This ITEP blog, written by Matthew Gardner, asserted that “Netflix posted its largest-ever U.S. profit in 2018—$845 million—on which it didn’t pay a dime in federal or state income taxes. In fact, the company reported a $22 million federal tax rebate.” Netflix’s 2018 10-K does show a “current provision” for federal income tax of -$22 million on page 58. The same page shows U.S. net income before taxes of $845 million. Both match what ITEP says.
However, provisions for income taxes in accordance with GAAP accounting are often very different from cash paid for taxes. The -$22 million provision is not a cash rebate or refund like Gardner says. He also conveniently omitted that page 42 of the 10-K shows Netflix paid income taxes of $131 million. The 10-K does not say how much of this was U.S. federal and state income tax.
A few days later a Snopes article asked “Did Netflix Make $845M In Profit and Pay $0 in Taxes Under New Tax Law?” No true or false judgment was given. To Snopes' credit, the article recognizes Netflix's taxes paid, $131 million. The article quoted Gardner of ITEP: “The popular video streaming service Netflix posted its largest-ever U.S. profit in 2018 — $845 million — on which it didn’t pay a dime in federal or state income taxes. In fact, the company reported a $22 million federal tax rebate.” …. "In all likelihood, every last dime of that $131 million has to do with foreign income and foreign taxes. We don’t know for sure but it sure looks that way based on current and cash income taxes.”
The way something looks is not proof. Gardner expresses no similar uncertainty and says nothing about Netflix paying foreign income taxes in his ITEP blog article. The only way to really know how much Netflix paid in U.S. federal income taxes is knowing what is on Netflix's U.S. Form 1120, which is a private matter between Netflix and the IRS. State income tax filings are likewise private.
Regarding Netflix's foreign operations, page 58 shows a provision of -$133 million for foreign taxes. So Gardner might be correct about the $131 million taxes paid being to foreign countries. This likely helped reduce Netflix's U.S. income tax provision, being that Form 1120 allows a credit for foreign taxes. The main U.S. corporate income tax rate of 21% suggests a crude tax estimate of 0.21 * $845 million = $177 million. The $131 million foreign taxes paid is large relative to that. Also significant are the deferred tax provisions of -$37 million federal and -$52 million state. This suggests larger deductions (faster depreciation) of capital spending for federal and state income taxes purposes than per GAAP accounting. (The difference will be reversed in future years.)
Lastly, neither Gardner nor Snopes said anything about Netflix employees paying federal or state income taxes. It seems Gardner's overwhelming purpose is to promote the idea that corporations per se should be taxed more. "When hugely profitable corporations avoid tax, that means smaller businesses and working families must make up the difference." That is clearly a non sequitur.
Friday, November 29, 2019
Monday, November 25, 2019
Amazon income taxes addenda
I did a Google search for these terms: Amazon income tax paid 2018. The Snopes article I commented on Nov. 21 was only one of the many results. Some of the more well-known names with stories about Amazon’s 2018 income tax were: USA Today, Yahoo Finance, CNBC, CNN, Business Insider, New York Times, The Washington Post, The Wall Street Journal, Forbes, Fortune, The Guardian, HuffPost, National Review, Fox Business.
The ITEP blog, which I referred to on Nov. 21, seems to have prompted this slew of stories. Most of them refer to ITEP. Like I said then, ITEP cited GAAP accounting numbers from Amazon’s 10-K. It missed or ignored the nearby taxes paid numbers, despite the article being allegedly about taxes paid.
I didn’t take the time to completely read all of the stories, but most didn’t say much more than echo ITEP – Amazon had a $11.2 billion profit but paid no income taxes in 2018. The Wall Street Journal (paywalled), National Review, and Forbes were exceptions. Forbes was an exception as follows:
1. Despite the title “Why Amazon Pays No Taxes,” the story says Amazon paid income taxes for 2017 and 2018. “In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes.” Nevertheless, a bit later it says, “It is true that in the last two years, Amazon did not pay federal taxes.” Was all of the $1.18 billion local, state or international taxes and none U.S. federal income taxes? (The expression "accounting for" is ambiguous.) I much doubt it. To know one would need to see Amazon’s IRS Form 1120, which is a private matter between Amazon and the IRS.
2. It explained why Amazon pays little or no taxes. The big reason is that Amazon uses what could be profits to reinvest in its business and hire more employees. Either creates an expense which reduces profit and taxable income.
