Tech Won't Save Us - Why Advertising Shapes the Tech Economy w/ Daniel Joseph

Episode Date: November 24, 2022

Paris Marx is joined by Daniel Joseph to discuss why advertising is central not just to the tech economy, but modern capitalism itself, and how the business models of companies are increasing shaped by serving ads and collecting data to inform them.Daniel Joseph is a Senior Lecturer of Digital Sociology at Manchester Metropolitan University. He’s also written for a number of publications, including Briarpatch Magazine, Motherboard, and Real Life Magazine. Follow Daniel on Twitter at @DanjoKaz00ie.Tech Won’t Save Us offers a critical perspective on tech, its worldview, and wider society with the goal of inspiring people to demand better tech and a better world. Follow the podcast (@techwontsaveus) and host Paris Marx (@parismarx) on Twitter, and support the show on Patreon.The podcast is produced by Eric Wickham and part of the Harbinger Media Network.Also mentioned in this episode:Daniel wrote about how advertising and the need to create audiences is much more central to the tech economy than is often discussed.Shoshana Wodinsky explained why so many companies are getting into advertising, including hotel chains, retailers, and more.Unity faced criticism for merging with IronSource, a known advertising malware distributor.After reporting a subscriber decline earlier this year, Netflix launched an ad-supported tier in October.Companies like Apple and Uber are expanding their efforts to increase advertising revenue.Ramon Lobato wrote Netflix Nations: The Geography of Digital Distribution.Support the show

every single digital company, if you can find a way to collect extra information about your customers, it's on the table for them. Hello and welcome to Tech Won't Save Us. I'm your host, Paris Marks, and this week my guest is Daniel Joseph. Daniel is a senior lecturer of digital sociology at Manchester Metropolitan University, and he's also written for a number of publications, including Briarpatch Magazine, Motherboard, and Real Life Magazine. Daniel was last on the show in November of 2020, episode 35, if you want to go all the way back there and listen to it. And we talked about the way that capitalism has shaped the video games industry from its very origins when it first started to emerge to what is happening to today in the changing business models. In this conversation, we talked about something a little bit different, but still

somewhat related. Daniel had a piece come out this summer where he discussed how the incentives to adopt an advertising business model are underplayed in a lot of the discussions around tech companies and the way that they have developed since their emergence, and also how there is a specific kind of incentive or drive for companies to adopt this type of business model because of how integral advertising is to selling people things under modern capitalism. We certainly recognize how companies like Facebook or Google are reliant on advertising as a key source of revenue, but we underplay the degree to which a lot of these other companies have shaped their business models to respond to that type of business model, to collect data on us, to respond to that type of business model,

to collect data on us, to inform advertising profiles and things like that, and how as these companies get increasingly squeezed, it looks like they'll be doubling down on that even further, to try to further collect data on us, to try to further get advertising revenue. And so we'll have to see how that is going to play out. But personally, I found this conversation really fascinating and I really enjoyed it. And I think it gives us another perspective that we can add when we're considering the incentives behind many of these tech companies

and the impact that they're having on the world and on us. So if you like this conversation, make sure to leave a five-star review on Apple Podcasts or Spotify. You can also share it on social media or with any friends or colleagues who you think would learn from it. And if you want to support the work that goes into making the show every week, you can join supporters like Watoto Coding in Nairobi, Kenya, by going to patreon.com slash techwontsaveus and becoming a supporter. Thanks for listening and enjoy this week's conversation. Daniel, welcome back to Tech Won't Save Us. Thanks for having me back. It's really nice to be here. It's great to speak with you again.

You know, last time you were on, we had a really in-depth discussion on like the history of the video games industry, the political economy of the video games industry that I found really fascinating. And certainly I think I've built on it with some other conversations with people like Rob Zachney, who I've had on the show earlier this year. But in this conversation, you know, I want to talk about a piece that you wrote recently for Real Life that digs into, I guess, the political economy of the tech industry, right? And how we have seen that evolve and what is actually driving many of these companies and their business models when we really get down to it. And so I wanted to

start with this kind of broader question, and then we can dig into more of the specifics of the piece. You know, I think when we think about the Internet and the history of the Internet, there's an argument that the advertising business model was something that was adopted because, you know, you had this kind of communications network that was developed without a clear business model. And so this was a way for companies to find some means of commercialization when there wasn't like a clear way to charge customers for things or whatnot. You know, do you think that that's an accurate representation or explanation for why advertising became such an important business model for the web? Or is advertising itself just much more central to capitalism in a way that this discourse maybe doesn't fully get to? Yeah, I think it is a bit of both.

Like we do have that original internet or the kind of like the internet that came out of ARPANET and stuff that was kind of unmonetized or kind of alternative space. There were obviously companies and websites, you know, selling things and taking certain cuts of transactions and stuff. But I think it's important to know that like, yeah, advertising is a huge industry, has a really big lobbyist wing and has played a big role in the shaping of, at least in North America, broadcasting and telecommunications companies. And so those have shaped how we understand those kinds of legacy media formats. The internet was in a sense like when it was privatized in the 1990s by the Clinton administration and rolled out as like a kind of worldwide thing

that everyone could get access to. Marketing and advertising companies were right there to play a big role in kind of shaping how it was going to be regulated and ensure certain things and certain privileges for themselves. I think the trend towards advertising as a kind of the big underwriting of the whole thing, both like a kind of website level, but also a platform level

