Personalized Advertising Is Under Attack – Web3 May Be the Solution

human hand holding image of person made of data points

By Jay Friedman, President at Goodway Group

Recently, consumer data collection by brands and advertisers has risen exponentially to deliver personalized experiences also personalized advertising. While beneficial to advertisers, this has been crucial to publishers by providing a revenue stream as a way of subsidizing non-paying visitors. As consumers become more aware of data collection, they are increasingly concerned about how their data is used. Legislators have labeled the practice as ‘targeted’ or ‘surveillance’ in efforts to pass privacy bills that curtail the flow of data through the media ecosystem without understanding there is a cost to the open internet.

Just last month, the European Union agreed to changes to the Digital Markets Act and Digital Services Act that would curb how companies use data to target consumers with the new rules expected to be written by Summer 2022. In the U.S., the Federal Trade Commission (FTC) is currently exploring how data collection can be better regulated and the effects of personalized advertising on consumers.

As new rules and regulations are proposed or go into effect, legislators and industry leaders must carefully consider how they can enable consumers to exert more control over their data. With this control, consumers must also be provided with the choice of paying for content with money, personal data to which they clearly and easily consent, or a combination of both.

Web2, the internet as we know it today, experimented with micro-transactions, and they didn’t catch on. Instead, advertising and data collection became the ubiquitous micro-transaction and method of payment. With Web3 introducing transparency and decentralization to the internet, there is a significant opportunity to bring consumers a real choice, enabling a future where consumers can opt-in or out of data collection fluidly with no unscrupulous surveillance.

Striking a Balance Between Personalization and Data Privacy in Web3

The issue with personalized ads lies with control and “fairness.” Consumers feel that data collection practices to date have invaded their privacy, extracting critical insights into their tastes, preferences, and lifestyle for profit in an unfair exchange. Understandably, they want a say in when, where and how their data is used and fair compensation when they consent.

While much of Web3 (gas fees, anyone?) is still too complex for the everyday consumer, now is the time to build for the future. Crypto wallets offer the ability for consumers to choose how they pay for content, whether with data or money. Site or app wallet integrations manage consumers’ payment options with permission living in the wallet under full consumer control. From an advertising perspective, this means consumers can fully manage their identity and opt-in status one time, on a site-by-site, publisher-by-publisher basis. They can also revoke publishers’ data privileges at any time!

Using decentralized crypto wallets as an intermediary for provisioning advertising data places consumers, advertisers, and content creators on equal footing while delivering on the promise of personalization and relevancy.

Here’s how it would work in practice. Imagine a user arrives at a site or app, connects their wallet and is prompted to choose how they will access the site’s content.

Pay Nothing: Access our entire site and, in exchange, we see your profile information, share with other publishers and intermediaries, and use other publishers’ and intermediaries’ data about you to show you personalized ads.

Pay $4.99/mo: Access unlimited readership and, in exchange, publishers don’t store any personalized information about you other than your wallet address for billing purposes only.

In this scenario, the consumer’s preferences are stored in their own wallet, not in the browser (cookies) or the site’s database. And, consumers can change their “subscription” level at any time. While this could be accomplished through Web2’s “log in with __” feature available today, that still centralizes identity with a corporation. Moreover, major browser players like Google and Apple are unlikely to agree to a common standard like this in Web2.

Realistically, mass wallet adoption is years away. Legislation has already been passed in Europe and some U.S. states to restrict consumer data collection, with more on the horizon. This is problematic because it may prevent publishers from giving consumers the choice they deserve. As publishers and industry trade groups explore Web3’s capabilities, advertising leaders can shape the future of privacy, data collection, and a profitable open internet that fits well within the spirit of existing and upcoming legislation.