3. Amazon’s employees pay income taxes.
The Forbes story gave no indication how much Amazon employees pay in federal income taxes. Payscale.com says the average salary at Amazon is $102,000. Wikipedia says Amazon has 647,500 employees. Assume a 15% average income tax rate. 647,500* $102,000 * 0.15 = $9.9 billion. (In addition, the employees and Amazon combined pay roughly the same amount of payroll taxes to Social Security and Medicare.) That’s a rough estimate but 88% of Amazon’s 2018 profit. It might be higher, since employees who received and exercised stock options would likely be taxed at a rate higher than 15%. Amazon’s 10-K says stock-based compensation reduced its calculated tax by about $1 billion. The recipients likely paid more.
I read The Washington Post story, since Amazon’s CEO Jeff Bezos owns the Post. The story gave a link to the ITEP blog post and repeated the $11.2 billion in profits but $0 federal income tax paid. It quoted an Amazon spokeswoman who said Amazon paid $2.6 billion in corporate tax over the last three years, which agrees with the 10-K. The author otherwise ignored, missed, or didn’t even look at what the 10-K said about taxes paid.
The ITEP blog, which I referred to on Nov. 21, seems to have prompted this slew of stories. Most of them refer to ITEP. Like I said then, ITEP cited GAAP accounting numbers from Amazon’s 10-K. It missed or ignored the nearby taxes paid numbers, despite the article being allegedly about taxes paid.
I didn’t take the time to completely read all of the stories, but most didn’t say much more than echo ITEP – Amazon had a $11.2 billion profit but paid no income taxes in 2018. The Wall Street Journal (paywalled), National Review, and Forbes were exceptions. Forbes was an exception as follows:
1. Despite the title “Why Amazon Pays No Taxes,” the story says Amazon paid income taxes for 2017 and 2018. “In 2017, Amazon paid close to $1 billion in income tax. In 2018, the amount jumped to $1.18 billion, accounting for local, state, and international taxes.” Nevertheless, a bit later it says, “It is true that in the last two years, Amazon did not pay federal taxes.” Was all of the $1.18 billion local, state or international taxes and none U.S. federal income taxes? (The expression "accounting for" is ambiguous.) I much doubt it. To know one would need to see Amazon’s IRS Form 1120, which is a private matter between Amazon and the IRS.
2. It explained why Amazon pays little or no taxes. The big reason is that Amazon uses what could be profits to reinvest in its business and hire more employees. Either creates an expense which reduces profit and taxable income.
3. Amazon’s employees pay income taxes.
The Forbes story gave no indication how much Amazon employees pay in federal income taxes. Payscale.com says the average salary at Amazon is $102,000. Wikipedia says Amazon has 647,500 employees. Assume a 15% average income tax rate. 647,500* $102,000 * 0.15 = $9.9 billion. (In addition, the employees and Amazon combined pay roughly the same amount of payroll taxes to Social Security and Medicare.) That’s a rough estimate but 88% of Amazon’s 2018 profit. It might be higher, since employees who received and exercised stock options would likely be taxed at a rate higher than 15%. Amazon’s 10-K says stock-based compensation reduced its calculated tax by about $1 billion. The recipients likely paid more.
I read The Washington Post story, since Amazon’s CEO Jeff Bezos owns the Post. The story gave a link to the ITEP blog post and repeated the $11.2 billion in profits but $0 federal income tax paid. It quoted an Amazon spokeswoman who said Amazon paid $2.6 billion in corporate tax over the last three years, which agrees with the 10-K. The author otherwise ignored, missed, or didn’t even look at what the 10-K said about taxes paid.
Saturday, November 23, 2019
Free market healthcare
This EconTalk interview of Dr. Keith Smith gives an insight into what free market health care. He co-runs a surgery center in Oklahoma that shows prices in advance, honors them afterwards, and only accepts cash, checks, and credit cards. The surgery center doesn't deal with insurance or Medicare. It has worked with employers who self-insure healthcare for their employees. Dr. Smith also cites tricks that hospitals use to get more money from the federal government and that insurance companies use to get more money from employers.
Thursday, November 21, 2019
Snopes re Amazon income taxes
On November 19, 2019 the fact-checking website Snopes asked, Did Amazon Pay No Federal Income Taxes in 2018? Their answer was True. Link. About 14 months ago Snopes asked, Did Amazon Pay No Federal Income Taxes in 2017? Their answer was True. Link.