is kind of central to it because advertising is a big part of the whole way of our society is built. It's fascinating to hear you say that, you know, advertising was really important to the broadcasting business model, especially in North America or the United States. And then, of course, when we think about the internet, you know, this very much is a product of the United States that really gets shaped by kind of domestic kind of political and economic factors in the United States and then pushed out to the rest of the world and taking a lot of that with it. And so then if you have a really kind of strong lobbying push by advertisers or an expectation that advertising is going to be really key to what the digital expansion looks like in the United States, then naturally that is going to also shape what the internet looks like in other parts of the

world because of how important the United States and US companies are in, you know, that process. Yeah, big time. I mean, you know, and that's the thing it can like looking at the origin of this technology. I was just teaching a, like a couple of weeks ago on the history of the internet and I emphasize military funding, but I think we can't, you know, under emphasize the fact that all of those other industries came into it and at that, you know, kind of formative moments in the 1980s and 1990s. And so much of the shaping around these communication technologies was to make sure that they were economically beneficial to gdp growth and stuff so um fitting them into the whole system was i think from the from the start like a big part of this right and you can look at

documents even before like other kinds of computer networking in this era when it wasn't just arpanet or you know there was many different formats of computer networking designs going around at the time, they were all focused on this kind of commercializing aspect. It was like access to databases, access to information, all these kinds of things will help business. And so, you know, the idea that advertising would never have been in the room and really have been like a big part of that, you know, was kind of, I think, silly. And in a sense, it also explains why, you know, there's a certain thing about the affordances of digital technology made it possible for them to kind of like

change the whole game in ways that I think the marketing industry has not liked. And certain intermediaries and rating agencies and stuff have lost certain amounts of power. They might not have liked necessarily the way that the internet kind of played out for making, turning Google and Facebook into big advertising, clearing houses and things like that. But at the same time, like those technologies that those platforms had, they were really seductive component of, you know, like making advertising more scientific, more accurate,

more focused on tracking and all these kinds of things. Yeah. Super important. Right. And I had Tim Wong on the show, and he talked a lot about those aspects of the ad industry as well, right? And how even though, like, it's not actually really clear the data around, you know, the number of people who see ads and whether it's as accurate as they lead you to believe, but, you know, people want to believe it so it doesn't get challenged, at least to this degree. And this expansion into the internet has allowed a lot of additional advertising to be done, you know, really grown the industry as well as it has moved online, offered a lot of new kind of spaces for advertising to be displayed. And certainly we continue to see that expand as we'll be talking about in this

conversation. So in the piece that you wrote for Real Life, you drew on the work of Dallas Smythe in analyzing the tech companies and their relationship to advertising. What does Smythe argue and how is it relevant to what we're observing and, you know, have been observing for a couple of decades in the tech industry? So what's interesting is like about Smythe and why he comes in to theorizing advertising at a time when broadly speaking in communication studies and political economy, those who were really focused on the effects of communication systems, broadcasting, telecommunications systems and radio and all this kind of stuff. It's coming into a conversation that it wasn't huge, like cultural studies hadn't been fully established as a discipline in the UK yet really and it was growing and there was kind

of like the cultural studies side of things which was you know associated mostly with the analysis of content and in some ways a lot drawing along a tradition that we can kind of identify with Marxist theorists that we might you know like Gramsci and you know the Frankfurt School so the Horkheimer and Adorno and their kind of analysis of the culture industry and that was mostly focused on the kind of you you know, communications as like a propaganda tool, as an ideological tool, as something that's important for shaping culture because of the messages inside the media. And Smythe kind of came along and his original target was kind of theorizing communication

around the message. And he says, well, what we need to understand is that communication and specifically advertising has shaped communication systems in the West as like around the production of audiences. And so he theorizes this thing called the audience commodity. There's a bigger bone to pick with a certain strand of like Marxist political economy and Marxist theorizing around the labor theory of value and all these kinds of things. And I think he's kind of mostly remembered for that. Like, I think he's more kind of considered a bit of a outlier in some ways, because he was theorizing that audiences were actually engaging in value producing labor. My opinion on this is a bit complicated. And it's kind of like, I feel like some people read it and get hung up on that. If they come from a strong Marxist background, they might not agree with it,

they might, you know, think it's wrong or whatever. But I think, generally speaking, why I wrote this piece was that Smythe's focus on the audience commodity, on this thing that, at the end of the day, that no one really disputes, that the construction of audiences is what these companies is about. If you talk to the people in telecommunications broadcasting companies, they were like, yeah, we produce audiences. We go to Nielsen, we negotiate based on ratings and how they've collected the numbers around who watches what, when, and how, and all this kind of stuff. And then we sell our spots to marketing companies to run their ads. And there's never any dispute about that. And I think that particular important truth around what is broadcast media, for me, continue to play a huge role in how we understand tech platforms and specifically platforms oriented around cultural production.

