Google’s $168 billion in ad revenue is at stake in a Supreme Court case

Social media companies view the incident as an existential threat. (representative)

Washington.

The US Supreme Court is set to hear a case that could threaten the Internet’s most lucrative business, online advertising.

The case, Gonzalez v. Google, will be argued on Tuesday and will focus on whether internet companies are responsible for the content their algorithms recommend to users. The tech industry says it is protected by a legal shield contained in the communications law known as Section 230.

Much of the debate surrounding the case has focused on the costs to online companies if a court finds them legally liable for the hundreds of millions of comments, videos and other content posted by users every day. However, such a decision could also strike at the core of automated advertising, which Meta Platforms Inc.’s Facebook and Alphabet Inc.’s Google rely on for much of their revenue.

In fact, social media companies view the incident as an existential threat.

“This case could have a negative impact on the entire advertising ecosystem,” said Mark Beckman, chief executive of DMA United, an advertising firm that regularly uses Google and Facebook tools to deliver targeted ads to potential customers around the world.

Google is being sued by the family of 23-year-old Nohemy Gonzalez, a US man who was among at least 130 people killed in the November 2015 attacks in Paris by Islamic State. The family claims that Google’s YouTube should be held responsible. For automated Islamic State video recommendations.

Websites and ad networks automatically target ads based on information they collect about users, including their location, browsing history, topics they follow closely, and more. Ads are placed on websites using online tools without human intervention.

Google declined to comment on the case. But in his Supreme Court brief, he said he was concerned about the case’s impact on the economy, including advertisers. Meta believes Section 230 protects the company from liability for all third-party content, including advertising, and the social media giant is concerned that the court could weaken that protection, a Meta spokesperson confirmed.

Experts say the Supreme Court’s sweeping ruling could effectively shut down the business of serving personalized ads on the Internet and return online advertising practices to the early 1990s. It could also force platforms to launch a wave of lawsuits against users over millions of ads, leading to smaller legal costs for ad networks and exchanges.

“If we don’t target advertising, we’re going back to the old ’90s model of ‘see who bites,'” said Jess Mears, an advocacy consultant at the tech-funded group Chamber of Progress. Miers previously worked at Google.

Together, Google and Facebook capture nearly 50% of digital advertising revenue worldwide. Companies called online advertising “two-tiers” collect reams of data about their users in order to serve them relevant ads; a business that earns both companies billions of dollars annually. According to data analytics firm Insider Intelligence, Google will generate $168 billion in ad revenue in 2022, and Meta will generate $112 billion. This year, Google’s US revenue alone is projected at $73.8 billion, compared to Meta’s at $51 billion. The Supreme Court ruling will only apply to the US, but it will be technically difficult for companies to treat advertising differently in its biggest market than in other countries around the world.

Companies already face legal challenges related to the advertising they serve, particularly on sensitive issues such as health care, politics, employment opportunities, and more. With few exceptions, Facebook and Google have been successful in winning most of the cases that would make them liable under Section 230.

That could change quickly if the Supreme Court decides to limit Section 230. While the shield protects companies from lawsuits over content created by ordinary people, Kathy Gellis, a California lawyer who has represented tech companies in online speech cases, said the ads could be classified as “user-generated content” if the Supreme Court’s ruling is extensive.

The digital advertising industry is already under fire as governments around the world come under pressure, claiming companies are collecting too much information about people without their consent and violating their privacy. In countries including the European Union, privacy regulations that limit the amount of data companies can collect on users have already put a lot of pressure on the digital advertising ecosystem, Beckman said.

“We are already implementing new marketing initiatives as an agency to not only combat what we believe will happen if 230 is restricted, but also these new restrictions on third-party data privacy,” Beckman said. : He said the era of “beautiful” and distinctive advertising could be on its way back, as advertisers can no longer rely on the hyper-personalized and low-cost ad networks they’re used to. While targeted advertising allows companies to reach their target audiences with little effort, moving away from algorithmic recommendations can require advertisers to work harder to gain attention.

Mears said it is likely that Google and Facebook will face most of the lawsuits that the court weakens Section 230.

Online advertising is so important to Meta’s and Google’s business models, it’s likely they’ll try to fight it in court, said Gelis, a California attorney. They would try to settle the legal costs and see if they could win the cases on the merits. “Everybody’s going to try to confuse as much as they can,” Gelis said.

For some critics of tech companies, ending internet ad targeting could benefit the internet’s most vulnerable users. Children’s advocacy group Common Sense Media and Facebook whistleblower Frances Haugen argued in the Supreme Court that Google’s videos and ad recommendations can create a “feedback loop” that sends children and teens down rabbit holes that can spiral into eating disorders, self-harm and around extremism. In their view, Google and Facebook should better monitor the ads it serves to younger audiences.

The case could be “a shock to many businesses,” said Eric Goldman, a law professor at Santa Clara University School of Law.

“So much advertising now is delivered dynamically,” Goldman said. “If that dynamic evaluation is an algorithmic proposition that disqualifies an ad network for 230 protection, then the ad industry needs to do something else.”

(Except for the headline, this story was not edited by NDTV staff and was published from a syndicated feed.)