Giving consumers choices regarding seeing advertisements on websites, while recognizing existing business models, has been a focus for many stakeholders in the privacy debate. Many groups and companies have worked to create a ‘Do Not Track’ feature that would give consumers the choice of not seeing advertisements, but in the newest version of its Internet browser, Internet Explorer 10, Microsoft has reversed that trend by changing a default setting and turning on its ‘Do Not Track’ tool. The browser’s default setting, set without consumer input, will now preclude consumers from seeing advertisements on the websites they visit for free. This undermines long-term prospects of the ‘Do Not Track’ system which was designed to allow successful Internet business models to continue.
The Internet doesn’t exist without cost and changing the rules of the game at this stage could have unforeseen consequences for competition and consumers and jeopardize the Internet, which is the most dynamic commercial ecosystem that has ever existed. It could well mean that consumers will no longer have access to all the benefits they now enjoy for free and undermine what many call the Web 2.0 world.
The Internet facilities the creation of business models, often by start-ups, that efficiently deliver value to consumers in new and different—perhaps even in disruptive–ways. This can only occur because the ecosystem of the Internet has, from the beginning, been relatively free of barriers and inefficiencies.
One example is the difference in the liability that publishers of traditional media face, versus the liability that online publishers face. In the brick-and-mortar world, publishers do not have many limits to their liability for defamation and other similar wrongs, but Congress changed the rules for online publishers when it passed the Communications Decency Act, a law that drastically limits liability for Internet publishers. This law was passed in response to a case brought against the ISP Prodigy, a competitor of AOL, because it had allegedly failed to adequately monitor and remove defamatory content from its web pages. Congress stepped in because it recognized that imposing traditional liability on Internet publishers would have been an almost insurmountable barrier that could stifle the future development of the Internet.
One of the other main barriers to the Internet is an economic one—users generally will not pay for access to websites. A number of companies have tried to monetize their content or services in this way, and in most cases they fail. Perhaps the best example is AOL. AOL tried to base its model on providing content to consumers, based in essence on a paid subscription model that was compared to cable television. The Comments of Bob Pittman in a New York Times article illustrate the view of AOL at the peak of its value:
If you really love AOL, would you pay $10 a month for AOL TV and five bucks a month to get your AOL e-mail on your Palm Pilot? I am loath to predict the future, but people pay 50 or 60 bucks a month for cable. I think people see us as comparable, so we have a lot of headroom to deliver value. — Bob Pittman.
Now, AOL Everywhere, July 4, 1999, by Saul Hansell.
Ironically, this article viewed AOL’s strategy as copying Microsoft’s domination strategy for operating systems.
Just as Microsoft has come to dominate the operating systems for personal computers, AOL, Microsoft and many other companies are fighting to control a new and crucial form of operating system, in essence for daily life. As people wire their families, their finances, their jobs — even their household appliances — into one vast network, whoever ties it all together will have much say in how the electronic future unfolds, and possibly capture much of the profit.
”Windows is the past,” Mr. Case says flatly. ”In the future, AOL is the next Microsoft.”
We all know now, with 20/20 hindsight, that this business model did not work, and that one of the core features of the Web 2.0 ecosystem is providing consumers services without cost, and relying upon advertisers to provide the revenue that permits companies to continually innovate.
For example, Facebook provides users with the opportunity to connect with friends, store pictures in the cloud so they are easily accessible, and connect with people in new and evolving ways. Google provides structure, guidance and search for the ever-expanding Internet ecosystem in a way that was unimaginable at the dawn of the Internet. Neither company charges users for these services. While this seems normal to us all, because we have this experience every day, think about how many other major companies provide you their product or service for free. The answer is not many, and that is because the Internet ecosystem, which is based upon advertising revenue, permits companies to provide these valuable services to consumers without charging them.
Microsoft is now in the middle of these issues again, in a different way than when AOL was trying to change the world and become the next Microsoft. Microsoft, a company that generates a significant amount of revenue by charging users for software, has now changed some of the default settings on the new version of Internet Explorer in ways that threaten to change the Internet ecosystem. By changing the default setting turning on its “Do Not Track” tool in Internet Explorer 10, Microsoft will precluded consumers from seeing advertisements on the websites they visit for free, all without consumer input.
The challenge of this approach is that by unilaterally blocking advertisements by default, this tool undermines consumer choice and also may force many companies to pursue the largely failed business model of charging for Internet services, because without advertising revenue many companies cannot continue to provide valuable services at no charge to consumers. Microsoft has disregarded the work of a number of industry coalitions, including the Direct Marketing Association, and Internet companies who have worked to create a Do Not Track feature that would give consumers the choice of not seeing advertisements, yet not threaten the very underpinnings of the Internet ecosystem, including through self-imposed regulatory models that many companies have already agreed to abide by.
Consumers and industry need to recognize that the Web 2.0 world doesn’t exist at no cost. At this stage, changing the rules of the game could have unforeseen consequences for competition and consumers, and mean that consumers will have to reach into their pocket quite often to enjoy the same benefits they now have for free.