One family took on YouTube’s algorithm — and threatened a $245 billion business

Google declined to comment about the case. But in its Supreme Court brief, it said it was concerned about the case’s impact on the economy, including advertisers. Meta believes that Section 230 shields the company from liability for all content from third parties, including ads, and the social media giant is worried that the court could weaken those protections, a Meta spokesperson confirmed.

A broad ruling by the Supreme Court could effectively snuff out the business of serving personalised ads on the internet and turn online ad practices back to the early 1990s, experts say. It could also force the platforms to litigate a wave of lawsuits over the millions of advertisements they target at users, resulting in exponential legal costs for smaller ad networks and exchanges.

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“If we’re not targeting ads, we’re going back to the old ’90s model of ‘see who bites,’” said Jess Miers, legal advocacy counsel with tech-funded group Chamber of Progress. Miers previously worked for Google.

Together, Google and Facebook capture almost 50 per cent of all digital advertising revenue worldwide. The companies, which have been referred to as the “duopoly” of online advertising, collect reams of data about their users in order to serve them relevant ads – a business that mints both companies billions of dollars a year. Globally, Google made $US168 billion in ad revenue in 2022 while Meta made $US112 billion, according to data analytics company Insider Intelligence.

This year, Google’s US revenue alone is projected to reach $US73.8 billion, while Meta’s is expected to reach $US51 billion. A ruling by the high court would apply only to the US, but it would be technically difficult for the companies to handle advertising differently in its largest market than other countries.

‘This case could adversely impact the entire advertising ecosystem.’

Marc Beckman,chief executive of DMA United advertising firm

The companies are already facing legal challenges over the ads they serve, particularly those that relate to sensitive issues such as healthcare, politics, employment opportunities and more. With few exceptions, Facebook and Google successfully win dismissals of most cases that would hold them responsible, thanks to Section 230.

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

The digital advertising industry is already coming under fire as governments around the world crack down, arguing that companies collect too much information about people without their consent and violate their privacy. Privacy regulations in countries including the European Union limiting the amount of data companies are allowed to collect on users have already put a huge strain on the digital ads ecosystem, said Beckman.

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“We are already, as an agency, implementing new marketing initiatives to not just combat what we think will happen if 230 is limited, but also in the face of these new third-party data privacy restrictions,” Beckman said. He said the era of “beautiful” and distinctive advertising may be on its way back as advertisers can no longer rely on the hyper-personalised and cheap ad networks they’ve become accustomed to. While targeted advertising allowed firms to reach their intended audiences with little effort, a pivot away from algorithmic recommendations could require advertisers to work harder to grab attention.

Miers said it’s likely that Google and Facebook would face the brunt of lawsuits the court weakens Section 230. But smaller ad agencies and ad networks will face “trickle-down” effects.

Online advertising is so key to Meta and Google’s business models, it’s likely they would try to fight it out in court, said Gellis, the California lawyer. They would try to handle the legal costs and see if they could win cases on the merits. “Everybody’s going to try to muddle through as best they can,” Gellis said.

To some critics of the tech companies, a wind-down of targeting advertising on the internet could benefit some of the internet’s most vulnerable users. Children’s advocacy group Common Sense Media and Facebook whistleblower Frances Haugen in a Supreme Court brief argued that Google’s video and ad recommendations can create a “feedback loop” that steers children and teenagers down rabbit holes that can revolve around eating disorders, self harm and extremism. In their view, Google and Facebook should better control the ads that it serves to young audiences.

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

“So much of advertising is now being delivered in a dynamic way,” Goldman said. “If that dynamic assessment is an algorithmic recommendation that disqualifies the ad network for 230 protections, then the ad industry has to do something different.”

Bloomberg

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