This piece was written by Joe Bosso and Juyong Do.

Have you ever talked about a product with someone, only to have it show up in an ad online the next day or even a couple of hours later? It probably took you aback; made you wonder, “How could they know that we were talking about that? Is my phone listening to me??” 

Well, your phone isn’t “listening” to you, at least not in the way that you probably think. It’s not turning on your microphone without you realizing and surreptitiously recording your conversations. Instead, it’s “listening” to you by tracking you both in physical and digital space. Using either Bluetooth sensors or location tracking, it likely knew that you were at your friend’s house; that they’d recently purchased an item; and that you’d probably notice and talk about it.

This kind of advertising — which many consumers find to be increasingly “creepy” — is possible because of a system that was created to keep websites “free” to users. In the beginning, most people were happy to accept advertisements on websites because it meant they could access those sites without paying a fee. But as the internet and its popularity grew, marketers sought ways to make the ads more effective. Tracking technologies allowed for them to better understand their customers and prospects and craft more targeted ad campaigns.

But those targeted ad campaigns come with some seemingly shady behind the scenes practices — hence that feeling that your phone is “listening” to you. Personalized content makes it seem like advertisers are spying on you, even collecting data without your knowledge. Worse still, the desire for consumer data has led some companies to collect as much data as they can. Unfortunately, oftentimes that means collecting more data than required for their purposes or doing so without getting customer permission, which has eroded consumer confidence and trust.

Some companies, most notably Apple, are taking action to regain that trust. Since Apple has allowed users opt in to tracking by third party apps rather than having them be opted in by default, 75% of users have opted out of being tracked and advertisers are very concerned about it. Since advertiser dollars are needed to support a free and open internet, what does the future hold? If digital advertising becomes less effective, will advertisers be incentivized to spend their money elsewhere? 

We certainly don’t think so — and there’s already evidence that we’re right. Many other mediums for advertising, such as television, are done with zero tracking and instead rely on what companies know about specific audiences. Things like where you live or the time of day and the type of program you’re watching. And with websites, advertisers are able to find  more reliable and targeted information about their audiences than even TV programs can. 

Despite the claims of many online advertisers, it is possible to both respect people’s privacy and serve them effective advertising. In fact, some studies cast doubt on the effectiveness of current ad tech models. According to the ISBA Programmatic Supply Chain Transparency Study, 15% of online advertising spend seems to be totally unaccounted for and publishers are only getting 51% of ad revenue. This tells us that the current model of tracking consumers and providing them personalized ads is flawed and not particularly efficient. A change may be better for everyone.

How to improve the advertising model

So what would this look like in practice? There are three principles that influence our idea for a new model for advertising online. First, we believe it’s time to rethink and reinvent a new, privacy-first internet advertising model. While advertising is necessary to maintain a free and open internet, we believe that the internet advertisement ecosystem can replicate the successful combination of free service without user tracking, as seen in traditional media like TV and radio. 

Second, we believe that there needs to be more transparency from advertisers as to what data they collect and how they use it. It is only then that a consumer can make an informed decision about whether they want to opt in to sharing their data. 

This brings us to the final principle: Power needs to be in the hands of the consumer. Companies need to put control over online privacy back into the hands of consumers. That means not requiring consumers to agree to extensive tracking in order to receive services. Following these principles would require businesses to move away from current paradigms of manipulation of consumers' privacy choices and to adopt a privacy-centered approach to the way that they do business. 

Apple is probably the main big tech company that is positioning itself as a leader in the privacy space and this will hopefully force other companies to improve their privacy practices. It’s a colossal change from the current digital advertising model, but it’s one that we believe is necessary and will ultimately benefit both consumers and advertisers.

Further reading:
Apple is improving privacy features, but is it enough?
How will advertisers respond to Apple’s latest privacy changes?