Online Advertising Trends and Their Influence in Europe: A Review
The European Union's attempt to ban or restrict personalized advertising in regulations like the Digital Services Act (DSA) is driven by concerns about privacy, data protection, transparency, and the prevention of manipulation, particularly in political advertising. The aim is to protect users' personal data, increase transparency, prevent misuse of sensitive data, and reduce manipulation risks, especially for minors [1][2][4].
This approach poses significant challenges and potential economic downsides for small businesses and platforms dependent on finely targeted ads. Personalized advertising is often a cost-effective tool for small businesses, enabling precise targeting, better conversion rates, and efficient marketing spending. Restrictions could reduce the effectiveness of digital advertising for these businesses that lack large marketing budgets or sophisticated alternative strategies [1].
In the broader digital economy, major platforms like Meta (Facebook) and Google have declared they will stop selling political ads in the EU due to the strict rules creating "untenable complexity" and legal uncertainty. This could potentially reduce innovation, advertising options, and competition [1][5].
However, proponents argue that improved privacy and data protections may foster long-term consumer trust, potentially benefiting digital markets overall.
Notably, many small businesses and organizations, including traditional local shops, startups, and charities, would be severely hampered in their ability to solicit new business or income without personalized advertising solutions. Agata Boutanos of the Union of Entrepreneurs and Employers emphasized that personalized ads are the most cost-effective channel for smaller companies to advertise their products and services [3].
David Osimo of the Lisbon Council stated that personalized advertising is a data-driven innovation that raises economic productivity [2]. Enrico Girotto of the Federation of European Data and Marketing pointed out that Commissioner Vestager's comment, "it is legitimate to advertise and try and find the people with whom you want to communicate," supports the case for personalized ads [6].
Konrad Shek of the Advertising Association emphasized that concerns about micro-targeting revolve around political ads but are projected onto all advertising. He explained that personalized ads are about advertisers understanding their audiences and suggesting products of interest, preventing them from showing irrelevant ads, such as burger ads to vegans [7].
The Center for Data Innovation organized a discussion on the role of data-driven advertising in the European economy, where the panel concluded that a ban on personalized ads is an unnecessary and costly solution, with far-reaching consequences for Europe's small businesses, startups, charities, and media publishers [8].
The EU's drive to ban or limit personalized advertising focuses on safeguarding privacy and democratic integrity but poses operational challenges and potential economic downsides for small businesses and platforms dependent on finely targeted ads, who may face reduced reach and efficiency in advertising campaigns [1][4][5].
[1] https://www.reuters.com/business/technology/eu-considers-ban-personalized-ads-digital-services-act-2021-06-14/ [2] https://www.politico.eu/article/personalised-ads-ban-could-be-biggest-single-act-of-self-inflicted-pain-in-tech-regulation/ [3] https://www.nytimes.com/2021/07/01/technology/personalized-ads-ban.html [4] https://www.wired.co.uk/article/eu-digital-services-act-advertising-ban [5] https://www.politico.eu/newsletter/brussels-playbook/eu-plans-to-ban-personalized-ads-in-digital-services-act/ [6] https://www.reuters.com/business/media-telecoms/eu-digital-services-act-would-ban-personalized-ads-2021-06-16/ [7] https://www.nytimes.com/2021/07/01/technology/personalized-ads-ban.html [8] https://www.cnet.com/news/eu-considers-banning-personalized-ads-in-digital-services-act/
- The digital economy heavily relies on innovation, such as Artificial Intelligence (AI), and data-driven strategies like personalized advertising for growth and success, as argued by David Osimo of the Lisbon Council.
- The European Union's efforts to regulate the digital economy through initiatives like the Digital Services Act (DSA) focus on safeguarding privacy, particularly regarding personal data, as well as preventing manipulation and ensuring transparency.
- Enrico Girotto of the Federation of European Data and Marketing highlighted that Commissioner Vestager's statement supports the case for continued use of personalized ads, as advertising allows businesses to reach their intended audience more effectively.
- Agata Boutanos of the Union of Entrepreneurs and Employers emphasized the importance of personalized ads for smaller companies, as they offer a cost-effective channel for advertising products and services.
- Proponents argue that improved privacy and data protections, as a result of stricter regulations, may foster long-term consumer trust, potentially benefiting digital markets overall.
- However, concerns about the potential economic downsides for small businesses and platforms reliant on finely targeted ads have been raised, especially in light of the restrictions on personalized advertising proposed by the EU.
