How ‘Do Not Track’ Will Transform Internet Business Models

Imag­ine a world where all inter­net browsers are required to present users with a sim­ple ques­tion: “Do you want your online brows­ing activ­ity tracked, recorded and shared with mar­ket­ing com­pa­nies — Yes or No?”

What per­cent­age of users do you sup­pose would answer “No?” My guess would be greater than 90%. If I’m any­where close to being cor­rect then Microsoft’s con­tro­ver­sial deci­sion to enable ‘Do Not Track’ (DNT) by default in IE10 and Win­dows 8 would seem to be very much inline with con­sumer sen­ti­ment. But adver­tis­ers, Yahoo, and the devel­op­ers of both the Apache web server and Fire­Fox browsers are all decry­ing Microsoft’s decision.

This rel­a­tively arcane debate over a new inter­net stan­dard masks a much more crit­i­cal issue: In the long-term, how viable is the internet’s — adver­tis­ing based — ‘Free’ con­tent model?

Adver­tis­ing rev­enue is the internet’s pre­dom­i­nant busi­ness model. This is of course the core busi­ness model that enabled Google to become the 800 lb. gorilla of the indus­try. But this busi­ness model is based on users accept­ing a ‘Faus­t­ian’ pact where they agree to increas­ingly inva­sive track­ing of their online activ­i­ties in exchange for free content.

There’s only one small prob­lem with the cur­rent sit­u­a­tion. Very few con­sumers have ever read or con­sented to the ‘Con­tract.’ Most of con­sumers have no earthly idea how inva­sive today’s inter­net track­ing tech­nol­ogy is and once they are aware they are not going to like it.

The howls of out­rage from adver­tis­ers and from sites like Yahoo — that depend on adver­tis­ing rev­enue for their very exis­tence — about Microsoft’s deci­sion to enable DNT by default mask a much deeper fear. Once online con­sumers real­ize the true value of their ‘click-stream’ per­haps they will start ask­ing for a lot more in return. Maybe the fal­lacy of ‘free’ con­tent on the inter­net will be made trans­par­ent with all the dire con­se­quences that would entail for the com­pa­nies that depend on this busi­ness model.

Here’s a sug­ges­tion. If adver­tis­ers — and oth­ers — are so con­cerned that DNT should require an explicit opt-in by con­sumers then lets imple­ment the solu­tion I alluded to in my open ques­tion. Every browser should prompt the user to make an explicit choice for the DNT set­ting dur­ing instal­la­tion or upgrade. How could that pos­si­bly be a bad thing? It would avoid tak­ing Microsoft’s assumed default approach and yet it would ensure that every con­sumer was made aware of the option and given a choice.

I sus­pect that adver­tis­ers would absolutely hate the idea of requir­ing an explicit and vis­i­ble opt-in for the sim­ple rea­son that they already know that the most users would opt not to be tracked.

All of this raises pro­found ques­tions about the long-term via­bil­ity of the internet’s only proven busi­ness model. I sus­pect that the imple­men­ta­tion and aware­ness of DNT is going to force many con­sumers to con­front their ‘Deal with the devil’ and many are not going to like the bar­gain they have struck.

As con­sumer resent­ment over inva­sive click-stream track­ing grows the via­bil­ity of purely adver­tis­ing based con­tent busi­ness mod­els will come into seri­ous question.

Com­pa­nies that depend solely — or largely — on online adver­tis­ing dri­ven rev­enue streams — Google, Yahoo etc. — have a major strate­gic prob­lem. How will they sur­vive if the major­ity of con­sumers — as I sus­pect — decide they do not want to be tracked? The under­min­ing of the cur­rent model of free con­tent in exchange for your behav­ioral data will require a re-think of inter­net busi­ness models.

Con­sumer aware­ness about the value of their behav­ioral data — high­lighted by options such as DNT — is likely to make paid con­tent mod­els much more attrac­tive. Smart paid con­tent providers will find ways to amplify con­sumers fears about being tracked. Like the emper­ors new clothes ‘Free Con­tent’ will be seen to be not free at all. Con­sumers will then need to decide whether a much more trans­par­ent con­tract — where they pay to access con­tent with­out giv­ing up their pri­vacy — isn’t an entirely more accept­able way to browse.

Ps. I do find it ironic that the Mozilla appear to be sid­ing so enthu­si­as­ti­cally with the posi­tion of adver­tis­ers in the DNT debate. Might that have some­thing to do with the fact that 98% of their $121Million in 2011 rev­enue came from adver­tis­ing based search royalties?

Pps. Here’s a pre­dic­tion. If the internet/advertising indus­try does not vol­un­tar­ily imple­ment the proac­tive DNT choice noti­fi­ca­tion I sug­gested above then they will find them­selves forced to do so within the next five years. I would not be sur­prised to learn that Euro­pean Com­mis­sion bureau­crats are just wait­ing for the DNT spec­i­fi­ca­tion to be com­pleted and rat­i­fied before mak­ing this demand of all browser manufacturers.