// Patrick Louis

Internet: Medium For Communication, Medium For Narrative Control — Adapting: Free Market, Let It Solve Itself

The "whitening" of the black matter after the phase of nigredo, shown as "women's work"

  • Internet: Medium For Communication, Medium For Narrative Control
  • Part 5 — Adapting
  • Section 1 — Free Market, Let It Solve Itself
Table Of Content
  • The Market Will Decide
  • Promoting Fair Competition
  • Privacy as a Feature
  • Changing The Economic Dynamics

In this last part of the series we’ll go over the adaptations we are undergoing to remove the frictions we have with the internet — anything to make it better suited for us. We’ll take multiple perspectives, primarily the ones of users, societies, and others that are encountering the issues we’ve seen related to this new communication channel.

Let’s start by taking the point of view of the market and economy as ways, in themselves, to provide solutions to problems we’ve had.
Keep in mind that these heavily depend on the locality, culture, and practices of the tech companies at the epicenter of the internet drastic changes that are taking over the world. Most of these giants embody a neoliberal mindset and originate from the USA.

A market solution is a solution based on trusting the free market before all else. It hinges on not having to intervene with regulations and laws but to believe the behavior of consumers, their choices and decisions, will eventually lead to an ethical and moral balance.
This laissez-faire attitude is anchored in what we’ve seen in the cultural ambiguity and truth and trust crises sections. They rely on the assumption that individuals understand the dynamics, are well-educated on the subject matter, and will always make the best (economic) decisions overall.
This line of thinking is contested, but let’s consider the adjustments and innovations that can be driven by users.

Market solutions are hardly international as they can only work by relying on fair competition and transparency between actors. Non-intuitively, at least in the eye of some, this can only be achieved through some regulations that keep the market in checks, and such regulations are geographically bound.

When it comes to the online world, because a lot of the money is made from ads and tracking, it means regulating the whole digital advertising tech supply chain, and data brokers along with their partnerships.

If this isn’t done properly, there could be conflicts of interests, some companies self-preferencing advertisements for the services they themselves provide. This is relevant because many of the ad-tech providers also offer other services, which they can promote through their ads to compete with other players.

This problem is exacerbated when only a few entities, which as we know is the case today, have the upper hand (hear by that almost monopoly) in the ad tech sector and data broker space. These companies can then thwart competitors by buying them or competing directly with their services.
The companies will then accrue larger datasets and it’ll be harder to compete with them. This is what we’ve seen in the new economies section. They can control the pricing and quality of services on this digital supply chain.

To promote fair competition, to make it a free market, many things can be done.
One of them is to break the large datasets into subsets to allow new smaller entities to compete instead of having systems of interlocking monopolies.
Another thing that can be done is to manage conflicts of interests, which is what some lawmakers are doing these days. This includes institutions such as the European commission, the Competition and Markets Authority in the UK, the Australian government, and the USA Congress that are now checking for risks of collusions, antitrust, and what can be done for fair competition. We’ll see more of the law and regulatory concerns next.

Additionally, one thing that can foster good competition is to have open standards describing what can be done with ad tech, the format of the data traveling on the pipeline. This includes implementing a common transaction and user ID for consumer and making them portable and interoperable across ad providers.
It would then be easier to port the data between rivals and might even allow consumers to regain control over their data, selecting with whom they’d like to share it. We’ll see more of that when discussing digital identity.
Apple uses something called IDFA, Google uses an analytics and advertising tracking ID, Facebook uses a Pixel ID and others.

Standardization also goes along openness such as the right to repair, to allow products to be repairable to last longer, and decentralization.

However, openness can also be abused for profit. We’ve seen countless times that standards that are initially open can be hijacked. The big players will in turn drive the standard towards more complexity and growth, consequentially kicking out any small player that can’t follow.
This is arguably what happened in the “browser war”, and is still happening today with web standards. The ones contributing the most will control and subdue them, while defending their actions on the basis of openness, improvement, and progress.

History also shows that the same companies that emerged thanks to openness tend to reject these principles when they undermine their strategic position. After gaining a substantial amount of users, after being rooted deep enough, they’ll use the network effect to justify changing their tactic and stance.
A too big to fail scenario.

