As you read this article, you may notice that the JIPEL website does not feature advertisements. Most likely, a majority of the websites you visit – or mobile applications and digital platforms you use – have “online” or “digital” advertising (hereinafter used interchangeably in the context of advertising market). These ads might reflect what you Googled yesterday, talked to your friend about on Instagram, or what you swore you only thought about in your mind.
The online advertising market is complex, as it consists of several submarkets and a variety of methods and tools to advertise across numerous platforms. In addition to a wide range of advertising tools (e.g., search advertising, classified advertising, display advertising), online advertisers also benefit from behavioral targeting tools, which aim to match the customer with an ad based on that customer’s data-driven history. For top digital advertisers like Amazon, digital advertisement is an unparalleled business tool used to funnel the market and engage directly with customers. Not only can businesses reach their target audience with precision using data-driven information about customers’ current interests and needs, but they can also adjust the timing, content, and frequency of advertisements with flexibility and specificity.
Certain simplified statistics – like the one featured below – serve to emphasize the rapid and pervasive growth of the online advertising market. However, these dramatic visual representations of the financial benefits to investing in digital advertisement do not capture the full picture, as they overlook some important legal challenges the market faces.
As the market for online advertising services develops, so too do the legal concerns across different disciplines. In fact, the online advertising market has always been under the close scrutiny of federal agencies. In a 2006 statement, the Federal Trade Commission (“FTC”) expressed concern over the asymmetry of information consumers have about the method and role of data collection in these advertisements. As a result, the FTC proposed principles to increase transparency and security in the online advertising market, as well as measures for giving consumers control and receiving express consent.
Since the publication of the FTC’s proposed principles for behavioral advertising, digital advertising practices have been scrutinized through the lenses of several branches of the law across various jurisdictions. From antitrust law, data law, and privacy law, even to anti-terrorism law, there are different legal reactions toward the complex dynamics of the online advertising market. Indeed, not so long ago, the FTC and Department of Justice (“DOJ”) together charged and ordered Twitter to pay a $150 million penalty for profiting by allowing advertisers to use phone number and email address data that Twitter users purportedly were asked to provide for the protection of their accounts. The Agencies highlighted the importance of consumer guidance about how their personal information will be used and proposed certain structural orders such as prohibiting Twitter from making profits from deceptively collected data. Similarly, a recent civil antitrust lawsuit by the DOJ together with several Attorneys General, including New York’s, claims that Google monopolized internet advertising technologies and almost effaced competition in this market.
Perhaps the most extreme of recent reactions is the U.S. Supreme Court’s Gonzalez v. Google opinion, which was decided on May 18, 2023, whereby the Supreme Court unanimously ruled that pursuant to Twitter v. Taamneh, charges against social media companies were not permissible under antiterrorism law. The plaintiff’s claim was that Google, as the parent company of YouTube, was liable for the death of Nohemi Gonzalez, who was killed in the terrorist attacks in Paris in 2015 executed by Islamic State. The argument for Google’s liability was that YouTube used a recommendation system that tailored content based on user profiles, meaning that the end users would be algorithmically and automatically exposed to the advertisements that the data proves they have an interest in. Based on evidence that YouTube led users towards recruitment videos for the Islamic State, the plaintiff argued that Google should not be exempted from liability under Section 230 of the Telecommunications Act of 1996, which immunizes service providers for third-party published content on their platforms. However, the Supreme Court agreed with the 9th Circuit’s Decision barring service providers’ liability. The ruling came as a relief to online advertising mammoths like Facebook and Google, which rely on digital advertising for a huge portion of their revenue. Had the Supreme Court ruled differently, targeted online advertisements could disappear and revert to the traditional advertisements of the 90s. For now, online advertising, with its targeting and behavioral methods, continues to exist in full force, and we will wait to see what other legal challenges this market faces in the near future.
