Are ads externalities? In the sense of, imposed upon people who don’t get a say in the matter?
My initial reaction was roughly: “web/TV/magazine ads no, you can just not visit/watch/read. Billboards on the side of the road yes”. But you can also just not take that road. Like, if someone built a new road and put up a billboard there, and specifically said “I’m funding the cost of this road with the billboard, take it or leave it”, that doesn’t feel like an externality. Why is it different if they build a road and then later add a billboard?
But if we go that far, we can say “people can move away from polluted areas”! And that feels wrong.
Hm. So the reason to care about externalities is, the cost of them falls on people who don’t get to punish the parties causing the externalities. Like, a factory doesn’t care if I move away from a polluted area.
So a web ad, I go to the website to get content and I see ads. If the ads are unpleasant enough that they’re not worth the content, I don’t visit the website. The website wants me to visit (at least in part so they can show me ads), so they don’t want that outcome. The ad can’t bring the value I get from the website below 0 (or I’ll not go), and it can’t dissuade so many people that it overall provides negative value to the website (or they won’t show it). They can destroy value relative to the world with no ads on the website, but not relative to the world without this website. For, uh, certain definitions of “can’t”. (And: ads on websites that also want me there for reasons other than showing me ads, are probably less bad than ads on websites that only want me there to show me ads.)
For a billboard on the side of the road… well, who’s getting paid? Is it typically the person who built the road? If not, the incentives are fucked. Even if it is… like the website the road is giving me value, and the ad still can’t bring the value it gives me below 0.
One difference: most of the value to me is getting me somewhere else, and the people and businesses at my destination probably value me being there, so if the value I get from the road goes to 0 and I stop taking it, that’s bad for other people too. Another difference: what’s the equivalent of “the world without this website”? Maybe if there’s no road there I could walk, but walking is now less pleasant than it would have been because of the road (and the billboard that isn’t narrowly targeted to drivers). Also feels significant that no one else can build a road there, and give me a choice of tolls or ads. The road itself is an externality.
I think my main conclusions here are
Billboards still feel like an externality in a way that web ads don’t
If I want to think about, like, idealized models of free-market transactions, roads are a really weird thing to model.
I wonder how efficient the ads actually are. And I realize that the ad companies have absolutely no incentive to tell the truth.
When you watch ads, you pay in two ways. First, by having your time and attention wasted, and possibly being annoyed a lot. This part is a pure loss for you; it doesn’t benefit the companies paying for ads in any way. Second (assuming that the ads really work as advertised), by sometimes, as a consequence of watching an ad, buying something you wouldn’t have bought otherwise—most likely, because you don’t actually need it.
The things you buy as a consequence of having watched the ad… in theory it could be something useful that you didn’t know about, so the ad really made you a service by telling you about it… yeah, that’s what people working for the advertising agencies will tell you (and you should trust them about as much as you trust people working for tobacco companies when they tell you about the benefits of smoking, or rather vaping these days). But we all know that most ads are not like that. Many of them actually about things you already know about; it’s just an ongoing work to keep a specific brand firmly implanted in your mind. Also, on internet, many ads are outright scams. I would say that you are 10x or 100x more likely to see a scam ad, than an ad for something that is really useful, that you didn’t know before, that comes at a reasonable price.
So, it seems to me that if we analyze the proposal “instead of money, you can pay by watching a few ads”, well, either the ads work—in which case, as a user, you save some money, but then lose a lot of time and attention and emotional energy… and ultimately, as a result of successful manipulation spend money on something you otherwise wouldn’t buy, so… perhaps paying for the service would have been cheaper, even from the strictly financial perspective—or maybe the ads don’t work, and this all is just an elaborate ritual to scam companies out of their money (most of them don’t do A/B testing on the effectiveness of ads, so they have no way to know), and as a user, you have the bad luck that your time and attention need to be sacrificed to make this ritual work. Realistically, it is probably something in between.
*
That said, the argument in favor of ad industry is that it works. Making people pay using their time and attention is technologically easier than making them pay using Paypal or Visa. The payment is proportional to time spent using the service, which is a great advantage: if you e.g. only watch one YouTube video per week, your suffering is effectively a micropayment.
Generally, paying for services makes more sense if you use one service a lot, and becomes unmanageable if you use hundred services, each of them only a little. Most companies probably wouldn’t agree that you only need to pay them a cent or two a month if you only use their services a little (such as one video or one article per week); and if everyone required a minimum monthly payment of one dollar, the costs would quickly add up if you had to pay literally for every website you visit online. (And that’s even ignoring the part about how half of those subscriptions would be extremely difficult to cancel.)
I think it would be nice if someone figured out a way how e.g. every person on the planet could pay a fixed monthly “internet fee” and the money would be distributed to websites proportionally to how much time the person spends there. But this comes with all kinds of problems, starting with weird incentives (when you make your web pages load slower, you get paid more), how would the height of the “internet fee” be determined, etc.
