Written by 15:19 Chambers, Media

Rocco Panetta on Chambers | Is it the End of Advertising-Supported Free Internet? A New Balance Between Privacy and Business is on the Way

Rocco Panneta of PANETTA Studio Legale discusses whether the implementation of data protection rules will signal the end of free internet supported by advertising.

It seems to be official by now: the era of free internet is heading for the sunset. After newspapers, it is now the time of social networks, given the latest announcements on Meta and X. When newspapers started going online in the late 1990s and early 2000s, there were no paywalls and information was free and accessible without having to go to the news stand; a real revolution. A few years later, the first blogs began to appear and then the first social networks – Linkedin, Twitter, Facebook, MySpace – paving the way for Internet 2.0.

As is well known, the enthusiasm for this “liberation” of information soon had to reckon with reality: online advertising was not sufficient to sustain the costs. The first to suffer the blow were the newspapers, and then it was the well-known social networks, which were better at profiling and thus also at advertising sales, that ended up on the defendants’ bench. And it was like that for years until the stricter rules introduced by the GDPR (with an effect on the e-privacy directive) made it compulsory to ask readers and users if they wanted to be tracked, instead of doing it automatically as had always been done.

“The era of free internet is heading for the sunset.”

Two more European regulations – the Digital Services Act (DSA) and the Digital Markets Act (DMA) – and a ruling by the EU Court of Justice have continued in this direction. The DSA came into force for Big Tech at the end of August 2023, imposing new limits on profiling and the use of dark patterns. The DMA, on the other hand, requires so-called gatekeepers not to use personal data of data subjects for advertising purposes obtained from third parties without their express consent, even if this data comes from other services offered by the gatekeeper itself.

In July 2023, the Court of Justice of the European Union came along and put a stone in the coffin of the possibility of using contracts or legitimate interests as a legal basis for profiling for advertising purposes, instead of consent. A glimmer of hope has opened up, however, in the Court’s judgment, which – recalling that consent must be free in order to be valid – recognises that users must be offered an equivalent alternative not accompanied by profiling for advertising purposes, for an appropriate fee if necessary.

Even before this judgment came out, many Italian newspapers have taken precisely that route over the past year, in order to cope with the decline in online advertising, giving the reader a choice: those who want to continue reading an article for free must agree to be tracked, or they must either subscribe or pay the small contribution that newspapers would receive from personalised banners. The Italian Garante has not yet expressed an opinion on this point, but it seems that it could be accepted if approached with due transparency and if the required fee is proportionate, so that the choice to be tracked is not compulsory.

“Those who want to continue reading an article for free must agree to be tracked.”

After the newspapers, social networks have also started to look at this possibility with interest. It was reported a few weeks ago that Meta was thinking of offering a paid version of Facebook and Instagram in Europe without advertisements, in addition to the classic version we have used so far. In this way, those who did not want to be profiled would have an alternative without negative effects on Meta’s finances. Those rumours were confirmed by an official post a few days ago.

Elon Musk had a similar idea and is thinking of doing the same. Both social networks already offer a premium version that allows for more options than the basic one, but Meta’s idea of offering this alternative is interesting because it states in black and white that data has an economic value, while at the same time needs to be protected. For that matter, the streaming giants have also understood this for months, offering the alternative of a cheaper subscription but with advertising, in order to attract new subscribers.

What the regulations in the industry want to achieve is that people are not manipulated through their personal data. Where there is clear and free consent, properly informed and transparent, companies are free to follow the path of profit as they see fit. It is true that the DMA and the CJEU ruling have highlighted what has long been known: the strong correlation between the use of personal data and monopoly positions. Those who have a large market share in the digital sector can no longer be considered to be on an equal footing with the other players, even in the absence of obvious economic harm to the consumer.

We will see whether the regulators on the one hand and the market on the other will approve these new choices.

The article was originally published HERE.