Nowadays, in the media ecosystem, the digital media is one of the most powerful channels whereby political information is conveyed. Indeed, the digital media is hosting more and more political campaigns aimed at achieving public consensus to gain new electors. This trend has led to an evolution of online advertising techniques, which have progressively included, together with the use of personal data, influencer recruitment and market segmentation among their practices.
At the same time, online political communication at the European level is much less regulated than that through the traditional media, both because the latter’s influence on public opinion has been observed since the first half of the 20th century, and for obvious reasons related to the relative novelty of the digital medium.
Consequently, opening up the discussion to this second front of online information seems entirely appropriate, so as to safeguard the proper conduct of the democratic process without leaving this new territory unregulated.
However, assessing the socio-economic impact of such regulation would appear to be useful, particularly by circumscribing it to the domain of political information and not turning it into a new regulation of digital advertising tout court.
Consequently, in order to analyse the potential impact that the new European legislation could have on the advertising sector, the scope and the importance of this market must be understood and, at the same time, the dimensions of the sub-market related to political ads needs to be verified.
First, it seems appropriate to analyse how the European population is informed in general and, more specifically, about political affairs. According to the most recent Eurobarometer data (Fig. 1), European citizens continue to rely heavily on television as their primary source of information (over 40%). Digital media, which includes newspaper websites, follows closely behind with 16.5%. In fact, online sources, which encompass a variety of platforms such as social media, blogs and messaging apps, collectively represent a preference of 35.6%.
Similar results can also be observed in a survey from the EU Commission conducted in early 2022 on media usage in the EU for obtaining news related to European politics. According to the research, 32% of respondents use generalist TV channels as their primary source to obtain political news, making television the most popular choice for acquiring such information (Fig. 2).
Considering the online information resources in aggregate terms (information websites, online social networks, video hosting websites, and blogs), it emerges that for 27% of respondents, online information channels are the primary means of information.
For this reason, even if most consumers continue to use traditional media to consult political news, it seems important to regulate the dissemination of this type of content also over the web.
The European advertising market and the political component
The growth of digital advertising, largely driven by the transformation of Internet, has rapidly increased in the past decade. Prior to the pandemic, digital advertising had already been showing signs of a stable and solid growth, while traditional advertising had been slowly declining. The pandemic has accelerated this process, leading to an exponential growth in digital advertising and a drastic decline in traditional advertising. In the coming years, we can expect to see a continued strong increase in online advertising due to further changes in internet consumption behaviour.
In 2021, digital advertising spent in Europe experienced a remarkable year-over-year growth of 30.5%, reaching €92 bn, being the strongest growth since 2008 (when the growth rate was at 58.6%). This increase of €21.5 bn compared to 2020 is larger than the total net increase from 2018 to 2020 (€19.4 bn) combined. This rise in spending, especially between 2020 and 2021, shows the increasing importance of the online advertising segment in the advertising market total.
Moreover, by comparing online political advertising expenditure with total expenditure in digital, we can see that the political component is almost irrelevant.
Indeed, the Ad Transparency Report, which provides collective data on the expenditure of political advertisements on Facebook, Instagram, Google and YouTube in the 20 weeks leading up to the 2019 European Parliament elections, shows that the total amount of spending on digital political advertising in Europe was approximately €43 m.
In numerical terms, the comparison between the weekly expenditure in political ads during the 2019 EU election campaign – hence in its peak time – with the average weekly expenditure of the total digital advertising in Europe in the same 2019, indicates a ratio of approximately 1 to six hundred (€2.15 m to €1.27 bn).
Thus, it becomes quite clear how important it is to circumscribe the regulation of online advertising as much as possible to the domain of political advertising. Indeed, while the latter is growing in importance and, therefore, needs clear regulation to ensure a fair, transparent, and accountable political process, the risks associated with the proposal for a new EU regulation could be as great as the economic and social importance of the advertising market that would be affected. This is particularly so if the definition of ‘political advertising’ is not sufficiently clear and precise.
