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January 05, 2012 8:14 AM Information Is Free Only Because Advertisers Pay

By Ezra Klein

For much of the 19th century, newspapers were financed by political parties. It was a transparent, transactional relationship: The newspaper would officially partner with a political party, and in return they received direct infusions of cash, customers and even news.

The cash would come from the party’s budget, the customers from the party’s base and the news from the party’s politicians. In return, the party had total control over what the newspaper did and didn’t publish.

Yet by the end of the 20th century, there were hardly any party-affiliated newspapers left. Many people assume that this was a triumph of journalistic ethics over partisan politics. But in a paper published in the November 2011 edition of the American Political Science Review, Maria Petrova suggests that the real story is less inspiring.

“Newspapers’ independence was positively related to the local profitability of advertising,” she writes. “In the areas with faster-growing advertising markets, newspapers were more likely to be independent. The effect of advertising worked both through the entry of new newspapers and through changes in the affiliation of existing newspapers.”

In other words, the news found a more lucrative patron than political parties: advertisers. This business model, though, required a different news model. “If the profitability of advertising is high, then it is costly for media outlets to distort their news coverage in the direction desired by a subsidizing group,” Petrova writes. “Any deviation from the coverage that maximizes audience means the loss of audience and the loss of corresponding advertising revenues.”

Strategy Had Changed

That was, in many ways, a good thing. The “objective” newspaper was certainly preferable to the propaganda outlets that preceded it. But objectivity wasn’t just about the news. It was also about keeping audiences large and advertisers happy. It was part of a business strategy. That meant it could often induce a kind of studied inoffensiveness, an unwillingness to speak truths that audiences didn’t want to hear. Still, the post-advertising newspapers were trustworthy, independent sources of information. Before moving to the advertising model, they weren’t.

Nor is the news the only form of mass information that appears free while actually supporting itself through advertising. One of the most mind-bending facts of our information culture is that almost every major medium of information supports itself by advertising.

Radio? Advertisers. Magazines? Advertisers. Television? Advertisers. Google? Advertisers. Facebook? Advertisers. Twitter? Advertisers. Perhaps the only major exceptions to this rule are books, which are supported by sales, and Wikipedia, which is supported largely through donations.

From an economic standpoint, most information is simply a vehicle for advertising. We see the advertising as a distraction. But so far as the media company’s bottom line goes, the advertising is the point. Without the advertising, the information wouldn’t exist. So the history of information, in the U.S. at least, is the history of platforms that could support advertising.

That doesn’t make advertising evil, or platforms that rely on it untrustworthy. In important ways, advertisers are the ideal sponsors for information. There are many of them, so no individual advertiser wields total power. They are, themselves, trying to convey information that consumers often find useful. And their interests are sufficiently narrow that it’s rare for the information they’re sponsoring to truly pose a problem for them — Macy’s, for instance, has few opinions on defense policy.

Consumers Want Free

They blend into the background so well that we can occasionally forget that they are there. Technology optimists like to say that “information wants to be free.” Perhaps the truer way to put it is that consumers want information to be free. And advertising makes it look free. But being free and looking free are not the same thing. In fact, they can be even more different than being free and being expensive, because at least in that comparison, the difference is obvious and easy to evaluate.

This is truer on the Internet than it ever was in newspapers or on television. At least with newspapers and television, the advertising was directly in front of you, and your interaction with it was straightforward. In the case of newspapers and, later, cable television, you were paying something — you knew the information wasn’t free.

Online, you not only are exposed to advertisements, but the data on what you search, where you go and what you do is fed to advertisers so they can better target their appeals. You’re often paying nothing for the experience, at work or in a cafe. As the information appears ever more free, the hidden costs are growing correspondingly greater.

The point of this column is not to warn against the dangers of advertising. It’s that our informational commons, or what we think of as our informational commons, is, for the most part, built atop a latticework of advertising platforms. In that way, it’s possible that no single industry — not newspapers or search engines or anything else — has done as much to advance the storehouse of accessible human knowledge in the 20th century as advertisers. They didn’t do it because they are philanthropists, and they didn’t do it because they love information. But they did it nevertheless.

