The death spiral of online advertising

The greatest irony about advertising in the Web 3.0 era may be its likelihood of shifting from hyper-contextual advertising to hyper-contextual commerce. This is because the Spatial Web allows any person, place, or thing to have its own digital wallet and to transact in digital currencies and even in micro-payments. How does this shift happen? We’ll get into that—but first, a brief review of advertising in the early 2020s, and how we got here.

It has been suggested that advertising is the thing that “ruined” the web. Many of the founders of the largest tech companies famously abhorred the concept of monetizing their services and applications with advertising; they wanted the functionality of the original service to drive engagement. Google, Facebook, YouTube, Instagram, Twitter, Snapchat, and WhatsApp all launched and drove massive user growth based on their core service. 

But aside from charging for their service, which would dramatically reduce their user base, selling advertising was the only other option to succeed financially online.  Over time, the user data market emerged which gave advertisers the ability to more effectively target users. Ads became more and more targeted. As mentioned previously, Google built a Search Graph in Web 1.0, Facebook a Social Graph in Web 2.0, and they were able to monetize these in unprecedented ways.

Senator Orrin Hatch at a Congressional Hearing to address the Cambridge Analytica scandal and the potential manipulation of Facebook’s ad platform by Russian spies asked “If a version of Facebook will always be free, how do you sustain a business model in which users don’t pay for your service?” Mark Zuckerburg famously replied, “Senator, we run ads.” History may look back and decide that this was the mantra of the Web 2.0 era.

The threat of Hyper-Reality

The scale of the hyper-targeted personal advertising market in the Spatial Web is exponentially larger than in its predecessors but carries the same double-edged sword with economic value on one side and human values on the other.

Hyper-Reality is a concept film by Keiichi Matsuda that shows a day in the life of a woman immersed in a futuristic world where her vision is filled to overflowing with games, Internet services like Google, and various other functions, alongside an assault of advertisements that constantly pop up as she moves around the city. It is an artistic exercise in digital consumption; it is death by a thousand notifications. And it perfectly showcases everything that we do not want Web 3.0 to be.

Similarly, there is a scene in Steven Spielberg’s film adaptation of the novel Ready Player One where the film’s corporate antagonist shares their monetization strategy for the Oasis, an interconnected VR universe. “Our studies show that we can fill up to 80 percent of someone’s visual field (with ads) before we induce a seizure,” he says. Two better examples of the insane drive to monetize our field of view could not be made. What’s of even greater concern is that breakthroughs in eye-tracking, along with biometric trackers that monitor pupil dilation, mood, and other biometrics will make immersive media the most “personalizable” medium for advertising, ever.

Certainly, an immense market opportunity lies here, but the ethical questions loom even larger. As a child, ice cream was a common cure for a bad day at school or losing a Little League game. So what is the harm in an advertiser using your present mood data to sell you ice cream if you seem a little down? That seems innocent enough. But what if they also know that you’re on a crash diet, or you’re exhibiting signs of depression because you continue to fail at your weight loss goals? Is it okay to offer you ice cream then? How about alcohol or prescription drugs? Or a gun? Certainly, individuals must have the wherewithal and responsibility to make good decisions about their health and livelihood, right? Right?!

One can imagine similar scenarios ranging from very helpful to incredibly destructive at every conceivable scale.

Luckily, the Spatial Web enables users to maintain a sovereign ID that can securely store and approve which advertisers have access to which information. This information can be conditionally set by location, time, mood, and/or buying cycle. This is actually good news for advertisers because they have a hard time trying to target users with the right ad at the right time. This is because they purchase a patchwork quilt of data from a number of different providers in an attempt to target you. However, in many cases, they are being sold bad or fake data. Often they are targeting users that don’t even exist; they are just bots, or they have no idea of where you are in a purchasing cycle, so they throw money away chasing you around the web with a product you looked at a week ago and bought somewhere else.

Privacy laws and regulations like the European Union’s General Data Protection Regulation (GDPR) standards and the California Consumer Privacy Act of 2018 are landmark regulations that are imposing serious fines on tech companies that do not properly handle personal data or do not allow users to remove themselves from their services. But advertisers would be far better served by access to accurate data provided by users directly—data that is correct, validated, up to date. And much of this user-provided data can easily be managed by a personal AI.

How advertising becomes commerce

And that brings us to our big shift for advertising on the Spatial Web. The point where you might encounter an ad in the physical world or in a virtual one can just as easily be a point-of-sale for that digital good, product, or experience.

For example, imagine that you are in the middle of future Times Square in NYC. You have the latest AR hardware on. You access the Spatial Web through a universal Spatial Browser. Based on the personal data profile that you’ve granted to any advertiser within range, you would see a personalized set of billboard and holographic ads. Advertisers and products that you are explicitly NOT interested in seeing would not even appear. Your personal AIs would block from view any ads or products that aren’t within the predefined range of your tastes or interests. This scene would look similar to scenes in movies like Blade Runner or Ghost in the Shell, although all of the content and objects would be completely personalized to your taste preferences.

Now imagine an ad appears on a billboard in front of you offering a new set of 3D holophonic AirPods. You can view them floating above you or simply motion for them to fly into your hands and see them in actual size, rotating the virtual AirPods as if they were physically present. You could modify the color, features, and materials before selecting your choice. At that point, you could merely signal verbally, biometrically, or otherwise and your digital wallet would make a peer-to-peer payment once your AI assistant had validated the authenticity and history of the vendor. You can have the product 3D printed on-demand at home so it will be ready for you when you arrive. Or you can have the product transported directly to you anywhere along your path via car or drone within minutes.

Now imagine instead of a pair of AirPods, the ad is for a new Flying Tesla Model Z. In this case, you could have the virtual car lowered to the ground and virtually step into it, experience a test flight through Manhattan as if it were real, and then purchase the actual vehicle with similar delivery options. The exchange becomes even easier if you are being offered a virtual car from another user, say a vintage one-of-a-kind 1981 Camaro Firebird for one of your avatars in the ‘80s virtual world that you frequent. In this case, the user profile that you allow advertisers to access isn’t limited just to your physical self but includes certain avatars that you have enabled with “cross-world” advertising. Just like the “retargeting ads” that you see today—the ones that seem to follow you across the web—these “cross-world” ads can do the same except that they can move between virtual worlds and the physical world to offer you personalized, discounted ads for virtual goods.

In this virtual vintage car example, whether you choose to purchase while physically in Times Square or opted to do so when you saw the same ad appear later in a Tokyo 2100 virtual world as a 3D hologram on the streets, you could simply authorize payment and put the car into your Smart Account inventory along with the rest of your personal assets or have it ported to the bitchin’ garage in your ‘80s World home, or to any other location for which you have transport rights.

Considering this scenario, the collapse of the advertisement and the transaction seems inevitable. This could allow entirely new categories of monetization beyond online advertising and traditional e-commerce to emerge. But for this to work, the Web needs a commercialization layer upgrade.

In this article:
Beyond the dystopia of Hyper-Reality lies the dream of a prosperous world—one with no use whatsoever for targeted ads.