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

Part of the debate – in the House of Lords at 1:03 pm on 25th April 2019.

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Photo of Lord Bilimoria Lord Bilimoria Crossbench 1:03 pm, 25th April 2019

My Lords, the UK’s advertising industry is a success story. It contributes £120 billion to the UK economy and supports 1 million jobs. London is seen as the global headquarters of advertising and a centre of excellence. We have heard that we export around the world and attract the best talent from overseas, giving us the highest quality internationally. Advertising contributes to our society and culture and highlights Britain as a great place to do business.

However, there is a but, which is that this sector is in a state of change and moving really quickly. I congratulate the noble Lord, Lord Gilbert, and his committee on their excellent and constructive report, UK Advertising in a Digital Age. It highlights the success of the industry and, once again, stresses that it is a significant sector of the economy in its own right. The report says up front that:

“Advertising is regulated by an industry-funded body with the aspiration that it should be ‘legal, decent, honest and truthful’”.

However, given the rapid change in the world with the internet, and with advertising spend on the internet being higher than on all other media collectively, other media are suffering. That is a challenge in itself, when you look at print advertising. The report also highlights that our departure from the EU poses challenges, particularly in attracting the best international workers in the industry.

The rise of digital advertising has changed the nature of business in the industry. The standards are questionable. We are all subject to bombardment by digital advertising and this can have a corrosive effect. A growing part of this, which has not been discussed much in this debate but is highlighted by the report, is programmatic advertising—the automated processes that are taking place. In 2017, $16 billion that was spent on digital advertising was stolen through fraud. I declare my interests and say that I am always worried about another problem: that my digital adverts will be placed next to something completely inappropriate or indecent, or something involving hate speech. Do I have much control over that at this stage? I would like to.

The report clearly recommends that the industry should take greater steps to self-regulate through independent bodies such as the Joint Industry Committee for Web Standards. Then again—this has been highlighted in the debate—the industry is completely dominated by a small number of large companies. The report recommends transparency and suggests that the CMA should investigate this market. I will come to that later. The Government’s digital charter needs to be addressed too. Perhaps the Minister could reassure us on whether the CMA will go ahead with an investigation. Whatever happens, we need to align with EU standards on data protection, and the report recommends that we have a seat on the European Data Protection Board.

The report makes an important point about which I am particularly passionate. It says that,

“the industry requires individuals with a blend of arts and science skills”.

I shared a platform on the BBC with Scott Hartley about his book, The Fuzzy and the Techie, in which he talks about the liberal arts ruling the digital world. There is a perception that it is all about science and STEM subjects, but it is not; it is about science and the arts. The report recommends that emphasis be given not just to science subjects but to the arts at school level, and that is excellent. It also recommends that universities should work very closely with the industry. As chancellor of the University of Birmingham and chair of the Cambridge Judge Business School, I could not endorse that more.

The conclusion of the report’s summary again raises the fears about the Government’s proposed migration rules, which will be disastrous for British industry on the whole, including the UK advertising industry. The self-regulation imposed by the JICWEBS is good; the intentions are good. If that fails, the Government will have to propose legislation.

The Incorporated Society of British Advertisers—ISBA—says that,

“content should not be made available for advertising placement unless it has been positively vetted”.

Is this practical? Can it be done in the real world? Consumers often do not pay for online services; they get them in exchange for giving up data. This is the way at Google and Facebook. Are the current competition laws fit for purpose in today’s world? The report recommends that,

“the Government should use the Digital Charter to gather evidence on this issue”.

Does the Minister agree?

The report says:

“Many advertisers … flout the rule that online advertising must clearly be labelled”.

This is where the report recommends that,

“the Advertising Standards Authority should create a universal, mandatory logo to signify wherever online content has been sponsored by a brand. It should enforce the use of the logo next to any paid for text or video”.

Do the Government agree?

Once again the report uses the term “STEAM”, not STEM. The fusion of arts and sciences needs to be encouraged.

On the Immigration Rules, the report recommends that,

“Tier 4 visas should be extended to allow all students to work in the UK for at least two years after graduation”.

As co-chair of the All-Party Parliamentary Group for International Students and president of the UK Council for International Student Affairs, which looks after all 450,000 international students in this country, I can say that as a country we are falling behind big time compared with our competitors: Canada, Australia and the United States. Canada and Australia in particular allow international students to stay on automatically for a minimum of two years. We used to allow that; we removed it. Research from international students around the world shows very clearly that the number one reason the UK is not their number one choice is because of lack of post-graduation work opportunities. The Government need to bring back the two-year post-graduation work visa. That will help the advertising industry as well.

The report also talks about freelancers in this world. The advertising industry relies on freelancers being able to move in this global world. We should create a visa environment that allows freelancers to work easily in the UK.

