February 27, 2024

Op-Ed: Florida's Senate Bill 262 will harm consumers and small businesses online

While it bills itself a “Digital Bill of Rights,” the Florida Senate Bill 262 could actually harm consumers and businesses online by substantially raising the costs of targeted advertising.

For consumers, this would mean less “free” stuff online, as publishers switch from advertising-based to subscription-based models. For businesses, it would mean having less ability to target advertisements to consumers who actually want their products, resulting in less revenue.

While this may be just an annoyance for Big Tech, it will be potentially catastrophic for Florida’s small-business community. Florida can do better.

SB262 is technically a transparency bill. It requires only services that collect consumers’ personal information to disclose what they plan to do with it. But it defines personal information so broadly that it would even include aggregated data that’s not personally identifiable, if it’s intended for the purpose of targeted advertising. In practical terms, this would mean that even collecting a device’s browsing or search history in order to serve that consumer with more relevant ads would be subject to heightened transparency requirements.

The rules are designed to encourage consumers to opt out of the online-advertising ecosystem. As a larger percentage of them do just that, the effects will certainly be felt by Big Tech companies like Facebook and Google. But the real pain will be borne by users of not only those platforms, but smaller online publishers that rely on advertising revenue, as well as the many small businesses that rely on those advertising networks to reach potential customers.

The revenue gained from targeted advertising is often the reason online platforms are able to offer free access to users. Insofar as the value of targeted advertising is reduced, online platforms will face pressure to raise more revenue through user subscriptions. This will be harmful to the vast majority of users, who would willingly choose free use over less targeted advertising. The ads that those users do continue to receive will also likely be much less relevant.

Companies like Google and Facebook can afford the compliance costs and marginal loss of advertising revenue. They will even likely be able to continue to offer free use of their platforms due to the enormous advertising networks and user bases they already have. But smaller platforms will be unlikely to ever be able to gain that kind of scale while complying with laws like SB262.

Similarly, smaller publishers that rely on revenue from targeted advertisements will be particularly harmed. Blogs that run advertisements from, for example, the Google ad network will lose more revenue the more that consumers are nudged into opting out. Content creators will be forced to either switch to a subscription model or find other sources of income. Either option would be to the detriment of those who enjoy their content.

Small businesses that use targeted advertising to reach those online customers who are most likely to purchase their products and services will also be harmed. They will have to rely on display ads and other methods that are significantly less likely to result in transactions. For Florida small businesses looking for local consumers, this could be particularly damaging.

While bashing Big Tech is all the rage among politicians in Florida right now, the effects of laws like SB262 will be felt more by Florida’s internet users and the small businesses who want to sell to them. At some point, citizens of Florida will tire of the political theater. Don’t break the internet to score cheap political points.

Ben Sperry is senior scholar for innovation policy with the International Center for Law & Economics.

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