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Ezra Klein is a columnist for Bloomberg View.
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Comments

  • Goldilocks on January 06, 2012 10:23 AM:

    In an ideal or "enlightened" society, where ideological fixations do not compete obsessively for political power, government would finance our informational commons for the benefit of all. This would imply an exalted kind of socialist freedom which is clearly anathema to the capitalistic puritanism operating in America.

    However, it is possible, as the British Broadcasting Corporation has demonstrated for nearly a century. All that is necessary is a sensible approach to a common need. A country which is unable to attain and maintain such an obvious provision cannot claim to be "the greatest country on Earth", as many Americans are wont to accord to themselves.

    Nevertheless, this article offers an excellent history and analysis of our current informational dependencies.

  • Paul Sweeting on January 06, 2012 12:38 PM:

    Advertisers have been ideal sponsors for information but ultimately, advertisers value eyeballs (or listeners), not information. The challenge today is that digital technology makes it trivial to deliver eyeballs to advertisers via aggregation without incurring the costs of gathering the information (c.f. Huffington Post). In fact, those eyeballs are generally far cheaper for the advertiser precisely because there is no need to subsidize the cost of the information, which only encourages them to abandon the original information producers in favor of aggregators.

    The crucial fact about the latticework of platforms that supported our information commons in the past is not that they were based on advertising, per se, but that they provided a means to indirectly subsidize the cost of information gathering. Today, when the value of information (i.e. eyeballs) can easily be captured by third parties that were not involved in its creation, the indirect subsidy model is breaking down.

  • Goldilocks on January 07, 2012 5:20 AM:

    Update: Information is free because advertisers pay AND millions of highly motivated, knowledgeable, enthusiastic, inspired people give enormous amounts of unpaid time and skill to maintaining and developing our information cornucopia. Money isn't everything.

  • Goldilocks on January 07, 2012 6:55 AM:

    Paul Sweeting's comment is fascinating in a hypnotic sort of way. If I understand correctly, he is pointing to a distinction between information creation and information distribution, both of which incur material and labour costs. Since information users are generally disinclined to contribute directly to these costs, revenue has to be generated in other ways.

    There are three sources of such revenue (aside from directly charging a fee): subsidy, advertising and donation.

    Subsidy can come either from government or vested interest, as Ezra delineates. There isn't anything particularly complicated about this form of revenue - except in its effect on the quality and neutrality of the information disseminated.

    Advertising requires a market economy to function. It aims to serve and stimulate consumer demand, and devises numerous tricks and enticements to fulfil its purpose. Here there are three types of responses from the "eyeballs" (and associated appetites and curiosities): One is blocking, evading or ignoring, with associated disgruntlement at the intrusion; a second is clicking and possible purchase; and the third is active search for a desired or required good or service. Advertisers have to deal with and satisfy these three types of potential customer responses.

    Donation is the most complex of the three. At one level it is simple and quantifiable, where an appreciative user donates voluntarily to the resource they avail themselves of. However, there is a more pervasive and less quantifiable style of donation in the form of time and skill. Millions of people participating in the Internet contribute in numerous ways, free of charge, their ingenuity, enthusiasm and knowledge. This is what I believe constitutes the largest part of the support and success of the information cornucopia.

    Information creation is the domain of scientists, investigative journalists and private individuals who have explored particular areas of knowledge. Many of them make their accumulated information available directly on their own or a third party website. They may do this on their own account or for remuneration.

    Information gatherers and distributors do just that: they collect and collate the information made available by the creators. More often than not they contribute an analysis and discussion of the information they present, so they are more than just information free-loaders. These are the providers advertisers seek to exploit and hence remunerate.

    Looking at the situation as a whole, clearly there are many components and interconnected moving parts. Everyone has to sell something in order to live, be it physical effort, skill, knowledge, experience or expertise. The common factors connecting what people do to earn a living are time and information. Money is basically a measure of these two common factors.

    In a simplistic way, therefore, one can say that information is money. How it moves and facilitates is the basis of Information Age economics. What a fascinating and delightful time to be alive!