On the size of this market, UK internet advertising expenditure has increased from £3.5 billion in 2008 to £11.5 billion in 2017. This is huge growth. As I said, internet advertising overtook all other forms of advertising—television, press, radio, cinema and outdoor combined—to reach 52% of advertising spend. Paid-for search is the largest category of online advertising, accounting for 50% of UK online advertising spend in 2017, compared with 36% for display, 13% for classifieds and 1% for other formats. The right reverend Prelate, who is not in his place, showed his mobile phone. Mobile accounts for an increasing share of the online advertising market, with smartphone expenditure accounting for 45% of total online spending in 2017, compared with 37% just one year before in 2016. Social media, mainly Facebook and YouTube, accounts for an increasing share of internet display advertising. In 2017, 57% of online display advertising was on social media, compared with 49% in 2016. These growth rates are exponential. Is the industry keeping up with it?

We then come to what the noble Baroness, Lady Kidron, spoke about so passionately: the assessment of potential harms, whether individual, societal or economic.

Then we had the Cairncross review, which was published on 12 February 2019. It highlighted the scale of change, saying:

“The most striking aspects of the change that is occurring are its speed and its extent. A majority of people—in the case of young people, a huge majority—now reads the news entirely or mostly online. In 2018, the Reuters Institute for the Study of Journalism reported that 74% of UK adults used some online method each week to find news, and 91% of 18-24 year olds”.

This is the scale of the challenge we are addressing.

Then we come to what my noble friend Lord Currie spoke about. He is very authoritative in this area as chair of the Advertising Standards Authority. He addressed in his own way what the ASA says:

“Myth: online is a ‘wild west’ for advertising, where the level of protections in place for other media don’t apply. Truth: The UK ad rules apply equally to advertising online, including companies’ own claims on their own websites, social media spaces and advergames”.

The ASA says that as the independent regulator. The Committee of Advertising Practice says, “We’re keeping this under review; we’re on top of this. Ads have to be responsible”. Its ambition is to get every UK adds to be responsible.

The ASA’s slogan is:

“Legal, decent, honest and truthful”.

These are good intentions, but the IAB UK says that,

“online advertising is like the Wild West … but not in the way you might think”.

It says:

“The idea that online advertising is a wholly unregulated market is a myth. As we continue to develop self-regulation, IAB UK is committed to reducing fraud, increasing brand safety and improving the digital advertising experience for consumers”.

It talks about introducing a kitemark. But I will give noble Lords one very quick example. During the referendum an advert was placed by the leave campaign about the NHS. It linked very cleverly to the slogan of £350 million on the side of the bus: let us save that and give it the NHS instead. This was a video advert on social media that I saw a number of times, with a split screen showing a young woman taking an elderly woman to the hospital, to accident and emergency. On the remaining in the EU side of the screen they waited and waited, and got grumpier and gloomier. On the leave the EU side of the screen they were seen straightaway and welcomed. Everyone was smiling, the old lady was treated; they all left and lived happily ever after. Was that stopped? It was shown millions of times. Where was the ASA?

Here is the reality: when it comes to misleading claims, unlike commercial advertising, which is regulated by the ASA, there is no complaints procedure for political ads that make misleading claims. The ASA received complaints but was unable to act on them. What will the Government have to say about this? People can make blatantly untruthful claims such as this and get away with it. It is absolutely shocking.

On the whole Cambridge Analytica scandal, in which it was accused of illegally collecting online data of up to 50 million Facebook users, Chris Wylie, its former director of research, said that his work allowed Donald Trump’s presidential campaign to garner unprecedented insight into voters’ habits ahead of the 2016 vote. He added that a Canadian business with ties to Cambridge Analytica’s parent company, SCL Group, also provided analysis for the Vote Leave campaign ahead of the 2016 Brexit referendum. This research, Wylie said, likely breached the UK’s strict campaign financing laws and may have helped sway the final Brexit outcome. Another individual involved was Shahmir Sanni. He told the Observer that,

“Vote Leave deliberately broke the law by purporting to donate £625,000 to a youth group, BeLeave, but instead funnelled it directly to its data and ad-targeting firm AggregateIQ (which had links to Cambridge Analytica)”.

Can the Minister update us on what has happened with these allegations?

The Chancellor, Philip Hammond, said in March that the Competition and Markets Authority should conduct a review into the digital advertising market following recommendations made in a report. Will that go ahead?

From my own business point of view at Cobra Beer, we sell beer in a digital world. We have a digital strategy. It is a brand and business strategy, executed in digital. It is an opportunity for us to have more personalised contact, which is key to driving appeal and usage.

The final point I want to make is that creativity is the essence of this. Those who have design-driven, creative digital work are more likely to exceed their business goals. The Government should encourage creativity to be taught and encouraged to our youngsters at primary school, whatever their career might be, because that power to be creative will give this country the power to be innovative and to power ahead in every area, including in the advertising industry.