Can the Cookie Law Build a Better Web?

By: Richard Beaumont | Thursday, November 3, 2011 | Tagged: Cookie Law | Leave Comment

If you read a random selection of blogs, articles and opinions on the cookie law, the view that you are most likely to come across can be broadly stated as:

This is a bad law that will break the web, destroy valued services and reduce many companies to dust.

Whilst there is an argument to be made that this law could have a negative impact on the digital economy, it is first important to realise that those people making the argument have a lot of interest in maintaining the status quo.  They have built their business models on how things work now, and are naturally resistant to disruption, because of the risks it creates for their businesses.

However, let's not forget that these same businesses would a few years ago have been hailing the disruptive power of the web, because it was then working in their favour.

This post looks at the arguments being made against change now, and then speculates about the positive impact that change could actually have.

The State of the Web Economy

A lot of the services on the web that appear to be free to the end user aren't.  Creating and operating a website like Facebook takes a huge amount of money and expertise, and yet nobody has to pay to join.  Why?

By using Facebook, people are giving it vast amounts of information about their interests, and this goes beyond the borders of the site itself.  Every 'Like' button gathers more data about the sites you visit - even if you don't click it.

Facebook uses this data to sell advertising space to organisations that will pay more to present adverts that you are more likely to respond positively to, because they are aligned to your interests.  So using Facebook is an exchange, their services for your data, and the advertising revenue they can generate from it.

This is a fairly obvious example of the exchange that is taking place between a service provider and its consumers.  However that same thing is happening everywhere else on the web, and usually in much less obvious ways. 

A quick analysis of the 70,000 plus websites in our cookie database, tells us that there are an average of 21 cookies on every website, and about half of these are 'third party' cookies - capable of tracking visitors across multiple websites.

So wherever anyone goes on the web, data is being gathered about them, and that data is being bought, sold and aggregated in increasingly sophisticated ways.

This trading finances a lot of the web we enjoy today, and it is really only possible through the use of cookies and other similar technologies.

Enter the Cookie Law

When websites have to start asking permission to use cookies, it makes this deal - services for data - more transparent.  It also changes the nature of the deal.

Until now the assumption has been that the deal is done, unless the consumer decides to opt out, which ultimately means setting up their browser to block cookies - usually in a rather crude, all or nothing, way.

This has allowed businesses to hide the details of what the deal is really about.  They have done this by putting the relevant information deep down in privacy policies, or sometimes they don't provide any information about it at all.

With the new law, the consumer has to be told up front what the deal is, what data they are exchanging, and who they are making the deal with. And then they have to agree to it.

This is a big change.  The risk to business is that some people, concerned about what they are being asked to give away in the exchange, will decide not to make that deal.  If enough people make this choice, then a lot of web services will become unviable, and may disappear.

This is fundamentally what businesses, led by the advertising industry as middle-men in the deal, are trying to prevent.  Their main argument appears to be that all these services are going to be lost, because not enough people will want to make the deal.

A Bad Deal?

What strikes me most about this stance is how much it reveals about the underlying thinking.  The only way you can come to this conclusion is if you think the deal benefits the data gatherer more than the consumer.

If those in the know actually thought it was a fair exchange, they ought to be confident that, once it was revealed, the consumer would see that too.  Then, in doing so, they would accept the deal by giving their consent to it.

If they are so scared that people won't give their consent - then maybe it isn't such a good deal for the consumer.  In which case, the law makes perfect sense from a consumer's point of view - it makes this imbalance fully transparent.

The Optimists View

The reality is that people have got used to the web, they rely on it.  They are not going to turn away overnight.

However, what they are likely to do is demand a better deal.  By becoming aware that their data has a value that is already being realised, people will begin to make more informed choices about who they trade it with, and what they expect to receive in return.

In the new 'cookie consent' world, consumers will be able to demand more in exchange for their data, but their demand will still be there.

Nobody yet knows how strong that demand will be, or what shape it will take, but those providers who can respond to that change in demand will win out against those who cannot. This means delivering the improvements in services so that people will take the deal

In Conclusion

The online advertising industry was built on the ability to use web technology (mostly cookies) to target consumers more precisely than old broadcast media could.  This has caused a massive shift in advertising spend from print and TV in particular. Those who couldn't keep up with the change were viewed as dinosaurs that should be allowed to perish.

So now, there is a new change on the horizon. It is likely that this change will turn a new breed of businesses into dinosaurs, and some of those will be the same businesses who benefited from the first round of disruption.  But I will guarantee that at the same time it will give rise to another new evolution of companies, adapted to the new world.

Whatever happens next, the most likely outcome will be a better web, and who would want to stand in the way of that?

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