True value of digital advertising has come into sharp relief

As the European Parliament's internal market and consumer protection committee (IMCO) prepares to vote on its opinion on the Digital Services Act (DSA) next week, the fate of targeted ads will become clearer.

There's been much speculation over what the precise outcome will be when it comes to targeted ads but the debate has highlighted how digital advertising is not a simple black-and-white issue but one that has major ramifications for small businesses and small publishers across Europe.

Ahead of the vote, it's important to remember that targeted ads are a vital part of the day-to-day operation of thousands of businesses in Europe.

They are effective at reaching new audiences, converting those audiences into customers, and giving businesses the ability to compete and grow. Targeted advertising is more than twice as effective at reaching new customers than contextual advertising, and is a low-cost, essential tool that is particularly useful for SMEs. And SMEs drive more than half of Europe's GDP, employing over 100 million Europeans.

After the Covid-19 pandemic - which has pushed operations for most businesses almost exclusively online as lockdowns became the norm - many SMEs, which are the backbone of Europe's economy, are still recovering. They simply cannot afford to lose the ability to effectively market their products right now.

For publishers, the situation has been most challenging too.

Targeted ads command a premium that contextual advertising just doesn't match. Where traditional media outlets have faced declining print circulations, digital advertising has proven a fruitful new source of revenue for many publishers.

Indeed, at last week's European news media summit, EU commissioner Thierry Breton highlighted the dramatic drop in ad revenues seen by the traditional news media which has been grappling with a rapid digital transition.

What has been missing from the debate on personalisation in advertising is that privacy and personalisation can go hand-in-hand.

Safeguarding privacy and data protection must be paramount, and there are tools to do that, in the form of the General Data Protection Regulation (GDPR). Enforcement of the existing law should pave the way for ensuring that the data-driven advertising business model is kept in check.

We must also remember that targeted ads help to fund a free and open internet.

With 68 percent of Europeans saying they would never pay for news content online, the revenues generated by targeted ads play a vital role in supporting a pluralistic media landscape and maintaining free access to news and content.

Heavy restrictions on the ability to address marketing communications would drastically reshape the internet as we know it and restrict access to reliable sources of news to a privileged few.

In an era of rising concerns over disinformation, this would be yet another blow.

Contextual advertising, often pushed as a catch-all solution by opponents of targeted ads, is not a panacea. While it is a relevant part of the online advertising ecosystem, they simply do not deliver the same reach to new customers or return on investment that targeting can.

Giving businesses the flexibility to choose how they advertise to their customers and select the tools that serve them best is an essential element of the digital economy.

As we reach an important milestone in the updating of Europe's digital rules, we must ensure that users are empowered with enhanced transparency to make informed choices about ad-supported content – in line with the significant transparency and accountability requirements under the GDPR.

It will go someway to helping policymakers ensure the DSA becomes a successful digital regulatory framework fit for the 21st century which will drive and sustain businesses of all sizes for many years to come.