A No-Alternative Dilemma: Targeted advertising seems unjustifiable but unavoidable

Most brands want potential customers to see their products, not be at the centre of the next outrage about the misuse of personal data and AI-powered personalisation! Clever Together Futureproof's take on the "no-alternative dilemma" engages with the idea that while targeted advertising done-as-is has generated discontent and disapproval among consumers, its alternative – ethical data-minimising marketing – has failed to lure advertisers. But being stuck in a place between two bad alternatives is a dilemma that needs to be solved, because even if the difficulty of moving beyond it is understandable, staying put can no longer be justified.

Key points:

• A rising number of consumers and consumer-representing NGOs and think tanks are concerned about the amount of personal (often sensitive) data that is collected to underpin the targeted online advertising system.

• Ethical approaches to defending consumers' right to privacy, however, are often seen as too abolitionist, too disruptive, and too impractical by advertisers, while regulators have now moved from struggling to strike a balance to actively enforcing consumer protection through substantial fines and new legislation.

• This tension is what we at Clever Together call the "no-alternative dilemma" – a situation in which the state of things seems both unjustifiable and unavoidable, and a solution is urgently needed.

• We believe that there is no one better placed than advertisers to kick-start finding a solution to the dilemma of the unjustifiable state of things and the absent alternative. 

• Of course, the onus is not on businesses as lone warriors. Strategy-making through an innovative and value-informed framework takes trusted partners, multi-stakeholder action, and deep issue exploration.

  
  

Regulators and advocates alike have said it’s bad

The European Commission has published extensive research on online advertising, and the message is clear. Targeted online advertising can and does generate benefits for both consumers and businesses – it enables the match-up process of advertisements and consumer interests, it allows for the filtering out of unsuitable content, and it allows businesses to adapt to exogenous circumstances.

On the other side of this shiny coin, however, the trading of personal data for accessing content online has created "a bad market" in which consumers suffer vulnerability and loss of meaningful agency. The UK Information Commissioner's Office has named targeted advertising "surveillance-informed", supported by other voices concerned about unjustified intrusions in consumers' personal lives.

The regulatory landscape is shifting fast. The EU AI Act, which came into force in 2024, now directly regulates AI systems used in advertising, with specific requirements around transparency, automated decision-making, and risk management. Major GDPR enforcement actions have resulted in hundreds of millions in fines for companies mishandling personal data in their advertising practices. Browser makers like Safari, Firefox, and Brave now block third-party tracking by default, fundamentally changing how the advertising ecosystem operates.

AI in advertising is standard practice – from gathering and processing data and generating visuals to underpinning creative campaigns and giving consumers a tailored experience of a brand. This is no longer an emerging trend but the baseline reality. And we can no longer turn a blind eye, or pretend that 'not illegal' equals ethical, especially now that what's illegal is becoming much clearer.

Consumer voices demand to be heard

Our research has uncovered that consumers understand the purpose of advertising. Consumers are conscious that they need to see ads online to access content that interests them, but…

“I find online advertising frustrating, I know my online activity is used to decide what advertising to show me, but I'm not always looking at things online I want or need… If I look up something I am soon bombarded with ads for something I have no interest in. I've even gone as far as adding ad blockers to my email and social media, so I can actually see the content I want and not be interrupted by ads every click of the mouse.” – a participant in Clever Together’s “Your Online Voices” citizen engagement in partnership with the European Interactive Digital Advertising Alliance (EDAA).

The ‘Your Online Voices’ citizen engagement by Clever Together was the largest and first-of-its-kind ‘conversation’ with Europeans to date about their perceptions, expectations, and preferred solutions in relation to the use of their data in digital advertising. Using our proprietary platform and methodology, we engaged over 1,100 people across five countries and analysed over 25,000 data points. The insights from our engagement have, in no uncertain terms, provided the online advertising industry with a view of what people think, feel, and want, in their own voice.

And our analysis showed that the quoted participant is not alone in sharing their discontent.

• In fact, 68% of the contributions by participants in our engagement expressed negative feelings and concerns about online advertising, and only 15% considered it useful.

• 45% of contributions called for better controls over targeting and privacy preferences, and further 28% - for less intrusive and better-quality ads.

• A whopping 55% of contributions expressed that consumers feel tracked online at best and spied on at worst.

Since then, consumer sentiment has only intensified. The rise of privacy-focused tools, the mainstream adoption of ad blockers, and the growing market for privacy-as-a-feature products all signal that consumers are voting with their feet – and their wallets.

So, if the consumers are telling us that targeted online advertising doesn’t really work for them, why isn’t the online advertising industry doing more to change the system?

The No-Alternative dilemma needs to go

To be fair, it has not been straight-forward to address consumer dissatisfaction when there was no proven, research-informed, and fool-proof alternative to the current system for targeting content. However, the landscape has evolved. Google's eventual pivot away from completely removing third-party cookies has pushed the industry toward contextual advertising, first-party data strategies, and privacy-preserving technologies like Privacy Sandbox. These aren't perfect solutions, but they demonstrate that alternatives do exist and can work at scale.