Snopes erred both times. I quote from the later article: "Though Amazon’s actual U.S. tax filings are not public, a broad overview of their overall tax burden can be found in their SEC 10-K filing. In 2018, the company made over $200 billion in sales, but paid no money to the U.S. government in the form of income tax (in fact, the government actually owed the company some $129 million as noted in parentheses in the chart below):"
I couldn't copy and paste here the chart from the Snopes article, but it shows "current" U.S. Federal taxes of -$137 million for 2017 and -$129 million for 2018. Snopes ignored the $565 million deferred tax provision for 2018. $565 - $129 = +$436. Importantly, except to Snopes, closely above and below those numbers say that the numbers are provisions for income taxes. The numbers are not what Amazon paid both years, but what were accrued both years following GAAP accounting rules. There can be big differences between the two, especially since the main corporate income tax rate was reduced from 35% to 21% effective 2018.
Indeed, Amazon's 2018 10-K belies Snopes' answering True both years. Regarding Amazon's U.S. federal income tax, the same page of the 10-K says, "Cash taxes paid, net of refunds, were $412 million, $957 million, and $1.2 billion for 2016, 2017, and 2018" (my bold). Alex Kasprak, author of both articles, apparently does not know the difference between provision and paid or between accrued and paid. He ignored or missed what Amazon paid.
This ITEP blog makes the same mistakes about Amazon's 2018 taxes. With a name like Institute on Taxation and Economic Policy, shouldn't it be more attentive to facts? With abettors like these, Bernie Sanders can lie "with authority" (link)!
The Snopes article adds that Amazon takes a tax deduction for the profits an employee gets from (exercising) stock options granted by Amazon. (Contra Snopes, the amount of the employee's salary need not exceed $1 million for this deduction.) The article says this like it is fishy, but current tax law allows it and there is an explanation. Suppose an X Corp employee's exercise price is $500 per share, and X Corp's share price at time of exercise and when the employee sells them is $1,500. To acquire the shares on the open market, the employee pays $500 and X Corp pays the other $1,000. The employee profits $1,000, and the $1,000 is taxable income for the employee. The $1,000 is a compensation expense to X Corp, like the employee's salary is.
The Snopes article adds that Amazon takes a tax deduction for the profits an employee gets from (exercising) stock options granted by Amazon. (Contra Snopes, the amount of the employee's salary need not exceed $1 million for this deduction.) The article says this like it is fishy, but current tax law allows it and there is an explanation. Suppose an X Corp employee's exercise price is $500 per share, and X Corp's share price at time of exercise and when the employee sells them is $1,500. To acquire the shares on the open market, the employee pays $500 and X Corp pays the other $1,000. The employee profits $1,000, and the $1,000 is taxable income for the employee. The $1,000 is a compensation expense to X Corp, like the employee's salary is.
Monday, November 18, 2019
Employer-sponsored health insurance #2
In my my previous post I said a little about Ed Dolan's idea of making healthcare deductibles higher for higher income people. This is not the case for Medicare now. Everybody on Medicare faces the same dollar amount. Dolan's idea is novel, and I believe it's worth considering.
Suppose poor Pete and rich Rich both have Medicare. Pete's income is $30,000, he has more debt than savings, and Rich's is $300,000 with substantial savings and no debt. Each is in the hospital for several days for an operation. This results in a $200,000 bill for each. Medicare will pay the same for each, about $200,000 - $1,364 (Part A deductible) = $198,636. (This is simplified, which should be obvious if you have seen a hospital bill or one for outpatient surgery.) Pete might have a Medigap policy to cover the $1,364. Else, it is probably a significant expense to him. Whether Rich has a Medigap policy or not, he could easily afford the $1,364.
One may argue the Medicare law treats both equally, but that is only in terms of dollars. On the other hand, one may argue the Medicare law treats them unequally in terms of percent of income or wealth. One may argue that Rich is entitled to as much or more from Medicare because he paid far more in payroll taxes over his working lifetime than Pete did. I have no incontestable answer to what is equitable here, i.e. how much Medicare ought to pay. Anyway, it seems that Medicare paying less on behalf of Rich is not an unreasonable opinion. How much less is very debatable. If it were much less, let's assume that Rich had the opportunity to purchase a Medigap policy with a lower deductible to recognize his higher Medicare deductible if he wished to buy insurance for the extra risk.
One may argue that using income to calculate how much Medicare pays adds an administrative burden on Medicare. That is true, but Medicare already does that for Part B and Part D premiums.
