I’ve been puzzling through a thought experiment, and I hope it interests you enough that you will choose to address it on your blog…
The logical endgame of all this consumer data mining, web tracking, ad targeting, and loyalty clubs is what I am calling “omniscient sellers.” Omniscient sellers know with 100% certainty how effective an ad will be and what it will take to get a consumer to change consumption decisions. What happens then? Here are some bullets on what I’ve come up with:
* Consumers’ attention becomes even more valuable than it is now, and the rewards for controlling that attention even greater (Facebook, Google, the NBA salary cap all explode even more?).
* Consumers feel very happy because they are largely consuming products that marketers have made them (or discovered they would?) want very badly.
* Could attention-controllers start paying users to use their sites, since attention is so valuable now? Could there be an attention equivalent of credit card reward points?
* I can’t figure out who collects rents here, other than the platforms benefiting from network externalities.
* Does this increase or decrease market entry costs? It certainly will give startup companies something valuable to spend their capital on.
I would value any thoughts you care to share on this topic, or if you know of someone already addressing it.
All very good questions. I would pose it this way: do consumers buy the ads, or do sellers/intermediaries bid for the attention of consumers? If intermediaries are competitive and goods suppliers are monopolistically competitive, the surplus mostly goes to the consumers, who are paid to read the ads and then get exactly what they want. If there is a dominant intermediary, say Google or Facebook with unique information, that intermediary will extract surplus from both buyers and sellers. People are happy with their purchases as they experience them, but both consumers and artistic producers have lower lifetime expected wealth, as the intermediary rather efficiently vacuums up those gains. Not that this scenario in any way resembles our world today…