Opinion | Online Ads Are Serving Us Lousy, Overpriced Goods

If you saw a Facebook ad recently for Jeremy’s Razors, which bills itself as a “woke-free” razor for men, you may well be a father of school-age children who likes ultimate fighting, Hershey’s chocolate, hunting or Johnny Cash. This is according to Facebook’s ad library, which describes the audiences to which marketers target their advertisements.

I can see why Jeremy’s Razors is focusing its ad dollars on men who might appreciate its hypermasculine message. But the reverse is not as clear: Are these men better off for having been pitched an “anti-woke” razor?

In the traditional media world, ads are sold in context of the area in which publications are sold: Perhaps Jeremy’s Razors might favor advertising in Deer & Deer Hunting magazine, for example. But online, many ads are sold based on the many details that advertisers have gleaned about your behavior and interests from your online activity.

Tech firms track nearly every click from website to website, develop detailed profiles of your interests and desires and make that data available to advertisers. That’s why you get those creepy ads in your Instagram feed or on websites that seem to know what you were just talking about.

The ability to track people has turned out to be an unbeatable advantage for the online ad industry, which has grown to a $540 billion market worldwide, according to the media agency GroupM, dwarfing all other forms of advertising, including TV, radio and newspapers. It has propelled the massive growth of Google and Facebook as well as hundreds of so-called ad tech firms that serve as intermediaries between the buyers and sellers of targeting information.

But the rise of microtargeting has come with a staggering price tag. “There is limited evidence to suggest that the efficiency and efficacy gains to advertisers and publishers of this system outweighs the societal impact,” concludes a 274-page study published by the European Commission this year. It calls for reforming the surveillance business model.

Already, we know that web tracking has decimated publishers. This has been particularly devastating for traditional news outlets: Global newspaper revenue plummeted from $107 billion in 2000 to nearly $32 billion in 2022, according to GroupM. This is a blow to democracy: Studies show that voting decreases and corruption increases in communities without strong news outlets.

Microtargeting has also enabled advertisers to discriminate in ways that are hard for regulators to catch. It is illegal, for example, for advertisers to use language in their ads suggesting that jobs, housing or credit opportunities are being offered to people of a certain race, gender or age or in other protected categories. But ad targeting means that advertisers can hide their preferences in the algorithm. Facebook has repeatedly been shown to have enabled discriminatory advertising. (The company has consistently argued in court that it is not liable for the choices advertisers make on its platform and has since agreed to change its ad delivery system.)

Microtargeting also allows politicians to deliver divisive messages directly to niche groups. In 2019, President Donald Trump’s campaign team flooded Facebook with targeted ads bearing inflammatory messages. In 2016, a Senate inquiry found that Russian operatives spread ads on Facebook targeting Black Americans that were aimed at discouraging them from voting.

On top of all of this, it turns out that targeted ads aren’t helping consumers, either. Last year, researchers at Carnegie Mellon and Virginia Tech presented a study of the consumer welfare implications of targeted ads. The results were so surprising that the researchers repeated the study to make sure their findings were correct.

The new study, published online this week, confirmed the results: The targeted ads shown to another set of nearly 500 participants were pitching more expensive products from lower-quality vendors than identical products that showed up in a simple web search.

The products shown in targeted ads were, on average, roughly 10 percent more expensive than what users could find by searching online. And the products were more than twice as likely to be sold by lower-quality vendors, as measured by their Better Business Bureau ratings.

“Both studies consistently highlighted a pervasive problem of low-quality vendors in targeted ads,” wrote the authors, Eduardo Abraham Schnadower Mustri, a Carnegie Mellon University Ph.D. student; Idris Adjerid, a professor at Virginia Tech; and Alessandro Acquisti, a professor at Carnegie Mellon. They posited that targeted ads may be a way for smaller vendors to reach consumers and that “a sizable portion of these vendors may in fact be undesirable to consumers because they are of lower quality.”

Quality seems to be an issue with Jeremy’s Razors, which, during the 30 days ending March 26, spent more than $800,000 on Facebook — the most among advertisers whose spending is disclosed in the platform’s ad transparency reports. When I checked Jeremy’s Facebook reviews, many customers said they liked the product’s political message more than the razor itself. “If you like razors that feel like someone is pulling your facial hair out with a tweezer one at a time, then Jeremy’s Razors are your razors,” one wrote. The razor has a 2.7 star rating (out of five), based on more than 280 reviews.

The government may finally be starting to take action to curb commercial surveillance. Congress is considering a comprehensive privacy bill, the Federal Trade Commission is writing new privacy regulations, and an unlikely coalition of senators, including Ted Cruz and Elizabeth Warren, just last week introduced a bill that would combat conflicts of interest among ad tracking companies.

The ad industry is gearing up for war. “Extremists are winning the battle for hearts and minds in Washington, D.C., and beyond,” David Cohen, the chief executive of the digital media and marketing trade association, declared in January at the industry’s annual swanky retreat on Marco Island, Fla. “We cannot let that happen.”

In March a coalition of trade organizations and companies, including advertising groups — which calls itself Privacy for America — sent a letter to Congress warning that any harm to the “responsible data-driven” surveillance business model could cost consumers on average $30,000 in economic value each year.

However, the $30,000 number comes from a study published in 2019 in which researchers asked participants to consider losing access to internet services like search engines, digital maps and email. Then participants were asked how much money they would accept to forgo access to those services for a year. Participants said they would require more than $17,000 to forgo access to search, more than $8,000 to forgo access to email and more than $3,000 to forgo access to maps, the study found.

Search, maps and email don’t make the case for creepy ads. Search and maps are primarily funded by contextual ads — ads that are related to the query that users type into the search engine or the map. Meanwhile, most email services are free for limited usage but make money by selling additional features. There are some ads in free email, but it’s not a huge part of the advertising ecosystem.

So it turns out that this $30,000 number is a better argument for the value of contextual advertising than of surveillance advertising.

Jeremy’s Razors doesn’t need to know your family structure, your favorite sport or the name of your favorite singer. Jeremy’s could simply place its anti-woke ads near anti-woke content.

Isn’t it time that we considered a future that didn’t involve companies spying on us?