Obviously, companies can also spend money to defend their interests, for example by lobbying the USA Congress, as we’ve seen in the new economies section.

There are many ways to make money online, on the internet market.
To make profit, as we’ve seen in the new economies section, the most popular models are the ones that go along with what users expect, namely zero-price models where data is exchanged instead of money. This goes under different names such as “free model”, “data-as-payment model”, “online advertisement-based business model”, “ad-supported model”, “freemium model”, etc..
There are other models that are possible, as we’ll see, such as a flat-rate model with unlimited or limited usage, a bundle-like model, and a per-usage or subscription based model where users are enrolled and charged recurrently.

The names for the free models actually have separate particular meanings that reflect how each view and make money from the data, personal data, or attention, which become the currencies of exchange. These models also provide insights into manners of approaching privacy.
The consumers are then free to select the model that they find the most suited to their needs, interests, and ethical concerns.

The ad-supported model, one in which companies make money from selling ads or from gathering data for ad-tech providers, poses the most privacy concerns. It is either targeted advertising, such as microtargeting, or context-based advertising.

A freemium model is one in which the product is offered free of charge and money, a premium, can be paid to access additional features or services.
The free of charge part can be combined as a hybrid with advertisement.

A data-as-payment model, aka PDE or Personal Data Economy, is a model in which individuals deliberately sell their personal data as an asset to pay for services and products. This model turns the surveillance economy upside down.
Similarly, a privacy-discount model is a model in which the users relinquish their privacy to obtain a discount on a product or service.
These two models are user-centric, letting the consumers take back a semblance of control over their data: with whom they share or disclose it, the price for it, and on which terms.

Each model has a different perception of what privacy is, either as a commodity/product/feature, as a luxury/premium, as a right, or as a utility.
In the market view it is primarily a feature or premium that can be transacted.

What we described as data-as-a-payment or privacy-discount are instances of perceiving privacy as a commodity. In these scenarios neither citizens nor governments care about privacy regulations but freely exchange and trade it. In this case, people are powerless about what information is being transferred, while tech companies can make huge profits by selling the data.

Privacy can also be seen as a luxury or something you get for a premium, aka PFP or pay-for-privacy, aka primium aka privacy-as-a-premium. In this scenario, consumers are encouraged to pay extra to gain back their privacy, or to acquire new products that will fill their desire for more privacy and security.
This is a case where companies profit from privacy by charging users for it. Transparency, awareness, and privacy have become competitive features delivered at a premium.
We’ll see that awareness and transparency are two things that can be enforced through laws in the next section.

On the other side, privacy can also be seen as a utility or universal right. Either something the governments regulate, control, and monitor, just like water, a tool — this is what we’ll see later with digital identity. Either as a universal right that needs to be protected by law, which is something we’ll see next too.

The debate over privacy can be confusing for consumers, they may feel torn between all these options. Some of them wanting to disengage with the virtual world to maintain their anonymity instead of putting themselves at risks. Without privacy, we are subject to social cooling, feeling tracked, caught in the polarization, as we’ve seen before.
This confusion is indeed what sparked the whole branch of privacy as a luxury, companies are capitalizing on it, for them it’s a new business opportunity.

Privacy is not only a feature in itself but also a stand, a brand, a show of force for publicity and marketing differentiation.
Many companies sole existence rely on this need: selling something at a higher price mark because of this or having products, devices, services, and tools, that will offer control back to users.
The market size of this type of business, according to Arthur D. Little, is estimated to be, as of 2020, around $5 to $6 billion.

VPN providers are one category of these flourishing businesses. They sell a service to avoid the continuous online tracking and data collection. A VPN being a proxy to internet requests, essentially hiding where they are originating from. Some commentators have suggested that all consumers should use a VPN.
In general, their model is based on offering a subscription, a pay-for-privacy product with recurrent payment. Though, ironically, some VPN companies also provide their services for free through the hybrid “ad-supported” freemium model.

