The European Parliament is considering a ban on targeted advertising
The European Parliament is currently dealing with fundamental issues in the area of the Digital Services Act (DSA) and, within that, the very sensitive issue of banning targeted advertising on the internet. In today's digitized world, targeted advertising has become the main source of revenue for many companies on which to build their business model. The planned measures, which would result in a ban on targeted advertising in the online space, would affect small and medium-sized enterprises, the media, but also, in principle, all ordinary Internet users. They can thus significantly affect the competitiveness and development of the entire digital space.
“We see the forthcoming DSA legislation as a great opportunity to create a strong and up-to-date legislative framework that will strengthen the EU's internal market and thus create the necessary legal certainty. We fully support those requirements that aim to improve the overall B2B and B2C transparency of digital advertising. However, we cannot agree with those parts of the legislative proposal that lead to the restriction of digital business models through outright bans, especially if they are already heavily regulated today by other existing privacy and data protection laws.” said Michal Kardoš, Executive Director SAPIE.
The functioning of democracies depends critically on whether citizens have access to services and information online. A ban on targeted advertising on the Internet would deprive businesses of revenue that would enable them to guarantee such access, and would also deprive European citizens of much of the content and services they benefit from today. It would also significantly reduce their efficiency and flexibility in the provision of services and innovation. Without a clear alternative, much content and services would be avoided, which would severely limit lower-income households and further restrict access to information. In addition, even today, those consumers who do not wish to receive personalized advertising or be "watched" online can simply use existing law to reject it before consuming advertising-supported content.
Who would be most affected by the ban on targeted online advertising?
Media and platforms having revenue from targeted advertising
Restricting targeted advertising would cut off a vital source of revenue for the media and content publishers, who rely heavily on advertising to fund journalism and create other content. According to a recent study, advertising for European media accounts for up to 81 percent of their revenue. Without sponsorship, publishers would have to turn to other sources of revenue. Only 28 percent of Europeans say they would pay for the news.
Segment of small and medium enterprises and startups
The European Commission has recently emphasized the importance of targeted advertising for the entry and expansion of SMEs. Their research shows that as many as 68 percent of these companies report that using targeted advertising is an effective way to reach new customers. Fewer barriers to market access mean more competition and a more competitive Europe overall. On the contrary, restricting online advertising would hit small businesses with small marketing budgets the most, and for many of them it would be virtually liquidating. On the contrary, the current situation associated with the COVID 19 pandemic supports and practically forces companies to digitize, so the notified measures should, on the contrary, enable and support these companies to survive and be competitive.
Online service customers are therefore the end customers
The introduction of a ban on targeted advertising would also mean the end of free access to content platforms (eg Spotify, Youtube) that offer free versions of their services through advertising. The estimated cost of banning advertisements could be up to € 106 billion a year, or € 237 per European citizen. This creates a position in favor of online users who can pay for the platform's premium services. As a result, there would no longer be access to unlimited content online, which would disadvantage users who cannot afford to pay these special premiums. In addition, it would run counter to the EU's fundamental principles of equality, freedom and democracy.
Personalized targeted ads are extremely useful for regional SMEs, as well as exporters with unique products who need to reach customers globally. They are also essential for large companies in the EU, whose business is fundamentally supported by better addressability. The EU has the most detailed privacy and data protection legal framework in the world with severe sanctions. If the European Parliament wants to increase consumer confidence online - one of the main objectives of the DSA proposal - it should insist on effectively enforcing this current framework and reject the temptation to extend the scope of the DSA in ways that would cause regulatory unrest and financial instability for many European businesses.
"European regulators should also focus on the protection and transparency of content and data, rather than interfering in detail and technically with the mechanism of digital advertising. They should also give priority to combating illegal content and misinformation, as well as interfering in detail and technically with the mechanism of digital advertising. At SAPIE, we are ready to support all similar activities, ”added Michal Kardoš.
As emphasized in the European Commission's statement, new legislation on digital services should guarantee the protection of fundamental rights. "Citizens are playing an increasingly important role in political life thanks to online tools and services, so when creating regulations affecting online services, we should pay attention to e.g. fundamental rights of access to information and freedom of expression online "- reads in the document. It adds that future regulations must strike a balance between digital security and freedom of data flow, as well as the development of new services.
