The January 6 attack on the U.S. Capitol has exacerbated the current dystopian view of the internet, leading to policy recommendations that strike at the heart of the digital economy. For example, the American Economic Liberties Project (AELP), an “anti-monopoly” group, recommends banning targeted advertising by communications platforms, arguing that the January 6 riot was to a large extent caused by the business models of Facebook, Twitter, and other social media platforms. The fundamental problem, according to the AELP, is that these “monopolists make billions from promoting misinformation, conspiracy theories, and violence.”

The AELP is not alone. In a February 11 New York Times column, Cornell economist Robert Frank labeled the targeted advertising business model of firms like Facebook and Google a “profound threat to the nation’s political and social stability.” To address the problem, he recommends abandoning the advertising-based model in favor of a subscription-based model. The CEO of German media conglomerate Axel Springer has proposed prohibiting the commercial use of private data. In a January 29 New York Times op-ed, Harvard Business School professor Shoshanna Zuboff also alleges a connection between the activities of internet platforms and “Donald Trump’s attempted coup.” Echoing the theme of her 2019 book The Age of Surveillance Capitalism, she asserts that gathering and using information on people’s internet browsing habits is fundamentally incompatible with democracy. (See “The Tech Giants Are Out to Get You,” Summer 2019.)

There is little question that groups involved in the January 6 riot used social media to communicate and recruit converts. But the implication that, but for the availability of these platforms, events like this would not occur indicates a lack of historical perspective. There are, unfortunately, all too many examples of mob violence that predate the invention of social media, from the Reign of Terror during the French Revolution, to the Tulsa race riots, to Kristallnacht, to name only a few. The notion that internet platforms are responsible for such events today when such events occurred in the past is farfetched.

Even aside from the events of January 6, it is frequently asserted that the internet, and particularly social media, are major causes of polarization in the United States. However, research on “affective polarization” — defined as the extent to which citizens feel more negatively toward other political parties than their own — by economists Levi Boxell and Mathew Gentzkow at Stanford and Jesse Shapiro at Brown suggests otherwise. They found that even though polarization had increased more in the United States than in other developed countries, internet and broadband penetration increased in all the sample countries and, indeed, rose faster in countries where polarization fell. They identify factors more distinctive to the United States — such as changing party composition, growing racial divisions, and partisan cable news — as more likely causes of increased polarization.

For most users, who are not engaged in socially destructive activities, advertising-supported platforms such as Facebook and Google provide great value. These platforms are intermediaries between marketers who want to reach consumers and consumers who want content and spend time on the platform and see ads generated by recommendation engines. The advertising revenues pay for the content enjoyed by consumers and for improvements in the platforms themselves. Economist David S. Evans has conservatively estimated that the value of these digital ecosystems to U.S. consumers exceeds $1 trillion annually.

The creative use of data is the basis for the success of many of this century’s great internet companies — predominantly American companies — whose revenue is primarily derived from targeted advertising. The popularity of platforms like Facebook and Google, in turn, drives demand for broadband adoption and the devices used to access that content, including mobile handsets, wearables, and laptops produced by companies like Apple and Microsoft.

The ad-based models make it simple for billions of users to access digital content. Moving to a subscription-based model would adversely affect lower-income consumers who would have to pay for a range of services like search and email they now receive free in exchange for their data. Raising the cost of content on the internet by eliminating the advertising model and mandating paywalls on the most popular sites online would induce some consumers to disconnect — a particularly unfortunate consequence during a national effort to reduce the digital divide.

Misinformation is a serious problem that the platforms are struggling with, but the suggested remedy to change the ad-based content model is likely to instill deeper damage to social welfare than advocates appear to recognize.

Readings

  • “Attention Platforms, the Value of Content, and Public Policy,” by David S. Evans. Review of Industrial Organization 54(4): 775–792 (2019).
  • “Cross-Country Trends in Affective Polarization,” by Levi Boxell, Matthew Gentzkow, and Jesse M. Shapiro. Stanford Institute for Economic Policy Research Working Paper no. 20–004, January 2020.
  • “Is the Internet Causing Political Polarization? Evidence from Demographics,” by Levi Boxell, Matthew Gentzkow, and Jesse M. Shapiro. National Bureau of Economic Research Working Paper no. 23258, March 2017.