Another company profiting from privacy is the device and OS manufacturer called Apple that sells products at a premium. It has recently (2021) stirred uproar from American companies that make money from the ad tech infrastructure and pipeline when it announced a recent update to their phone, tablet, and TV OS. Apple is a popular product in the USA among high earners, thus good ad targets.
The recent update would notify users when applications want to access location, track them across apps and websites, or others. The user would have the choice to allow or disallow such action.

The move is arguable, as Apple makes a lot of money from the ~30% cut (the Apple tax) it takes from in-app purchases, disallowing any other type of external purchases linked to apps. Such a change would force app developers relying on the ad model to switch to another model such as subscription or in-app purchases, which they’d take a percentage of.

As can be seen, the free market and laissez-faire approach brings with it a lot of conflicts. When big players can enforce business models on their platforms, after using the network-effect to acquire users, it enrages other players.
The dynamics at play are interesting.

When privacy is offered at a premium it raises concern about the inequality of acquiring it, a socioeconomic digital divide. “Advertising is a tax on the poor”, as Scott Galloway said. It creates incentives for the companies offering privacy and security-centered products to keep the status-quo, to make more money from it.
There’s also the lack of consumer knowledge and understanding on these issues and their implications. They could either be unaware that these are issues, or be misled by marketing schemes portraying products as privacy-aware while not providing any proof to back it up.
Privacy can be advertised on the front while in the back tracking is done. The tracking, the telemetric gathering, is not limited to advertisement purposes but could also be used for partnerships with other entities that would allow companies to gain an edge. For example, a partnership with state actors, internet providers, or mobile operators.

Let’s remember that companies are not moral agents, nor arbiters of truth, and that their decisions are both restricted by, on one side, the legislative geography they are operating on, and on the other side, the profit made from the appearance and satisfaction they offer customers. Ethics is only a cosmetic feature.
This can be hard to grasp for the neoliberal mind that tries to find their meaning through the purchase of products, as an extension of themselves. Especially when these products only provide that in return of profit.

One solution for consumers is to go toward models that remove data from the equation, thus changing the economic incentives for online businesses. These alternative models rely on putting real value on what we consume and use online, going back to transacting money for intangible assets.

While the free models were disruptive when they came out, it turns out, unsurprisingly, that consumers don’t like being harassed by constant ads.
Tech aware users will often install adblockers on their machines, rely on one of the above paid solutions to not be tracked, use browsers that block third-party cookies, and other mechanisms. We’ll dive more into the tech solutions later. Statistics show that in the USA 47% of users use adblockers.

This kills companies that rely mainly on the ad model. Either because they aren’t able to attract enough users to generate revenue, or because it damages the brand image.
Additionally, companies don’t want to be at the mercy of the ad tech monopoly, which puts them at risks when they decide on the budget and price they allocate for specific ads and on which platforms they’ll run them. They could demonitize them at any time or disallow them on the ad platform for arbitrary reasons.
Furthermore, even companies paying for ads are starting to see the limits of this model because of the lack of good insights, bots, and fake information that return to them.

For these reasons, we’re seeing the rise on the internet of the subscription economy, micro-transaction economy, passion economy, and the economy of patronage.

We already discussed the passion and patronage economy in part 2 section 2 so let’s focus on the others. All these are about putting the consumers in power, letting them make decisions through their wallet. In this case we’ll have a consumer-controlled world, thus a working free-market solution.

There are different types of subscription models, either based on usage volume, or based on time via a billing cycle. It stands in contrast with a pay-per-product model where users would pay only once, in subscription the payment is recurrent.
Consequentially, this works well for products that either perish quickly, need to be replaced, e-commerce loyalty programs, or intangible goods such as the ones provided by SaaS (Software as a Service) companies.
These include Netflix, Amazon Prime, Hulu, YouTube, Spotify, SirusXM, Pandora, VPN services, among others.

The subscription model has been estimated in 2017 to have 28k companies worldwide and had more than a 100% yearly growth. The largest retailers in the category generated more than $2.6 billion in sales in 2016, up from $57 million in 2011.

The model has the advantage that it is flexible and provides customer satisfaction. Buyers aren’t burdened by large fees and can stop the subscription at any time.
The companies providing the services are then forced to innovate, improve, and provide quality to be able to attract and keep customers. There are many instances that show that switching from an ad-based model to a subscription model has helped increase revenue.

