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Programmatic Advertising

The “American dream” has always been a powerful idea that has echoed throughout the world. The citizens of the poorer countries of this world have always associated the “American dream” with the way of life in the developed countries. Increasingly, it seems that the “American dream” is a thing of past – a broken contract between the state and its people from the times of the rich post-war America of the 1950s. The wealth gap is becoming a prominent theme in the developed world and rightfully so. A recent book by French economist Thomas Piketty has become the topic of a great many discussions. It attracts controversy by arguing that the deepening inequality gap is a result of a law of economics as defined by Piketty himself. The rate of return for owned capital exceeds the overall rate of economic growth, so that, unavoidably, the rich get richer.

Published in August 2014

Like so many other theories of economics, Piketty’s idea is attractively entertaining because it explains so much with so little. Economics is a cynical science based on the premise that human greed and the desire to possess are the triggers for most human actions; but Mr Piketty’s argument may not fully explain what is happening. Society is undergoing a fundamental shift: in the way people consume, interact and live their lives in general. Because the internet can meet so many of our needs, we do not need or want to own so much. The internet will make the utilisation of assets infinitely more efficient. Already, we see the first success stories of the new “sharing economy”. Airbnb allows users to swap their apartments, so that they can go on holidays, without the need to “wastefully” occupy a hotel room while leaving their apartments empty at the same time. Zopa creates a perfect match between private borrowers and smart savers. By circumventing traditional banks, it can offer much better rates to both sides. EasyCar Club allows car owners to hire out their cars to strangers.

The sophistication of the internet frees us from the need to amass possessions or to require the work of others. Intelligent image recognition is done by mashing up millions of other pictures, so that repeating patterns are picked up by computers and remembered to recognise text, objects and people in other images. Similarly, automated language translation is built on the access to millions of other translations done by real people and stored on the internet.
Our privacy is the valuable resource of the “sharing economy” and we are giving it up gratis. Without asking our permission, internet companies collect incredible amounts of information about us to create algorithms, which compare and correlate our actions, needs and characteristics. In exchange for the “free” internet services, our choices in shopping, music, friends, reading and watching are tracked and fed into the all-mighty “meta” computer. ¬†Algorithms are then created, which attack our desires, manipulate our attention and help companies make optimal decisions. A bank will assess its customer using his credit card information, previous buying habits, social interactions and potential career prospects all at the same time, so that it can prepare a perfect estimate of the risks of giving him a loan and customise his repayments and interest rates to reflect this. An internet shop with the access to a record of our past purchases, our pictures on a social network and using an automated algorithm to make assumptions about our music and film taste can show us the products that we will like, but will also show them being used by our friends or favourite celebrities on the browser’s sidebar.¬†
We, the citizens of the “sharing economy”, get the short end of the stick. We are manipulated, controlled and misused by the internet companies and all we get in return are numbers and codes – music, films and information in a digital format for free. The automation that comes with the “sharing economy” reduces the need for the low-skill jobs and eliminates the livelihoods of millions. And yet, all these changes are part of a progress and restricting them would be counter-productive. The new more sophisticated internet promises much more than just an efficient way to manipulate our senses and desires. As more data is collected and analysed, patterns and inferences become apparent that would otherwise never have seen the light of the day. Storing the health records of millions of patients, linking them with the diagnosis they have received and the result of the treatment will enable “meta” computers to become automated doctors. In the near future, people will use a smartphone to measure their blood pressure and pulse, take a photo of their health condition and send it all to a computer, which will establish the most probable diagnosis by learning from the stored information and making inferences from it.
For economists – the most cynical of human beings – free market is the best remedy to any social problem. In the world where greed is a catalyst of most human actions, only monetary gain can bring us the satisfaction. Milton Friedman has once famously proposed to legalize drugs. A free market with competing drug producers would remove the black market and with it the dangerous low quality products. Making drugs freely available would also remove the attraction of the “forbidden fruit”. In a similarly cynical vein, Jaron Lanier in his influential article proposed a free market solution to the growing inequality. According to Lanier, instituting a universal micropayment system, keeping track of where information came from and then paying to people when information that exists because they exist turns out to be valuable would help to fix the digital economy.
Larnier’s solution is not far from reality. Programmatic advertising involves collecting information about us as we browse the internet to make inferences about who we are and what we like. In the exact moment when we visit a website, a bid request with information about who we are is created and sent to market exchange, where multiple advertisers submit bids in real time to place their advertisements. The advertisers bid through automatic algorithms – sets of rules for bidding on particular types of consumers. The process takes place in real time within milliseconds and for every empty banner box on the webpage. There are other ways to cash in on the sharing economy. The social media product placement may soon become a wide-spread phenomenon. People will be asked for the consent to use their private images, while wearing or using a particular product or a brand. An image will be shown to their friends, family and other social network connections to influence their decisions. Never before has the marketing message been so direct and immediate to our senses.
What is presently a calm calculative automated marketing apparatus, could make the “sharing economy” fairer. Perhaps, if the websites shared some of their fees with us, we would more happily share our privacy and the quality of information would increase. After all, we are all profit-seeking actors controlled by our greed.


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