The House of Lords Communications Committee has slammed the online ad market – despite hailing the wider industry as a “success story” – branding its use of personal data “dysfunctional” and “murky”, with consumer targeting techniques threatening to undermine the trust which the industry relies on.
The wide-ranging 66-page report, “UK advertising in a digital age”, follows a eight-month investigation by peers into the future of the sector.
It states: “There has been an explosion of businesses using technologies which make money from delivering advertising online, which often rely on processing personal data of consumers. The committee heard evidence that even individuals within the industry do not have a comprehensive understanding of how business models such as these work, making the digital advertising industry dysfunctional and opaque.”
The report also reinforces widespread concerns over the lack of transparency, quoting one estimate, that over $16bn spent on digital advertising was stolen through fraud in 2017.
It warns that digital ads do not adhere to the high standards of print and TV, and consumers are bombarded by “clickbait”, insisting that “this threatens to undermine the trust which the advertising industry relies on”.
The committee recommends that the industry should take greater steps to self-regulate through independent bodies such as the Joint Industry Committee for Web Standards (Jicwebs).
It also calls for the Competition & Markets Authority to undertake a study of the digital advertising market – including an investigation into the dominance of Facebook and Google – to ensure that it is working fairly for businesses and consumers. The Government should review whether competition law is appropriate for the 21st century digital economy, it states.
However, the report is not all bad news, insisting that the UK’s advertising industry is also a “success story”, which added £120bn to the UK’s economy and supported over 1 million jobs in 2016. “Advertising is a creative endeavour that contributes to the UK’s culture and society,” it adds.
The committee also supports industry efforts to keep the flow of international talent coming into the sector, arguing that to extend the tiered visa system, which it calls “slow, expensive and restrictive”, to EU nationals will create “an unmanageable barrier to finding and hiring the talent that the advertising industry needs”.
It recommends that the Government should seek to negotiate reciprocal agreements with other countries under which international workers with a job offer in the advertising industry will have the right to work in the UK. The Government should also introduce a creative industries’ freelancer visa.
Not that it is content with many of the current working practices in the sector. It adds: “The industry should discontinue informal working and recruitment practices, such as unpaid internships, which present a barrier to groups from lower socioeconomic groups. The Government should clarify the law on unpaid internships. This will allow the advertising industry to access a larger talent pool which better reflects the advertisers’ audiences.”
Committee chair Lord Gilbert of Panteg said: “Advertising contributes to culture, society and fuels the economy by helping businesses to grow and compete against one another. It is therefore essential that UK advertising continues to thrive and maintain its international reputation. But the industry is facing immense changes which threaten to undermine its success.
“Digital advertising has quickly become the most significant form of advertising by spending. But the market for delivering digital advertising to consumers is notoriously ‘murky’: businesses which buy advertising services don’t know how their money is being spent, whether their advertising is being displayed next to content which is obscene or which supports terrorism, or whether their ads are being viewed by a human being at all.
“The consumer’s experience is also poor as they may be bombarded with clickbait, or their personal data may be exploited without their knowledge. To restore the public’s trust in advertising as a whole, the industry must commit to adhering to proper standards.”
Commenting on the report, Advertising Association chief executive Stephen Woodford said: “Across the industry many organisations and trade bodies are working to ensure it continues to be a sustainable, competitive and trusted industry.”
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