And my argument is to kind of like almost go a little bit further and say like, this is a structured dynamic, even at other levels in the tech ecosystem. So I do some comparisons around gig work and stuff. And I'm not necessarily saying gig workers or audiences, but I say there's similar dynamics going on here that are influenced by what comes from the advertising industry. I found the piece really fascinating and the argument itself, which is obviously why we're having this conversation. But, you know, before we dig in more specifically to the tech industry angle of this, I'm wondering, because you talked a bit in the piece, you know, more broadly about

the advertising industry. Can you explain why advertising is so essential to modern capitalism? Like why it plays such an important role in the economic system that we've built up? Yeah, Smythe in his piece, he really is coming at this from the Marxist political economies, the monopoly capitalism school of thought, which is kind of finds its origins in the late 19th century Marxist theorists, both in Europe. Vladimir Lenin's writings heavily theorize this, but this goes back to another writer called Rudolf Hilferding. And there's this kind of argument that there was a competitive capitalism that existed in the pre-1870s era, which is the one, the capitalism that we see that Marx theorized in Capital Volume One. The system that he's constructing and criticizing is one where competition rules the day. And what theorists later on start to argue is that monopolies are

the dominant force in capitalism. They control their prices. They're not necessarily engaged in competition at its most basic level. And so they've kind of shored themselves up, constructed a castle that protects themselves, and then control and dominate markets at a world scale. So, you know, this kind of thing that like a handful of large companies own and engage in like the production and distribution and sale of commodities that is the most of what is bought and sold in any commodities market. And like the example often used, especially in the 20th century,

is like consumer packaged goods. Like think about companies like Unilever and Nestle. They own tons of brands. They produce tons of things. And broadly speaking, they sell almost nearly identical products. And that means that in a marketplace where things are basically the same, you need to create brands. And so this brand awareness becomes a really important thing. It's like, why do you buy one piece of toilet paper rather than another? Well, there might be some quality differences, but broadly speaking, there's that need to differentiate and use that with packaging design and advertising and making sure the brand is known to consumers. 40s and 1950s, we get a book by Paul Sweezy and Paul Buran called Monopoly Capital. And that book has kind of like starts to begin to theorize this thing called the sales effort. And they start to try and identify the advertising industry as a big part of this. But really, Smythe is kind of one of the first people to really take this further and elaborate

a little bit more on like how important it is for brands to basically protect themselves and as monopolies in consumer marketplaces through advertising. And broadly speaking, the general trends of monopoly ownership in all of these consumer products is generally the same, if not actually more acute now than it was when this was theorized in the mid 20th century. Yeah, you know, the brands are everywhere. They're tweeting at us to make themselves feel familiar to us. You know, it's always been interesting to me to also think about, you know, kind of the distinction between urban commerce, urban living versus suburban ism, where I feel like in the suburbs, you need those brands even more because you're driving at these high speeds. It's not a culture where you're kind of on foot. And so if you're going to go shop at a store or go to a restaurant or something like that,

you know, you're looking for the identifiable brand in a way that you might not need as much if you're kind of moving a little bit slower in a city itself. I guess this is a bit maybe off of your point, but it is what came to mind, you know, but I still feel like there's a piece of that in you need that kind of recognition, you need people to know your brand, know what you're selling. And thus, of course, that also contributes as you're talking about monopoly to this increased consolidation that we have in the economy, where, you know, there's fewer distinct kind of different places to go. And it's all kind of homogenized around these brands, as you're saying. Yeah. And I think like, you know, the creation of like big box stores where they stock many kinds of brands, like, you know, for me, the suburban lifestyle is all about, yeah, it's the

car, go to the big box store, shop at a giant wall of identical things. And then you really are making snap decisions based off of kind of like lifestyle advertising and general product and brand awareness. Like, you know, why do you pick one kind of toilet paper rather than the other maybe for comfort maybe some is softer that you like but like for the most part like you know there's own brands of course now like the big sports stores have their own brands and things and they make a big deal about that but it's a world where you're buying in large quantities you know you're looking at a wall of identical things and you need to make a choice and it's different in different places i think north america that was still the

where it's most pronounced um you see europeans come over to canada or the u.s and shot are surprised at how many brands of toothpaste there are or something like that you know very much that kind of like but i think the most level of competition in terms of branding happens in the u.s which I think is interesting. And because it's a land of exurban, suburban lifestyle, it's where it was kind of creative at its most extreme. Daniel, I think you mean that is freedom, actually. I grew up in southeast Texas in a town two hours from anything good. And it was just like you really you were tied to your car.

And now that I don't have to have a car, I'm like, that's more freedom than having one. But that was what they told us, right? Cars were romantic items. We'd go part and parcel with this whole way of life. Absolutely. Yeah, I completely agree. You know, you're preaching to the choir here, not controversial statements on this podcast, certainly for listeners who are familiar with my work as well. I also think it's really interesting. And, you know, we'll get to kind of the audience commodity piece of it, how these companies are really focused on advertising and this kind of business model. But it's also really clear when you look at the tech companies themselves, that they recognize the importance of advertising, of PR, of having like a really good PR department to sell their not just their product, but like

to sell a vision of themselves and kind of the world that they're creating to the public so that they buy into the idea of the brand and feel themselves become associated with it in a way that's not just, you know, I'm buying this product, but I'm buying into this idea of myself as someone who is associated with Apple or Uber or whatever company. Yeah, that does, you know, it's the cornerstone of like branding, right? Like you need to make tangible goods and tangible feelings. And so like, it's hard to say like how much of this is manipulation or just kind of like, there is something that we recognize in brands. Like they, I think they come so easily to us is because so much of our life is emotionally oriented and clothes and consumer goods. We imagine ourselves

in the eyes of others constantly. And these companies have more than 100 years now of really expertly understanding this and understanding the social nature of consumption, which is so much of what it's about. It's about thinking about ourselves in relation to others in relation to brands that, and when people talk about brands, it's not just the product, it's something else. And yet, when you think about what that something else is, it's purely the product of images and surface and vague ideas, right? And that's why I think Mad Men is such an interesting show, because they kind of pull back a veil a bit on that kind of dynamic of it. No, I think it's a really good point. And unfortunately, I've never watched Mad Men.