Suppose poor Pete and rich Rich both have Medicare. Pete's income is $30,000, he has more debt than savings, and Rich's is $300,000 with substantial savings and no debt. Each is in the hospital for several days for an operation. This results in a $200,000 bill for each. Medicare will pay the same for each, about $200,000 - $1,364 (Part A deductible) = $198,636. (This is simplified, which should be obvious if you have seen a hospital bill or one for outpatient surgery.) Pete might have a Medigap policy to cover the $1,364. Else, it is probably a significant expense to him. Whether Rich has a Medigap policy or not, he could easily afford the $1,364.
One may argue the Medicare law treats both equally, but that is only in terms of dollars. On the other hand, one may argue the Medicare law treats them unequally in terms of percent of income or wealth. One may argue that Rich is entitled to as much or more from Medicare because he paid far more in payroll taxes over his working lifetime than Pete did. I have no incontestable answer to what is equitable here, i.e. how much Medicare ought to pay. Anyway, it seems that Medicare paying less on behalf of Rich is not an unreasonable opinion. How much less is very debatable. If it were much less, let's assume that Rich had the opportunity to purchase a Medigap policy with a lower deductible to recognize his higher Medicare deductible if he wished to buy insurance for the extra risk.
One may argue that using income to calculate how much Medicare pays adds an administrative burden on Medicare. That is true, but Medicare already does that for Part B and Part D premiums.
Sunday, November 17, 2019
Employer-sponsored health insurance #1
I missed this EconTalk interview about employer-sponsored health insurance when it occurred in January. The topic is still very relevant, so the interview is still worth hearing/reading. My comments follow.
Ed Dolan was the guest. He said he knew of no major countries other than the United States where health insurance is tied to a job. Some who commented on the interview said that wasn't true, which Dolan acknowledged. I consider that a very minor flaw, and he made several good points.
The structure of the health insurance market was discussed, but not that there are really two very different parts to that structure. One part consists of people who have employer-provided health insurance or they buy individual coverage from an insurer (some on the Obamacare exchanges). The second part consists of people who have (1) Medicare Advantage, or (2) original Medicare plus perhaps a Medicare supplement or Medigap policy or Medicaid. A supplement or Medigap policy or Medicaid pays for healthcare in addition to what original Medicare pays.
The first part consists mostly of people under age 65, and the second part mostly people age 65 or older. The exception for the first part is that a few people under age 65 have Medicare due to disability. The exception for the second part is that a few people age 65 or older do not have Medicare or Medicare Advantage because they still work and have employer-sponsored insurance.
The second part of the market is quite competitive. Many insurers offer Medicare supplement (Medigap) policies and Medicare Advantage policies. They are often advertised, especially during open enrollment (Oct. 15 to Dec. 7). In contrast, the first part of the market is not very competitive. An employee must generally choose from a very small number of plans the employer offers. Not many people buy insurance policies for themselves, so the market is small and the risk pool is small and very risky to insurers. The buyers are the self-employed, not employed, part-timers, and employees of smaller employers that do not provide health insurance. Many complain about the premiums being too high. I don't see many advertisements aimed at potential buyers. The number of persons with employer-sponsored insurance is several (7 or 8) times as many as the number buying individual insurance on their own.
Here I argued that making employer-paid insurance premiums taxable income to the employee would significantly change the nature of the first market (and lower government deficits). Some employees, considering how much they pay into an employer plan plus the additional income tax, would choose to switch to the individual policy market. Many could switch eventually, with fewer employers offering health insurance and higher wages instead. The individual market risk pool would become much larger, with more choices and more competition. Also, people who have employer-sponsored coverage tend be healthier than average. If many of them moved to the individual market, there would be more spreading of the risk and lower, more predictable claims, which permits lower average premiums.
I believe the Universal Catastrophic Coverage that Dolan proposes would be much better than the current system. Higher income folks having higher deductibles, i.e. higher out-of-pocket expenses, makes sense. They can better afford it, and it would reduce government spending on healthcare. I find it ironic that people such as Bernie Sanders and Elizabeth Warren don't advocate higher deductibles, i.e. higher out-of-pocket expenses, for people with higher incomes. They only advocate lower deductibles to benefit middle and lower income people. In general higher income people utilize healthcare more and live where medical provider charges are higher. Lower deductibles benefit higher income people, too! Why do Sanders and Warren desire a plan that does that? Of course, both are advocates of ever higher government spending with little or no concern for government deficits and debt. As is, Medicare and Medicaid will add to ever increasing future deficits, much due to the aging baby boomers. Medicare spending is expected to double in 10 years (link).
