would be to ditch the advertising revenues in favor of a subscription model. Facebook wouldn't have to collect so much data, and it shouldn't need to sell its users' activities to third-parties constantly. Instead, it could protect its users from all that tracking and just make sure the servers are up for a reasonable subscription fee. 

With its current advertising-based business Facebook's fundamental dilemma is that it cannot claim to be on the side of its users. No matter how the ad industry positions itself -- advertising is not content. 

Yet this is exactly what the ad industry has attempted to do over the past two decades -- helped by Internet technologies. Advertisers used to focus on finding the right content because that's where potential customers could be found for their messages.

The Internet allows advertisers to bypass the content and act on consumers in a highly targeted way -- such as with those ads that follow you around the Internet regardless of the content on that page. This is why the media industry is in such terrible trouble and continues to shrink.

Why pay the ad rates for readers of the New York Times when you can target those rich consumers wherever they go on the Internet (or rather the Metaverse?) 

Harm to society

This concerted action by the advertising industry of removing the foundational business model for the media industry has caused great harm to our society. It has resulted in an explosion of misinformation and distrust in almost every organization. When even the truth looks like a lie, we face serious problems.

The inability of Facebook to deal with fake news has significantly contributed to a general mistrust of government and scientific organizations.  

Mark Zuckerberg told Congress in 2018 that it would be many years before it had the technology to control fake news and hate speech. Yet, the mainstream media had no problems with blocking out fake news and hate speech. 

If Facebook is profiting from the declining media industry, then surely it needs to take on those social responsibilities that newspapers and news stations once maintained in regards to accuracy, civility, and fairness. 

Just because Facebook doesn't have a tech solution to deal with this misinformation doesn't mean that there isn't a well-established solution available, but that would involve large numbers of editors -- large numbers of servers are preferable at Facebook. 

Mark Zuckerberg has seen the future, and it doesn't include Facebook in its current form. 

It's not so much that Facebook could be broken up into smaller businesses by lawmakers angry at its data privacy scandals. Or by nefarious organizations meddling in US elections thanks to Facebook's user data.

Zuckerberg is concerned that targeted advertising will become nearly impossible. That removes Facebook's greatest advantage -- it is a walled garden and is not currently restrained in how it handles its user data internally -- but that won't last. 

Why does your soap powder need to know so much about you?

Zuckerberg is worried that the politicians will ask the most basic question of all. After all, Procter and Gamble sold plenty of laundry detergent for decades without collecting troves of personal data.  And it's precisely that collection of personal data that is dangerous because it is misused for political and other non-consumer purposes. P&G saves a few cents per package in marketing and advertising costs, but the cost to society is far greater than the dangerous uses that these troves of personal data allow. 

Stopping the sources of that data is one way to derail this dangerous technology. And the state of California is showing the way forward with a new data privacy law coming into effect in January 2022 and will be the strictest of any other state law. 

It will have a chilling effect on collecting and selling data involving California residents because of large fines that can be levied against any large company that does business in California and fails to administer that data in very strict ways. 

The law also controls the sale of such data and that the original collector is responsible for it even after a sale. This is to ensure California residents have the right to request a stop to the use of their personal data. Unless a company knows where that data is stored, it cannot comply. Therefore, it has to take a detailed inventory of its IT systems and know where all its data resides, even on notebooks and mobile devices.

For some companies, the IT headaches of managing compliance with California's Privacy law will likely lead to erasing that data and eliminating the risk of big lawsuits. 

California is considered a leader in data privacy laws, and other states will likely adopt similar measures. But every US state can create their own version, which will be a nightmare operational scenario for large companies to ensure they are constantly compliant in how they use personal data.

This trend pretty much means targeted advertising technologies will be cut off from their data sources and won't be able to do the things they do now. The advertising industry will have to shift back to focus on content and not directly to the consumer. 

Advertising is notcontent. This 20-year experiment to cut out content, and thus the publishers, has failed. Online ad conversion rates are constantly declining. 

Targeted advertising is what has hurt the media industry and harmed society through its support of publishing platforms such as Facebook that cannot control misinformation or hate speech. This technology needs to go. 

Facebook sees the future, and it is Meta. Whatever that is, it is a chance to come out on the side of its users rather than spying on them on behalf of its advertisers.

The end of targeted advertising would be a boon to many. And the return to contextual advertising would help rebuild professional media organizations -- ones that can handle the task that Facebook says it cannot -- of keeping out misinformation and hate speech. 

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