I always meant to. And then like, it felt like it was too late. Maybe I'll have to go back and check it out. So I want to move on to this discussion, right? Because you're talking about this way of seeing it through this kind of advertising lens. But you also discuss how, you know, we've seen or we have a tendency to look at the political economy of the internet or tech companies through a number of different approaches that aren't so much associated with this up to this point, at least. And, you know, the dominant ones that you talk about are an approach of digital labor, you know, where we're looking at people on social media platforms and whatnot as performing free labor for these companies.

Surveillance capitalism, of course, Shoshana Zuboff, you know, the kind of deep surveillance of the data capture that is going on here. And of course, techno-funeralism, you know, this idea that we're all kind of serfs on the platforms of our techno lords, right? Now, we don't need to get into too exhaustive of a discussion on these, but can you briefly kind of outline what they suggest and why their explanations don't kind of fully capture what is going on here with these tech companies? It's interesting because like there's a zeitgeist within this kind of area of tech

criticism, right? Both academic and, you know, journalistic. And so, and all of these authors, the people affiliated with them have pretty decent platforms. And I guess for me, I was like, well, I come from a unique tradition, not one that is unknown, but like being trained in Canada, partially in political economy, which is kind of distinctly, you know, political economy communications, like it's very kind of has a very strong presence in Canada. And I was always kind of like, you know what, like, it feels like a bit like we're missing a big chunk of what's going on. And the digital labor thesis, like I agree with a lot of big chunks of it in a lot of ways. You know, I'm sympathetic to it. I've written about it.

I teach it. And the same, you know, like, like the whole autonomous criticism of the internet was certainly interesting, even if I don't fully buy everything about it. I think that, you know, surveillance capitalism, I, again, I have issues with Zuboff's work, like at least that book's like basic argument, but I think there's something interesting about positioning surveillance in that way. And then obviously she's not wrong about the actual day-to-day workings of how data is extracted and processed and then used by especially big companies like Google. And the, you know, the techno-feudalism argument, I think, is also compelling in some ways. For me, it's kind of almost vibes-based.

It's kind of like, yeah, you're right. We do feel like we are working on someone else's land, and I'm tithing them for the privilege of using it and all this kind of stuff. But I thought that even though surveillance capitalism is about the production of data, it doesn't talk about, well well for whom and to what purpose digital labor will you know often talk about the production of content but again like how do the end of the day platform social media platforms actually turn the production of that content into their business like facebook is an advertising company you know like they make most of their money from advertising and And yeah, so I've posted a lot and interacted with my friends and added value into the network.

But it only makes sense if we talk about advertising. And I think techno-feudalism focuses too much on that. And I'm very sympathetic to the argument that it's because they control the market. They take cuts of every single sale that goes through them. They make a lot of money. They work as that kind of landlord, as that rentier. Agreed. But at the same time, so much of that is undergirded.

So much of the transactions taking place are ads. And so much of the network data collection itself is around advertising. And Google is making most of its money from advertising. They rent out services. They do all these other kinds of things. But at the end of the day, they're producing data for data for ad sales obviously none of these companies only do ads but it's at the end of the day they're mostly making money that way so we should be talking about advertising more the people these companies are talking about advertising a lot so i was just

like well like put this in put it into the mix a little bit more yeah and you know like just because the companies are talking about something doesn't mean it's always something that we should be paying attention to. But I think in this case, like you've hit on something that's important, right? Especially as we see more and more of these companies move into advertising or find ways to kind of profit from the scale of advertising online. And so if the digital labor thing, the surveillance capitalism, the techno feudalism doesn't fully explain what is going on here, what do you see the tech companies actually doing then? You know, how do they produce this audience commodity that you're talking about?

It's in a lot of different ways. I think we know that they benefit from the network effect thing, right? Like, why is Facebook powerful? It's because they really benefited from economies of scale based on their network effects. And then they started to monetize and wrap the content that people are socially creating into hyper-targeted ad markets that basically gobbled up the extremely lucrative business of classifieds. So classified, you want to sell something on Facebook Marketplace.

You want to do all these kinds of things like local advertising for small businesses. I was briefly a student journalist when I did my undergraduate. And that student newspaper at Laurier made a ton of money by just selling local ads to local companies in Waterloo. All of that market's been eaten by Facebook now. And so that's what they did. They took massive markets that were all over the world, but highly localized in specific regions that were dominated mostly by local newspaper companies,

selling, again, audiences to people. And obviously, film and television and radio as parts of that as well. But they've gobbled up those ad markets and then obviously used the data to better target them and tell people that it's worth more money. You get better targeting for, for less cash and all this kind of stuff.

So it's, there we go. They've collected the audience. They have all the people on that network and that's how they still make all their money. And that's, you know, why they can continue to expand and all this kind of stuff.