Ed Dolan was the guest. He said he knew of no major countries other than the United States where health insurance is tied to a job. Some who commented on the interview said that wasn't true, which Dolan acknowledged. I consider that a very minor flaw, and he made several good points.
The structure of the health insurance market was discussed, but not that there are really two very different parts to that structure. One part consists of people who have employer-provided health insurance or they buy individual coverage from an insurer (some on the Obamacare exchanges). The second part consists of people who have (1) Medicare Advantage, or (2) original Medicare plus perhaps a Medicare supplement or Medigap policy or Medicaid. A supplement or Medigap policy or Medicaid pays for healthcare in addition to what original Medicare pays.
The first part consists mostly of people under age 65, and the second part mostly people age 65 or older. The exception for the first part is that a few people under age 65 have Medicare due to disability. The exception for the second part is that a few people age 65 or older do not have Medicare or Medicare Advantage because they still work and have employer-sponsored insurance.
The second part of the market is quite competitive. Many insurers offer Medicare supplement (Medigap) policies and Medicare Advantage policies. They are often advertised, especially during open enrollment (Oct. 15 to Dec. 7). In contrast, the first part of the market is not very competitive. An employee must generally choose from a very small number of plans the employer offers. Not many people buy insurance policies for themselves, so the market is small and the risk pool is small and very risky to insurers. The buyers are the self-employed, not employed, part-timers, and employees of smaller employers that do not provide health insurance. Many complain about the premiums being too high. I don't see many advertisements aimed at potential buyers. The number of persons with employer-sponsored insurance is several (7 or 8) times as many as the number buying individual insurance on their own.
Here I argued that making employer-paid insurance premiums taxable income to the employee would significantly change the nature of the first market (and lower government deficits). Some employees, considering how much they pay into an employer plan plus the additional income tax, would choose to switch to the individual policy market. Many could switch eventually, with fewer employers offering health insurance and higher wages instead. The individual market risk pool would become much larger, with more choices and more competition. Also, people who have employer-sponsored coverage tend be healthier than average. If many of them moved to the individual market, there would be more spreading of the risk and lower, more predictable claims, which permits lower average premiums.
I believe the Universal Catastrophic Coverage that Dolan proposes would be much better than the current system. Higher income folks having higher deductibles, i.e. higher out-of-pocket expenses, makes sense. They can better afford it, and it would reduce government spending on healthcare. I find it ironic that people such as Bernie Sanders and Elizabeth Warren don't advocate higher deductibles, i.e. higher out-of-pocket expenses, for people with higher incomes. They only advocate lower deductibles to benefit middle and lower income people. In general higher income people utilize healthcare more and live where medical provider charges are higher. Lower deductibles benefit higher income people, too! Why do Sanders and Warren desire a plan that does that? Of course, both are advocates of ever higher government spending with little or no concern for government deficits and debt. As is, Medicare and Medicaid will add to ever increasing future deficits, much due to the aging baby boomers. Medicare spending is expected to double in 10 years (link).
Friday, November 15, 2019
Surveillance Capitalism
Last week I watched a PBS Frontline show about artificial intelligence. One person on the show (a little past midway) was Shoshana Zuboff, author of The Age of Surveillance Capitalism (link). It was the first time I heard the term surveillance capitalism. I was curious enough to borrow her book from the library and start reading it.
The book is long, nearly 500 pages plus acknowledgements, notes, and index. I agree with several of the reviews on Amazon that the book is twice as long as it needs to be. I read about half before finding that she was interviewed by Russ Roberts on his EconTalk blog (link) in July. I may not read the rest of the book, since I suspect there is little to learn that goes beyond what is in the EconTalk interview.
She presents surveillance capitalism as a new kind of capitalism, quite unlike, for example, industrial capitalism or the mass production capitalism of the first half of the 20th century. I believe surveillance assisted advertising would be more accurate, but not near as attention grabbing. According to her, "Surveillance capitalism claims private human experience for the market dynamic. And that private human experience is reinterpreted as a free source of raw material for translation into behavioral data."
Zuboff is very disturbed about it, enough to label it Big Other, an allusion to Big Brother. Online companies, especially Google and Facebook, can track users and collect personal information about them. Their purpose is to present ads for its advertisers, who want to sell goods or services to the users, and be paid revenues for doing so. Roberts asks her several times what is the harm in this. He agrees that advertising is often annoying and in rare circumstances might lead to harm, but in general, what is the enormous harm that Zuboff tries to portray? She doesn't answer his questions directly, but dances around the topic and moves on to talk about something else.
