UK Advertising in a Digital Age (Communications Committee Report) - Motion to Take Note

Part of the debate – in the House of Lords at 12:37 pm on 25th April 2019.

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Photo of Lord Gordon of Strathblane Lord Gordon of Strathblane Labour 12:37 pm, 25th April 2019

My Lords, I joined the committee just after it started this review and just before the noble Lord, Lord Gilbert, became chairman. First of all, I take this opportunity to thank him for his chairmanship of the committee—he did superbly—and for his success in finally securing a debate on a report produced a year ago. Harold Wilson once said a week is a long time in politics. A year is an eternity in the digital world. Look at the changes that have taken place; how much better informed would my questions to Google have been had Shoshana Zuboff’s book The Age of Surveillance Capitalism been published then? Mind you, the committee would have taken a lot longer to reach its conclusion, because it is a real doorstopper of a book: 600-odd pages. I am wading my way through it slowly.

The noble Lord, Lord Gilbert, alluded to the success of the advertising industry. It is one of our success stories in Britain. We seem to be rather good at it—not because advertising is a particularly native British characteristic, but because a lot of people from all over the world have decided that London is a nice place to live, work and do business. That is wonderful at the moment, but should remind us that the advertising industry could be highly mobile. If the climate in this country turned very unfavourable to advertising, or difficult to operate through remoteness from trade arrangements—I put it no higher than that—all those skilful, well-paid jobs could disappear.

The noble Lord, Lord Gilbert, also referred to the fact that advertising, as well as being important for a market economy, is an important industry in its own right and provides jobs and so forth. It also has been used in this country to fund our press, television, radio and now the internet. Most people are prepared for a trade-off. They will accept getting their newspaper at a certain price while leaving themselves exposed to adverts. The problem with the internet is that much of what is done appears to be done by stealth. The viewer does not know that his eyeballs are being commercialised and sold on to someone else. That has led to a degree of distrust coming into the main off-line advertising industry, which is why that industry has reacted so adversely to some internet practices. Large companies such as Procter & Gamble have said, “We’re not advertising any more on the internet until you put your house in order”.

That has also started to spread distrust of the internet. I agree with the right reverend Prelate in his paean of praise for the internet—I think it is wonderful. But he was also quite right to point out its potential tremendous pitfalls as well. It is a question of trying to get the best out of the internet while avoiding the problems.

Matt Hancock, who was one of the Secretaries of State during the period of the inquiry, which rather dates things, pointed out that we need to attract great talent from all over the world and also rear our own talent. To take rearing our own talent first, to be fair, the advertising industry does better on diversity than anyone else in Britain. The percentage of BAME people it employs is higher than that of the UK population. It is less than it should be in London, but over the country as a whole it is pretty good. By and large, if the rest of the country were operating as well as the advertising industry, the country would be a lot better off in that regard.

I recognise the point about class. I think there is a parental problem there with working-class parents. In my part of the world, Clydeside, marketing was almost viewed as snake oil salesman stuff. You built the perfect locomotive and the world beat a path to your door. The fact that you had an empire that rather restricted the freedom of choice of the indigenous populations seems to have been ignored. When suddenly we were exposed to competition, we found that we had lost all those markets to the Americans. But people relied on the quality of the product and felt that that was all that mattered. They wondered whether advertising was really a serious job. That is changing, but I agree with the committee’s recommendation that we need to do more with careers advice to point out that advertising can be a very rewarding career.

On one minor point, the noble Lord, Lord McNally, pointed out the jobs that would be lost with the switch to robots. I am not saying that advertising is immune, but jobs that require flair are more immune to “robotisation” than others. People working in advertising are less likely to be threatened by the advent of new technology.

On apprenticeships, we all agreed that the Government had done a good job in introducing apprenticeship schemes. Full marks to them for that, but a report of the previous committee, which I was not on, found that the creative sector scheme was ill-equipped for purpose. A lot of people regarded apprenticeships as simply a tax on employment rather than a source of possible good training.

As regards foreign talent and the effect of immigration, the noble Lord, Lord Gilbert, pointed out that we need to be able to attract people readily. Our immigration system is simply not fit for purpose for the advertising industry and we face a severe problem.

Turning to other aspects, we also need to ensure that data transfer will remain aligned with Europe. Advertising cannot continue without adequate data transfer.