And Google, you know, it was the AdSense program and all the other like ways that they integrated cookies and stuff and to be able to track people's whole experiences across the internet. So again, Google's as a search engine at the end of the day, but like their spiders are everywhere, right? And so it's just by tracking that they can then go to again, marketing companies and say, Hey, we've got the audiences that you want in hyper specific ways and you're going to buy from us because our network is the biggest i think it is it's that

kind of thing that again you can just keep continuing to like sell those people that have interfaced in some way with the network that's the construction of it is basically you know through these economies of scale and gobbling up older markets that pre-existed them. Yeah, they have these users. They're able to segment them in a very effective way so that they can present them to all of these advertisers and say, give us your money so that you can reach these people that we can uniquely give you access to in this way where we promise you that it's going to be more effective than previous ways that maybe you've advertised before because of all this techno magic that we're doing,

whether or not that is actually the truth of the matter, you know, the technology can lead you to believe that that's the case. What role does data play in this then? You know, because data is really key to kind of the whole surveillance capitalism argument, right? That these companies are really spying on us so that they can collect this data that's valuable for their business models. You know, if it's not at its core about surveillance, what is the role of data in this process? This is really interesting. So it's kind of like I'm working on some project right now that's kind of around this, like, and thinking about what is data, what does it represent, right? And at the end of the day, that data, they can claim it as valuable because they can say within a certain percentage accuracy that it is accurate.

Because that's what you're promising the people who are buying those ads. You're saying, we're going to be able to serve content to these people who we believe are real and are really there. The flip side of that is that this is this long thing. How can a marketer trust a company to be selling what they say they're selling? And so the data is all about... I think so much of that data and the way they sell that data is to sell that data as authentically representing what they say it's representing. If the 18 to 35 demographic is the most valuable male, all this kind of thing like you actually need to be able to sell say to the people oh it's authentic and it's not

fraud because a big part of this industry and i'm not an expert in it but like everyone i talk to is on the fraud issue says it's all fraud there's tons and tons and tons of examples of people trying to fake information this is why there's obviously worries about bots on networks, you know, worried about bots on Facebook and bots on Twitter, fake reviews for things like so much of this industry is caught up in a world of fraud and fakery. And so they have to really constantly be like selling the data and verifying that data and making the case that that data is authentically what it is. And so it's not just that they have collected the data and it's a one-to-one representation, but it's also how they frame it and sell it. And so I think actually the accuracy of the data almost doesn't matter.

What matters is the fact that that company is able to produce the receipts and the authentication metrics and all these other things that say it's real. And this goes back again to earlier forms of audience measurement, which had to be done by survey, had to be done by those Nielsen boxes. If you're a Nielsen family, you had to sign a thing and say exactly what you were watching every day. The box would track some of it, but you'd have to say who was watching it at that time. And those companies then have to say, oh, yeah, we verified it. We make sure they're not lying to you kind of thing. So the data, you know, it has to sell itself.

It's fascinating, though, right, to think about it. And to think about we've essentially built this infrastructure that at its core, or at least one of its key aspects, is about collecting all of this data on us. You know, when we're online, increasingly as we're out in the world, everything that we do has to be quantified and turned into data. And just how much this feeds into advertising systems and an advertising business model that is essential to these companies. And that even a lot of the companies that tell us they're about something else, you know, whether it's Amazon and it's e-commerce and cloud, but has a huge and growing advertising segment as well. You know, they lead us to believe that in many cases, their whole business is something different entirely.

But they either have like a massive advertising business alongside it or advertising is key in a way that maybe a lot of people don't recognize yeah and i think that's the thing it's just ads are kind of like the data collection aspect of it the plugging it into broader networks thing is is where all kind of websites and tech companies have found themselves even if it's like not exactly everything they want to do or necessarily the thing they talk about the most as the thing that they're most innovative in, but that they're disrupting the most. There is, you know, at the end of the day, I think just the fact that they are doing these things. It's something good to sell, right? And it does plug in. And there's a huge market for it. And that's, again, going back to that gobbling up older markets, like the way this industry is

organized is kind of ridiculous. Like it's so big and messy. It also makes you think about how like, you know, there's all this talk about innovation that comes along with technology and that these tech companies are facilitating, right? That they're moving us forward in all these important ways, supposedly. And then when you kind of look at what they're doing and where so much of this focus and money and investment is going, it's to find new ways to collect data on us to serve us ads in new and innovative ways. Even as many people I think are getting like pissed off with the degree to which they see so many ads. You know, that's why people adopt ad blockers and all this sort of thing. And it's like there's this constant kind of fight as to how much data

you collect, how many ads can you serve people how supposedly accurate can you make them even if there's a whole load of fraud within it and then how can we kind of escape ads as much as possible because everything is just ads now yeah and and what's funny i think there's like i guess like the kind of two kinds of the internet now is like where there's the ad free spaces are the ones that our ad blockers guarantee us a little bit of freedom from. And then there's the fully enclosed platforms where you go on Instagram, you can't get away from them. You can't ad block the ads on your app. And so in a sense, that's why when they rolled out the Reels feature, which is very much about pushing users towards specific content that increases engagement,

that you can also, importantly, wrap ads around. I think one of the arguments against TikTok's monetization, they're not profitable right now. They're not making money from advertising. TikTok is going to change a lot when they switch to their ad model because they need to create ad-friendly content. Lots of companies don't want to surround extremely risque content or gross-out content or violent content with their ads. And so when Instagram did this change, everyone revolted against it. They hated the Reels thing. They created a feature that you could snooze all the suggested content. And they understood that there's a certain limit to that because they don't want to play... It is still a very profitable platform for them because most Instagram content is like a store right you're shopping

