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Economic Case Against Social Media’s Targeted-Ad Business Model
Social media platforms like Facebook rely on a targeted-ad business model, which generates revenue by using detailed behavioral information to direct ads to individual members. That bland description fails to convey even a hint of the profound threat this business model poses to the nation’s political and social stability. The problem has nothing to do with aggressive pricing, abusive service or other ills often associated with monopoly. Instead, it stems from the targeted-ad model’s powerful incentives to spread of misinformation, hate speech and conspiracy theories. Economic analysis helps explain why shifting to a subscription model would sharply curb such abuses.
Questions:
1. Give two examples of individual choices that have negative spillover effects.
2. Why does the targeted-ad business model encourage social media platforms to steer addictive content to members?
3. Explain why a social media platform like Facebook has much in common with natural monopolies.
Source: NYT: Robert H. Frank, The Economic Case for Regulating Social Media, Photo by Brett Jordan on Unsplash