My next point, which I shall allude to only briefly and do not expect the Minister to reply to because we do not want to stray on to Brexit more than is absolutely necessary, is to remind the House that advertising is a service industry. We are already concerned about trade in goods, but goods are small beer in this country compared to our trade in service industries and unless we strike a deal on them, we have a problem. There is a worry in the broadcasting and advertising sectors that, while the Prime Minister’s speech at the Mansion House was very encouraging, that was the Monday, and by the Chequers agreement on the Friday, suddenly service industries were being ignored. We need to pay attention to that.

Coming on to the internet, which, as our chairman acknowledged, has begun to dominate our thinking, it is true that 2017 and 2018 were the years when the initial wonder and awe about it wore off a bit and people became first irritated by being bombarded with what they regarded as irrelevant advertising and then slightly concerned and fearful. People thought that Nineteen Eighty-Four really might somehow be yet to come. That view might be reinforced if you have read Shoshana Zuboff’s book.

Another factor in this, which we have to acknowledge, is that all briefing on this is dripping with self-interest. The press has turned anti-internet, for the very understandable reason that it has lost all its advertising to the internet. It is beginning to hit back, somewhat belatedly, but it means that any misdemeanour on the internet is magnified in the press, and that did not happen five years ago.

I commend box 2, on page 13 of the report, which is about programmatic advertising. The thing that really shocked us all was, as the noble Lord, Lord Vaux, pointed out, disassociation. Previously you put an advert during “Coronation Street”, or close to “News at Ten”, or on a page of a newspaper or in the sports section because that is where you thought your target market would look most. Now it is done by algorithms. Three-quarters of digital advertising is programmatic. As somebody pointed out, the internet advertising equivalent of “There’s no such thing as a free lunch” is “If the product is free, you’re the product”. The fact is that people’s eyeballs are, as it were, bought and sold and traded across markets. I commend that box. The frightening thing is that you move from the online auction of the fact that you are watching a page to a sale in microseconds, and nobody knows anything about it. The advertising industry does not know too much about it, and it is rather concerned about it. It is so complicated that it is time that the Competition and Markets Authority looked at it.

There is a slight difference of opinion. The noble Lord, Lord Goodlad, asked a Question in December about whether the Government would instruct the Competition and Markets Authority to do an inquiry into the internet advertising world. He got the normal, straight-bat written reply that it was a matter for the Competition and Markets Authority and that the Government do not interfere, all of which is perfectly true. Then, in his Spring Statement, the Chancellor of the Exchequer said that he is going to ask the Competition and Markets Authority to do an inquiry. I suspect that this is part of the negotiation about how much tax the digital companies will pay, and the Chancellor is perhaps rattling his sabre slightly just to remind them that he can make life a little uncomfortable for them. The amount of tax paid by internet companies seems to be determined by their public affairs departments rather than the finance departments. It is a question of what will keep people sweet for another year or two. If we are able to tax internet companies, why have we not done so already? Why are we hitting on the idea only this year? The other thing that the Competition and Markets Authority could look at in passing is whether the contract rights renewal provisions for ITV, which in my view have been out of date for at least 10 years, should now finally be put to rest.

In conclusion, I tend to be an optimist and I believe in self-regulation if it is possible. However, in the report we say:

“If businesses fail to do so”— in other words, to join up to JICWEBS and things like that—

“the Government should propose legislation to regulate digital advertising”.

For me, it is a combination of the stick and the carrot. I commend the Internet Advertising Bureau for doubling the number of companies that have signed up in the last year. It has also introduced a gold standard, which in my view is what the internet industry has to aim for. We have to infuse it with the desire to aspire to better regulation, because better regulation is in its own enlightened self-interest. If people do not trust a medium, it will quickly be discarded. A way of rebuilding trust would be for the industry to adopt the principles outlined in both this report and our subsequent report on regulation in a digital age.

We also have to bear in mind that we have not yet really seen the impact of the GDPR on this process. The fact that most eyeball trading is done without the knowledge, let alone consent, of the original viewer must surely contravene the GDPR, so sooner or later there will be a bit of a clash.

However, if we can get 95% of what we want with self-regulation, I will settle for that, unless the remaining 5% is extremely important, simply because we cannot operate this without the full, willing consent of the internet industry. We have to get it to realise that it is in its own best interests to be regulated. Lord knows, banks are bad enough even with regulation. Nobody would want to go into a bank that was totally unregulated. Regulation will help to build trust, and I hope that the internet industry will embrace it.