and then you're also getting ads fed to you and i find this like very much in my case you know you look at a pair of shoes on there you know from a from a retailer and then suddenly you're surrounded by shoes so and then in journalism here and for instance in manchester the only local newspaper of any size their website is a nightmare of ads. I cannot overemphasize how bad local newspapers have become because they're just chasing viral stories. Or they'll do like, what time is Game of Thrones on tonight in the UK content? And then that page is started by three or four little boxes that you have to click away just so you can see it. And even with an ad blocker on, there's still a million little boxes that seem to have escaped it

so the kind of end goal the end state of this kind of like advertising centric system is just like a nightmare to navigate and it's so hard to understand just like all of the kind of easy access to information that you expect from something like wikipedia or whatever which is very easy to navigate. It kind of disappears in the ads, that deep end of what advertising sponsored content looks like. Yeah, it's so frustrating then to see the experience that we're then saddled with because of all these ads.

And then in particular, the people who don't have the tech savvy to try to use an ad blocker or can't pay to get the ad free subscriptions or anything like that. But of course, you know, many of us just have to put up with these things. I want to talk about this in a few different areas, a few different companies and whatnot. You were talking about social media there. I feel like Netflix is a really kind of key example here of how this progresses, right?

Because for a long time, Netflix's whole kind of pitch was, you know, you can come here, you can watch your content, there's going to be no ads, we do not believe in this. You know, our whole thing is just to increase subscribers. And as long as they are paying us their direct monthly fee, we have no need for advertising. You know, we're following this HBO model where ads are not coming next to our, you know, great, amazing content. Of course, the content has also become not so amazing, I think is fair to say. So what do you see when you look at Netflix, both in the kind of broader model that it created, and then also how it's now making this shift toward ads and bringing ads into the platform yeah i think so it's interesting so this is like the

main area of my study and my research is on cultural production right and so obviously social media platforms lots of ads all that kind of stuff like you said cultural production has a different relationship at least platformized cultural production has had a different relationship with us so obviously youtube monetized through ads you know other kinds of creator platforms and things like that generally speaking if it's a streaming site like that it's going to be ad supported while yeah the kind of hbo subscription based models of a lot of services seems to eschew that but netflix's model was premised on on user growth i don't think they're making money last time i checked't think they're making money.

Last time I checked, I think they were still in the red or barely in the black. And so much of their stock valuation, because again, the tech economy all are underwritten by this. What once was very cheap VC cash that you could just get from banks and underwrite these huge valuations and then grow globally. Netflix's growth has stalled immensely because they basically hit the top end because their service isn't very cheap by global standards. Is it cost as much as certain premium cable packages? No, but it is still quite expensive in a global sense. And they can't keep growing at that rate. And they've also decided, I think importantly,

there's a great book called Netflix Nations by Roman Lobato. And he kind of talks about how they basically have decided to stop. They don't want to sell cheap subscriptions to lower income people around the world. So in India, their subscription is extremely expensive and most people won't use it. They're going to use local alternatives that have more local content and have licensed films that are cheaper than what Netflix is making. So to keep their growth model intact, they have to offer this subsidized subscription that is subsidized by advertising. And it's the only way they're going to really, I think, climb out of the kind of rut that they're in, which is that there's a limit to the growth that they promise to their investors. You can pretend that the subscription model is enough, but the subscription model that makes enough money to underwrite that kind of content, that kind of global expansion is not their subscription-based model. Well, if you really want to be the streaming platform for

the whole planet that everyone has, you're going to have to subsidize it some other way. And that will be ads. And we see this in, I think, other tech companies too. It's fascinating as well, because, you know, you're talking about needing this subscription revenue in order to subsidize or in order to make possible this kind of global expansion. But then at the same time, there's a lot of people in Hollywood, in the TV and film industry, who would say, you know, the Netflix model that they're promoting is actually one that's less lucrative than what existed before, because you're taking out all of these kind of additional revenue streams that existed, you know, you'd go to

theatrical, or, you know, the first release on television, and then, you know, there'd be kind of a second release, or the movie would go to TV, and, you know, there'd be pay TV and just all these, you know, you'd go to DVD and do the home video sales and there'd be a ton of different ways to kind of resell the movie to make more right sales to make more money off of it. But then in the Netflix model, it just goes into the streaming platforms, you know, library and then it sits there and it never makes additional revenue beyond just having those subscriber fees. And so eventually, you need to look somewhere else for cash for financing. And of course, Netflix now finally, and many of these other streaming

services, if they hadn't already, are moving into advertising as a new form of revenue as they continue to raise their subscription fees as well in order to bring in more money that way. And so, you know, I think it's a real example of these companies and in Netflix in particular, you know, making a promise as to what they could deliver with this kind of technological solution to content distribution or creation or whatnot in this case. And then, as we so often find with these tech companies and their business models, finding that it doesn't actually play out the way that they initially imagined it, the way that they initially sold the public, and then they need to reimagine that business model later.

Yeah. And I think for me, it's like so much of the kind of broad conclusions I draw out from this is like by bringing this discussion back to pre-internet monopolies and the structure of industries. And then I compare that with the rhetoric of decentralization, democratization, the disruption of established business models. Like, OK, well, those things were disrupted. But what does the general trend lead towards? And that general trend, after all this, the technical solution to the problem was we give everyone the internet and then everyone can stream any movie they want

and that'll work. And the whole industry is actually shifting back to kind of what we saw. And I think that's the thing, is that older business model of mass media production was actually more lucrative. But because it was so heavily disrupted, it did throw everything for a loop.