Here the customer is at the center and their expectations are king. For this model to work the company has to build a long-term relationship with them, often focusing on the relationship more than the product or the transaction.

Nonetheless, it isn’t an easy task. A minimum number of subscribers is needed for the business to subsist, and it’s not easy to attract them when netizens are used to getting things for free.
This has especially been hard for newspapers, as we’ve said in the past. Statistics show that in the USA in 2017, only 11% of consumers were paying for online news. The rest of the world isn’t as generous either, the statistics have been replicated in other places with an average of 10% paying for news. Yet, recently we are now seeing an unexpected resurgence, a new growth. It has been reported that in 2017 the American newspapers The New York Times gained 130k subscribers and the WSJ gained 300%, the British newspaper the Guardian has also announced that it had seen profits for the first time after 20 years with more than 300k people making contributions.

The most successful stories of subscription based businesses are those that relied heavily on partnerships — between brands, consumers, affiliates, and others.
Despite all this, companies relying on the subscription model can still rely on product placement and advertisements, which puts us back at square one.

Another method to increase the number of customers, to persuade them of contributing, is to lower the barrier of entry. This could mean making it more affordable, or even to change the value of the product based on the purchasing power of the individuals or their locality.

The new disruptive approach is to make the payment infinitesimally small, a micro-payment, a micro-transaction, which can be fractions of cents, there’s almost no line of demarcation.
This can create a dynamic in which ads and trackers are unnecessary because users would pay directly with these monetary tokens the online content creators. The tokens essentially being the monetary form of the attention of users.

The word micro-transaction refers to purchasing virtual goods through micro-payments, however it also has a historical meaning attached to the gaming world.
Initially micro-payments acted as a sort of virtual currency that existed only within games.
Later on, some game developers used a model in which they provide virtual desirable assets, such as loot boxes, in exchange for micro-payments. Micro-transactions have thus gained a connotation with gambling and addiction, which brings some countries’ legal matters and regulations in the mix especially when it involves kids.

The main issue with micro-transactions is that they can only be possible if there is a monetary technology that allows real-time transfer, no fees, and privacy.
Cryptocurrencies on a blockchain seem to be the go-to solutions for this. They are far away from the traditional pipeline that is also linked to data brokers, as we’ve previously seen.

Unfortunately, some of the cryptocurrencies have issues regarding scalability and volatility, which makes them ill-suited for such endeavor. Cryptocurrencies are now more attached to investment and gambling than an internet free of ads.
Recently, payment gateways and banks have taken a particular interest in trying to gain power in this space. Namely, VISA and PayPal are now allowing certain cryptocurrencies to be used and converted on their processing platform. This would then bring information related to cryptocurrency to data brokers, removing the privacy aspect.

Still, the applications for micro-payments open avenues and unlock an entire economy between subscriptions and ads.
We’re slowly starting to see this appear in specialized browsers that allow to distribute attention tokens to websites and content creator, and newspaper that want to allow micro-transactions along with their other revenue streams.

This concludes our review of how the free market can be used as a method to adapt to the internet. First we’ve seen what this idea implies: well-informed customers making the right choices to balance the status and set things right. Then we’ve explored how this cannot be true if there aren’t regulations set in place for fair competition to happen between companies. Next, we’ve discussed some of the possible regulations and things that could be put in place to achieve this such as collusion checks and open standards. After that we’ve set ourselves on looking at different business practices, ways of making money online. Some of them are related to the ad business, others subscriptions. We’ve tackled how these models offer a glimpse into what privacy is considered: product, luxury, tool, universal right. When privacy is a product it’s traded freely. When privacy is offered at a premium, which we called primium, it’s done because of a need and not because of moral or ethical standards. We’ve listed some businesses that base their marketing or product around privacy. Finally, we’ve seen what removing data from the equation implies: having customers pay again to be able to choose, either through subscriptions or micro-payments.

Table Of Content

References








Attributions: S. Trismosin, Splendor solis, London, 16th century




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