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By John Hood
RALEIGH — Put me down as entirely unsurprised that media companies are adding commercials back into their streaming services as a means of making them profitable. Advertising has never been as unpopular as its critics imagine — a truth that North Carolina policymakers should embrace as they try to finance new infrastructure without irritating taxpayers.
I admit to a personal stake in this debate. Two decades ago, I wrote a book entitled Selling the Dream: Why Advertising Is Good Business. It explored the history, economics, and policy implications of commercial speech, including newspaper and magazine advertising, broadcast commercials and product placement, signage and billboards, and public relations.
My argument, then and now, is that advertising confers net benefits on society. It conveys critical information about the cost, value, and availability of goods and services, fueling the innovation and competition that boost living standards over time. Contrary to popular belief, for example, services for which advertising is restricted or prohibited tend to have higher prices, not lower ones.
Do commercial messages get us to buy things we wouldn’t otherwise buy? Of course! That doesn’t mean we’re being bamboozled.
All economic activity is a process of discovery. Advertising “injects a pleasant surprise in the mind of consumers,” as one economist put it. When companies track your media consumption and purchases, generating a profile that informs the emails you get and the online ads you see, they only earn their money back if you actually buy some of what they’re selling. Did I know I wanted that John Carter, Warlord of Mars t-shirt? No. But it was a pleasant surprise to discover it.
Even abstract imagery, catchy jingles, and celebrity endorsements can aid consumers by saving time and by signaling which brands to trust (because they reasonably conclude companies that can afford pricy campaigns must have lots of repeat customers).
Sure, most of us might say we’d rather listen to music or watch a movie without commercial breaks. The critical question, however, is how much we’re willing to pay to avoid them. Since the advent of the penny press in the 1830s, audiences have paid for the media they consume in part by buying the products of advertisers. Their revealed preference — as opposed to their (cost-free) stated preference — is usually some mix of subscription or ticket price and advertising.
The National Bureau of Economic Research just released a study by scholars at Standard, Northwestern, and Carnegie-Mellon universities working in partnership with researchers at Meta, the parent company of Facebook. Since 2013, they’ve been running a gigantic experiment. They selected a subset of Facebook users to experience the social-media platform without any advertising. Using surveys, the researchers compared their experience to that of other Facebook users.
“We find that users’ valuations of Facebook are not statistically different from each other in the treatment and control groups, both in the overall sample and in individual geographies,” they wrote. That means that “either the disutility of ads for consumers is relatively small, or that there are offsetting benefits, such as helping consumers find products and services of interest.”
What do such findings have to do with state and local policy? Plenty. Just a couple of months ago, the North Carolina General Assembly overrode Gov. Roy Cooper’s veto of a bill that, among other provisions, allowed outdoor advertisers more latitude to keep foliage from obstructing motorists’ view of their billboards (so long as they compensate the state for cutting trees on public property and obtain the permission of private landowners to do the same).
State lawmakers called this one right. I’d also encourage municipalities to ease restrictions on retail signage and billboards in their jurisdictions, and to make greater use of advertising on public vehicles, infrastructure, and right-of-way to help defray the cost of operation and maintenance.
We live in a commercial society — a privilege for which we should be immensely grateful. A thriving commerce in goods and services is impossible without the freedom to engage in commercial speech.
John Hood is a John Locke Foundation board member. His latest books, Mountain Folk and Forest Folk, combine epic fantasy with early American history (FolkloreCycle.com).
I completely detest the state of media advertising now. I do not and will not ever want the ‘woke’ ads in my home. Commercials used to be entertaining, now it seems they are pushing ideologies that I don’t care to see or hear.