But I think we're actually seeing a different version of that but not dissimilar in structure locking back into place and so the return of advertising but also the return of probably it wouldn't surprise me if netflix one day sells its production half and just says you know we're actually just a distribution platform we'll integrate with the theater system and all these other things. But being on the production side, distribution and consumption, doing all that, it doesn't make sense for us. And that's where most of their money is getting burned, right?

It is in production to build that subscriber base. They might give up on that one day. It wouldn't be surprising to me. So the older model is, I think, actually kind of like a good idea of what we're going to get with time and overtime. William Torres. Yeah, it's funny. It doesn't work because it was underwritten by the cheap cash in the economy, which, again, is another discussion entirety. But low interest rates allowed for the ballooning of these big companies. Right. So we're kind of in a new position now where things, I think, might change quite rapidly.

Yeah, it's absolutely fascinating. And I want to ask you about the video games industry as well, because, you know, it's the topic of our last conversation on the podcast. But I find it really fascinating because the way that I remember video games as I was growing up is, you know, you'd have your console or your PC, you'd go buy your game, you know, you'd play it, and then you'd go buy another game and you'd play it that way. But increasingly, the video games industry itself seems to be, you know, certainly we've seen this for the past decade or so with free to play games since the advent of mobile, the explosion of mobile. And now that kind of business model, that idea that you get the game for free or cheap, and then you know, you're served ads and have a bunch of micro transactions in order to fund the business model seems to be extending from this kind of free to play mobile

space into the broader industry as more and more games need to be kind of always on need to have this kind of constant playability where you need to be constantly making these purchases in order to do well in the game itself and i think that this is to some degree linked to the metaverse push as well that Facebook, that Epic Games, that Microsoft are making too. It's just, you know, kind of extending this further. So what do you see going on there? How do you understand this shift in the video games industry? And is it related to what you're talking about here with, you know, this kind of constant need to go for advertising and to create audiences for that? Yeah, I think it's interesting. So the video game industry has always been a little bit different, right? Like it's been console based, but it's also been

reliant on the PC. The production pipeline for most video games never really conformed to an advertising business model. And so it's always been a little bit outside of that. But at the same time, yeah, mobile, especially mobile free-to-play, like you said, it is built around the ad industry. It uses a lot of the same systems that the ad industry developed to keep track of its players. And importantly, it relied on that kind of network effects that social media allowed. What is mobile, if not the kind of like what we were originally seeing with like Farmville and Facebook games, which is this kind of like system of play that exploited simplistic gambling mechanics and gates that stop you from playing as much as you wanted to, and it exploited your social networks to get more people into it. Social casino games, they make a lot of money. They're the most, in terms of income, mobile is where it's at. Free-to-play

is where it's at. They make the most money. And they're very much plugged into these ad networks. So all those games are very much a part of that ad ecosystem as they're buying ad space in it. But they also feed back into it by selling player information and player profiles and all this kind of stuff into the ad networks to keep track of. And then, yeah, they rely on that kind of advertising to you know ensure that you can buy more of the in-game commodities and so free-to-play model is all about buying energy gold crystals whatever it is you need to keep playing to buy in-game at cosmetics and stuff like that so they themselves are selling a lot of the things that need ads to

kind of like ensure there's demand for to a certain extent yeah i'd be curious to know because we're also seeing like the switch in gaming to um with xbox live game pass and other things like with subscription models so we're starting to see that but i'm interested to see if games and ads have more overlap or if they become more integrated beyond what we've kind of discussed in terms of the social game and mobile game aspect of it. I don't know. They could be. If I'm right, is it Unity, I think, recently made an acquisition that was about bringing more kind of ads into its engine, which is one of the major kind of engines for creating video games, right? Yeah, exactly. And yeah, that was like, I forgot. I forgot. I talked about that in my piece. What was the company called? It was Iron Source. Yeah. In-app advertising and monetization. Right.

So those games again, like, you know, one of the ways they stop you is they say, oh, you're out of energy. Would you watch this ad and you can keep playing? Right. So that is the kind of mobile things like you suffer through to keep playing your kind of repetitive game by being forced to watch advertising. And I think that'll probably continue to be very much like a key component of that particular market, which, again, is the most lucrative marketing. And Unity is a production platform, right? They're integrating every aspect of a game's business model into themselves. And so buying that was a big part of it, right? And they've been buying up ad network connectivity stuff for a long time.

This is just the most recent acquisition of something like that. Yeah, it's fascinating and concerning or annoying. Maybe it's just because I'm someone who tends to prefer single player games, you know, just have my experience and kind of move on. And it feels like the whole industry is increasingly moving toward these games that are like never ending that are huge, that require a huge time commitment. So you're spending a lot of money, you know, potentially viewing ads in the future or, you know, with free to play seeing ads to some degree. And it just, I don't know, it's very much against the way that I'm interested in playing games. And, you know, I guess I play fewer than I used to anyway. But yeah, I don't love the direction things are going. Yeah, like, I guess. Yeah,

it's funny, because I don't, I'm not really big into mobile game, despite that I do a lot of research on mobile app stores and stuff. The game I play the most is Apex Legends, which is like a free to play game with loot boxes, a battle pass. And those two things make them a ton of money, right? And I see ads for that game all the time on Instagram, for instance. They know I play that game based on probably the way I tweet or the certain kind of accounts that I follow and stuff. And so despite the fact that it's not as necessarily plugged into those ad networks as it could be, but it's still like they tell me about, oh, these new skins are coming out.