Insights into the European proposal for a regulation on political advertising
In November 2021, the European Commission issued a proposal for a regulation on the transparency and targeting of political advertising (‘PRPA’) aimed at fully harmonising the fragmented legal framework concerning the provision of political advertising services. The main objective is to find the right balance between the need to deliver to the public relevant and accurate political information and minimise the risks of political manipulation and polarisation by private advertisers.
The proposal reflects the urgency of a European intervention before the 2024 elections to avoid the regrettable political situations that took place in the U.S. and in the U.K. Therefore, the PRPA is certainly a welcomed intervention as it establishes common standards that ensure European citizens will enjoy high-quality information (also) during electoral periods while providing more legal certainty for all businesses willing to offer cross-border advertising services.
The fine line between political and commercial advertising
Included in the definitions laid down in Art. 2 of the proposal, the most debated is that of political advertising. The provision defines it as “the preparation, placement, promotion, publication or dissemination, by any means, of a message:
- by, for or on behalf of a political actor, unless it is of a purely private or a purely commercial nature; or
- which is liable to influence the outcome of an election or referendum, a legislative or regulatory process or voting behaviour”.
The broad approach followed by the Commission entails the risks of capturing commercial advertisements which are already heavily regulated by European and national consumer and data protection rules. In fact, many digital creators (including NGOs) engaged in discussing or satirising current affairs (i.e., climate change, inflation, or LGBTQI+ rights), if they are likely to influence a legislative or regulatory process, may fall under the application of the proposal. This would create a disproportionate legal overlap that would result in an increase in the compliance burden.
It is hoped that policymakers will fine-tune the definition with further guidance to distinguish political from commercial ads, the latter already being regulated by the Unfair Commercial Practices Directive.
The burdensome transparency obligations and the chance to tier them based on the size of the provider
The PRPA aims at creating a level political playing field by introducing a set of disclosure obligations that will remove the loopholes for big money interference by malign and foreign actors.
The transparency rules are detailed in Arts. 4-11 of the proposal. According to the articles, providers of advertising services should comply with different kinds of obligations, from making online users aware of the political advertising service through disclosure notices (Arts. 5 and 7), to the record-keeping and transmission of the information that providers of political advertising services collect in the provision of their services to various stakeholders (Arts. 6, 10 and 11), to the periodic reporting on the amounts or the value of other benefits received in part or full exchange for those services, including the use of targeting and amplification techniques (Art. 8), and to the set-up of mechanisms enabling users to indicate potential unlawful political messages (Art. 9).
However, it is still controversial whether these transparency requirements should apply to all providers of political advertising regardless of their size, considering that SMEs could find them burdensome.
The controversial regulation of targeted advertising
Though generally beneficial for consumers, targeted advertising is a practice that has the potential to amplify political bias, fostering political polarisation and filter bubbles. Some political actors could deploy recommendation algorithms to discourage potential voters of the political opposition to vote through advertisements that reduce their trust in the democratic system while hiding their sponsoring of such ads.
Art. 12 of the PRPA sets out further obligations than those of the GDPR to minimise – if not eliminate – the detrimental effects of this practice. Firstly, it introduces a clear obligation for targeting and amplification techniques involving the processing of sensitive data, as defined by Art. 9.2, a) of the GDPR.
Secondly, it stipulates specific requirements related to targeted or amplification techniques in the context of targeted advertising.
There is a current debate about the legitimacy of targeted political advertising since some organisations ask for a direct ban while digital platforms highlight the benefits for citizens arising from the exploitation of personal data. For instance, in making sure that content is delivered locally, relevantly and in the right language considering the gigantic amount of uploads per minute.
Final Caveat
The implementation of regulatory changes, such as those brought about by the PRPA, could have a considerable impact on the operations of the media industry, possibly affecting its core principles. Therefore, it is advisable to thoroughly analyse the consequences resulting from significant regulatory interventions, without jeopardising the sector’s contribution to GDP and a viable digital transformation in the long term.