The no-alternative dilemma that held advertisers hostage – stuck between knowing consumers are dissatisfied with targeted online advertising and lacking clarity about the business value and technical application of an 'ethical' alternative – is dissolving. The real question now is whether the industry will move fast enough to meet both regulatory requirements and consumer expectations.

There are two issues with this:

1. Firstly, we need to accelerate the shift toward privacy-conscious practices that are both technically viable and economically sustainable; and

2. Secondly, we need to establish why online targeted advertising, as it currently operates in many contexts, is not only unjustifiable but increasingly untenable from a business risk perspective.

   
   

There seems to be some lingering difficulty letting go of the idea that data ethics comes with strict, yet unclear meaning. The mental blockage of trying to rationalise "ethics" as a concept is understandable. For so long, ethics has resided in the theoretical realm that now, when we have to make it practice-oriented, it seems to neither bend, nor break. Instead, we could treat ethics as an empty vessel that comes with the imperative of having to fill it with meaning. Thus, advertisers have a choice to make between saying: "well, the ethical approach asks too much of us" without rationalising what we are asked to do or realising that "the ethical approach can support what we need" and use it to increase trust, build stronger relationships, and grow and maintain loyalty among consumers.

We can thus have ethics do the part of justifying targeted advertising to consumers. Changes in audiences online and, with that, those audiences' values necessitate the need to think, really think, about justifying approaches and having them not only appear to be, but actually be ethical. Gen Z and Millennials continue to dominate social media engagement, while Gen Alpha – now actively online and making purchasing decisions – are even more values-driven. These generations get information on new products and services from TikTok, Instagram, and YouTube, and try out products because of an endorsement or recommendation online. They are also most likely to care about values such as sustainability, social responsibility, human rights compliance, and data privacy. It is increasingly difficult to justify opaque data practices to the main target audience of social-media-based advertising and simply throw the "there is no alternative" argument at them – because alternatives now demonstrably exist.

What we are getting at here is that the fight should not be with the ethical alternative, but for a better alternative – in support of the good value exchange of consumer data for access to services in a way that builds trust, stable relationships, and positive experiences.

Instead of looking at metrics such as clicks and engagement levels, why not focus on some elevated metrics:

• preserving brands' reputation based on positive, mutually beneficial relationships with consumers,

• building trust and loyalty among consumers,

• respecting human rights (such as the fundamental right to privacy), and

• avoiding being impacted by and bringing about harmful externalities (such as disinformation, discrimination, environmental impact, impact on democracy and more)? 

Here, the value of ethics being abstract comes forward – industry can take it up and employ it to its own agenda, in complement to its goals and ambitions, in support of elevated metrics.

A solution-making approach will help you along

We believe that there is no one better placed than advertisers to solve the dilemma of the unjustifiable state of things and the diminishing excuses for inaction. After all, they are the ones financing the online advertising system in its current form and they, too, don't seem to be happy with it. And nor should they be, as when consumers get frustrated with the ads they see online, they get frustrated with the brands behind them.

Of course, the onus is not on businesses as lone warriors. Strategy-making through an innovative and value-informed framework takes trusted partners, multiple perspectives, and deep issue exploration. Here's something to jog your mind:

• Be brave to move beyond the status quo and reconstruct a system of digital advertising with privacy-conscious and human-centric KPIs.

• Apply rigour in co-creating solutions with different stakeholders in the system and importantly – involve citizens in the process.

• Be playful in imagining different ways to create mutually beneficial value exchanges with the people whose personal data is being used.

• Embrace differences without judgment to ensure all stakeholders around the table feel heard in building the way forward.

This is our take on the subject with our Clever Together values at the core. If we were to wave a magic wand, we would love to see a coming together of different parts of the targeted advertising ecosystem with experts, advocates, consumers, and regulators to align on:

• The case for change of the current targeted advertising system,

• A new set of foundational non-negotiable standards for ethical treatment of data and use of decision-making technologies that align with AI governance best practices,

• An approach to ingraining these into companies’ cultures and ways of working,

• The technical solutions needed to deliver on the new standards, controls, and information that consumers have called for, and

• Clarity on the responsibilities within the data-driven advertising supply chain, similar to how we treat physical supply chains on sustainability matters.

  
  

There is still a window of opportunity to act now and create a new ethical (and better) online advertising system for the future! And from what we're seeing it will work better for everyone involved. After all, most brands want potential customers to see their products, not be at the centre of the next scandal about the misuse of personal data.

Want to understand how emerging targeted advertising and AI personalization trends will affect your responsible marketing and brand safety practices? We can help! Contact us to explore how your organization can navigate this evolving landscape with confidence and integrity.