So get ready to buy your in-game gold kind of thing to buy new stuff for it so i'm like you i mostly play single player big games you know i don't like a freemium game and yet here i am finding myself doing that all the time i've been playing that game for like three and a half years now and you know i started a new account i was like yeah i'm gonna spend uh 70 pounds on the cosmetic items to get a special super rare one. I'm like, why? Anyway, here I am. This is what Zuckerberg and the metaverse are hoping we all kind of do, right?

I guess to kind of broaden out the scope of the discussion to start to wrap things up. I think that we've seen in recent years, and this is pulling from Shoshana Wodinski's reporting on the ad industry and all this data collection, is we have more and more companies that we wouldn't even traditionally consider to be tech companies, finding ways to create audiences, to collect data on the people who use their services, whether it's hotel companies, ensuring that they have data on the people who stay at their hotels that they can then sell to advertisers or data collection firms or whatever. Car companies are trying to collect more and more data from drivers and from the cars and how people drive so that that can also be sold to these companies to work for advertising. And then, you know, as I was saying, we also have these larger tech companies that we often don't associate with advertising to be increasingly moving into that space as well as at least another revenue stream. Amazon is, I think, the third largest advertiser, digital

advertiser right now behind Google and Facebook. Apple seems to be moving into ads after doing its kind of restrictions on Facebook and things like that, that hit the revenues of a lot of other advertisers. Uber is moving into ads, is creating a new kind of ad platform or whatever it's doing. So a lot of these major tech companies are moving into it, but then a lot of companies that are beyond tech are also kind of feeding into this ecosystem as well. What does that tell you about advertising, the advertising business model, how key it is to so much of what goes on here, and how it also incentivizes this infrastructure of data collection more broadly? Yeah, I think, again, it kind of goes back to that issue of everyone wants to collect this data because it's almost self-justifying because it's market

research, right? You find out more about your customers, you feel like you can better serve them. And that is a big argument for this kind of data collection. And I think it's also, it's about authenticating itself. It's like the more information you collect, the more you can confirm or argue that it's authentic,

the more, again, you can self-justify what you do and shape your products and services towards like what supposedly these audiences want. And what is an audience, if not like a marketplace, like a bunch of possible consumers. that's you know every company needs to be thinking about who's buying their stuff right like there's like no reason not to collect information applied research that kind of like the basics of social science where people are creating surveys and trying to find information about who their audiences are is like it goes back a long time right and when capitalism really ratcheted itself up to like the next level as monopolies began to form like you know a colleague of mine at the university of toronto dan guadalagnolo he's

the historian of you know advertising and like what i love about his research is so much is just like all like so much of like what we understand about psychology and everything like that was like influenced in large part by companies trying to collect information about their customers to better understand them so they could better sell stuff to them. And so every single digital company, if you can find a way to collect extra information about your customers, it's on the table for them. And again, yeah, it becomes a special commodity that you can sell to other people. Why wouldn't you plug that into an existing network that wants another space to corroborate that information? And we shouldn't forget about the fact credit rating agencies and insurance companies and all this kind of stuff keep shadow profiles of everybody. And they pay good money to collect and collate this information.

Banking, your ability to get a mortgage or get health insurance, all these other kinds of things is like a whole shadow economy of data collection that we don't really see because it's opaque, except when there's like a data breach, basically what happened with Equifax. You know, I think the fact that so many companies want more information and they want to sell it and they want to know more about it just is a function of how capitalism works. And there's a certain sense about social reproduction. Like if the economy is to continue operating smoothly, it has to have this information. So there isn't a crisis of overproduction or whatever, right? You make too much stuff, you can't sell it all, you're going to go bankrupt. Yeah. So it's just like, it's core. And I think that's why I tried to talk about in the piece of it, it's just like advertising is

kind of like at the beating heart of capitalism. It's not just an appendix or whatever, right? It is like very much close to how it functions. And I don't think it exists without it. I think that's absolutely fascinating. And I think it gives us such a good insight into, you know, how these business models work, how integral advertising is to capitalism, and how then naturally we see that kind of replicated and reproduced within the tech economy and what all of these tech companies are doing.

And I think it will be interesting to watch in the coming as, you know, we've had this tightening as there's less access to cheap capital, as these companies have to find new ways to bring in revenue, as we were talking about with Netflix, if there's going to be an increased move toward advertising even further. And of course, if the contradictions, if the fraud in to be an increased move toward advertising even further. And of course, if the contradictions, if the fraud in the ad industry finally kind of explode in its face, but I guess we'll have to see what happens there. Daniel, it's been great to have you back on the show. It's been great to discuss this. Thanks so much. Yeah, well, thank you so much for having me, Paris. This was a lot of fun. Always fun to talk about this stuff. That's why I write it. That's

why I do it. So thank you. Daniel Joseph is a senior lecturer of digital sociology at Manchester Metropolitan University and has written for a number of publications. You can follow him on Twitter at Danjo Kazooie. You can follow me at Paris Marks. And you can follow the show at Tech Won't Save Us. Tech Won't Save Us is produced by Eric Wickham and is part of the Harbinger Media Network. If you want to support the work that goes into making the show every week, you can go to patreon.com slash tech won't save us and become a supporter. Thanks for listening. Thank you.