Are ads externalities? In the sense of, imposed upon people who don’t get a say in the matter?
My initial reaction was roughly: “web/TV/magazine ads no, you can just not visit/watch/read. Billboards on the side of the road yes”. But you can also just not take that road. Like, if someone built a new road and put up a billboard there, and specifically said “I’m funding the cost of this road with the billboard, take it or leave it”, that doesn’t feel like an externality. Why is it different if they build a road and then later add a billboard?
But if we go that far, we can say “people can move away from polluted areas”! And that feels wrong.
Hm. So the reason to care about externalities is, the cost of them falls on people who don’t get to punish the parties causing the externalities. Like, a factory doesn’t care if I move away from a polluted area.
So a web ad, I go to the website to get content and I see ads. If the ads are unpleasant enough that they’re not worth the content, I don’t visit the website. The website wants me to visit (at least in part so they can show me ads), so they don’t want that outcome. The ad can’t bring the value I get from the website below 0 (or I’ll not go), and it can’t dissuade so many people that it overall provides negative value to the website (or they won’t show it). They can destroy value relative to the world with no ads on the website, but not relative to the world without this website. For, uh, certain definitions of “can’t”. (And: ads on websites that also want me there for reasons other than showing me ads, are probably less bad than ads on websites that only want me there to show me ads.)
For a billboard on the side of the road… well, who’s getting paid? Is it typically the person who built the road? If not, the incentives are fucked. Even if it is… like the website the road is giving me value, and the ad still can’t bring the value it gives me below 0.
One difference: most of the value to me is getting me somewhere else, and the people and businesses at my destination probably value me being there, so if the value I get from the road goes to 0 and I stop taking it, that’s bad for other people too. Another difference: what’s the equivalent of “the world without this website”? Maybe if there’s no road there I could walk, but walking is now less pleasant than it would have been because of the road (and the billboard that isn’t narrowly targeted to drivers). Also feels significant that no one else can build a road there, and give me a choice of tolls or ads. The road itself is an externality.
I think my main conclusions here are
Billboards still feel like an externality in a way that web ads don’t
If I want to think about, like, idealized models of free-market transactions, roads are a really weird thing to model.
I wonder how efficient the ads actually are. And I realize that the ad companies have absolutely no incentive to tell the truth.
When you watch ads, you pay in two ways. First, by having your time and attention wasted, and possibly being annoyed a lot. This part is a pure loss for you; it doesn’t benefit the companies paying for ads in any way. Second (assuming that the ads really work as advertised), by sometimes, as a consequence of watching an ad, buying something you wouldn’t have bought otherwise—most likely, because you don’t actually need it.
The things you buy as a consequence of having watched the ad… in theory it could be something useful that you didn’t know about, so the ad really made you a service by telling you about it… yeah, that’s what people working for the advertising agencies will tell you (and you should trust them about as much as you trust people working for tobacco companies when they tell you about the benefits of smoking, or rather vaping these days). But we all know that most ads are not like that. Many of them actually about things you already know about; it’s just an ongoing work to keep a specific brand firmly implanted in your mind. Also, on internet, many ads are outright scams. I would say that you are 10x or 100x more likely to see a scam ad, than an ad for something that is really useful, that you didn’t know before, that comes at a reasonable price.
So, it seems to me that if we analyze the proposal “instead of money, you can pay by watching a few ads”, well, either the ads work—in which case, as a user, you save some money, but then lose a lot of time and attention and emotional energy… and ultimately, as a result of successful manipulation spend money on something you otherwise wouldn’t buy, so… perhaps paying for the service would have been cheaper, even from the strictly financial perspective—or maybe the ads don’t work, and this all is just an elaborate ritual to scam companies out of their money (most of them don’t do A/B testing on the effectiveness of ads, so they have no way to know), and as a user, you have the bad luck that your time and attention need to be sacrificed to make this ritual work. Realistically, it is probably something in between.
*
That said, the argument in favor of ad industry is that it works. Making people pay using their time and attention is technologically easier than making them pay using Paypal or Visa. The payment is proportional to time spent using the service, which is a great advantage: if you e.g. only watch one YouTube video per week, your suffering is effectively a micropayment.
Generally, paying for services makes more sense if you use one service a lot, and becomes unmanageable if you use hundred services, each of them only a little. Most companies probably wouldn’t agree that you only need to pay them a cent or two a month if you only use their services a little (such as one video or one article per week); and if everyone required a minimum monthly payment of one dollar, the costs would quickly add up if you had to pay literally for every website you visit online. (And that’s even ignoring the part about how half of those subscriptions would be extremely difficult to cancel.)
I think it would be nice if someone figured out a way how e.g. every person on the planet could pay a fixed monthly “internet fee” and the money would be distributed to websites proportionally to how much time the person spends there. But this comes with all kinds of problems, starting with weird incentives (when you make your web pages load slower, you get paid more), how would the height of the “internet fee” be determined, etc.