Refelections on Media Economics: advertising and social production

July 28, 2008

In keeping with the objective, textbook-style editorial posture it maintains throughout, in its chapter on advertising, Media Economics acknowledges the popular divide on the subject:

“Advertising is both attacked as a monopolistic and wasteful practice and defended a promoting competition and lowering the cost that consumers pay for goods.” [p.248]

Advertising especially lowers the cost of what we pay for information goods, as illustrated by the example of how the NY Times simultaneously lowered subscription costs to consumers and raised advertising rates as a result of the increased circulation.

The debate over the merits and perniciousness of advertising has continued full pitch in digital media arena. Online advertising seems to rouse even more populist ire than direct mail, in part, I believe, because we think of the Internet as a public good (p. 295), as nonrivalrous and nonexcludable as media has been yet, at least for those of us on the lucky side of the digital divide. An advertising-free Internet is an idealistic extension of the Information should be free ethic. To the capitalism-weary, advertising is glaring, galling evidence that the Internet is being bought up, parceled and sold out by the same oligopolies that control traditional media.

One of the revolutionary prospects of social production offered by Benkler in The Wealth of Networks is that non-market-based production will “present new sources of competition to incumbents that produce information goods…” (p. 122). And since these new production entities aren’t in it for the money like the Firms they compete with, they won’t exact the price of making us endure pre-roll advertising with out videos or even Google ads with our encyclopedias.

Social production success stories such as open source software and Wikipedia certainly validate the potential, but the jury is still out as to how deeply and broadly social production will compete with the profit-driven industrial information complex. No matter how powerful our emotional and altruistic motivations to participate in social production, quality has inevitable financial costs, and if social production infrastructures are going to proliferate beyond the limited number that can be bankrolled by benefactors, revenue (not profit), is essential.

I would challenge advocates of social production to look at advertising afresh, not as toxic waste from the capitalist media model, but as biofuel for the social production factories. As Google has demonstrated, advertising that is informative, non-intrusive and highly relevant to users can be hardly annoying at all, and even helpful. Social production enterprises have enormous potential to build unique, informed and highly engaged communities of producer-consumers — very attractive audiences for advertisers. A successful social production enterprise could not only be very selective about the types and volume of advertising it features; it could promise advertisers highly efficient targeting, charge premium rates and effectively compete with its profit-driven counterparts at their very own game.