In its early years Google's mission was to create the best search engine. The user would enter search terms (keywords) and Google would hunt for and show the user the websites with the content most relevant to the keywords. However, this didn't yield much revenue. The Google founders at first disdained but then turned to advertising. By showing ads along with search results, Google could collect more revenue from advertisers, and Google desired the revenue to improve its search methods. At first searches and ads presented were based only on the keywords the user entered. Then Google decided that also getting and using info about the user could make the advertising more effective. The oft-used term is targeted advertising.
The metric of effectiveness is click-through rates, a topic Zuboff covers some. However, she says very little to quantify them. She does say click-through rates skyrocketed at Google and elsewhere after search engines started using personal information of users as well as keywords. What does "skyrocket" mean -- go from less than 1% to 1.5% or 1% to 2%? She mentions increases in her book, but not from x to x+Δx, only Δx. Anyway, she portrays the after state with generous helpings of the words certain and certainty. For example, she says to Russ Roberts: "What are these businesses selling? They are selling certainty. They are not selling certainty about, you know, oil futures or pork bellies or whatever. They are selling certainty about future human behavior. They are trying to get as close as possible to being able to guarantee outcomes to their business customers." Huh? A click-through rate of 1-2% or even 3% is certainty or a guarantee?
During her interview with Roberts she says: "[T]he impact was a revenue increase of 3,590%, just during those years 2000-2004." Okay, 36 or 37 times as much. What part was due to an increase in click-through rates versus the number of searches and how much Google charged advertisers for more prominent placement of ads?
Incidentally, as much as feasible, I use the Brave browser, search engine DuckDuckGo, and AdBlock Plus to minimize the barrage of advertising and other attempts at grabbing my attention when online. (Sometimes I use Google because it allows more detailed search terms and shows more results than DuckDuckGo.)
The book is long, nearly 500 pages plus acknowledgements, notes, and index. I agree with several of the reviews on Amazon that the book is twice as long as it needs to be. I read about half before finding that she was interviewed by Russ Roberts on his EconTalk blog (link) in July. I may not read the rest of the book, since I suspect there is little to learn that goes beyond what is in the EconTalk interview.
She presents surveillance capitalism as a new kind of capitalism, quite unlike, for example, industrial capitalism or the mass production capitalism of the first half of the 20th century. I believe surveillance assisted advertising would be more accurate, but not near as attention grabbing. According to her, "Surveillance capitalism claims private human experience for the market dynamic. And that private human experience is reinterpreted as a free source of raw material for translation into behavioral data."
Zuboff is very disturbed about it, enough to label it Big Other, an allusion to Big Brother. Online companies, especially Google and Facebook, can track users and collect personal information about them. Their purpose is to present ads for its advertisers, who want to sell goods or services to the users, and be paid revenues for doing so. Roberts asks her several times what is the harm in this. He agrees that advertising is often annoying and in rare circumstances might lead to harm, but in general, what is the enormous harm that Zuboff tries to portray? She doesn't answer his questions directly, but dances around the topic and moves on to talk about something else.
In its early years Google's mission was to create the best search engine. The user would enter search terms (keywords) and Google would hunt for and show the user the websites with the content most relevant to the keywords. However, this didn't yield much revenue. The Google founders at first disdained but then turned to advertising. By showing ads along with search results, Google could collect more revenue from advertisers, and Google desired the revenue to improve its search methods. At first searches and ads presented were based only on the keywords the user entered. Then Google decided that also getting and using info about the user could make the advertising more effective. The oft-used term is targeted advertising.
The metric of effectiveness is click-through rates, a topic Zuboff covers some. However, she says very little to quantify them. She does say click-through rates skyrocketed at Google and elsewhere after search engines started using personal information of users as well as keywords. What does "skyrocket" mean -- go from less than 1% to 1.5% or 1% to 2%? She mentions increases in her book, but not from x to x+Δx, only Δx. Anyway, she portrays the after state with generous helpings of the words certain and certainty. For example, she says to Russ Roberts: "What are these businesses selling? They are selling certainty. They are not selling certainty about, you know, oil futures or pork bellies or whatever. They are selling certainty about future human behavior. They are trying to get as close as possible to being able to guarantee outcomes to their business customers." Huh? A click-through rate of 1-2% or even 3% is certainty or a guarantee?
During her interview with Roberts she says: "[T]he impact was a revenue increase of 3,590%, just during those years 2000-2004." Okay, 36 or 37 times as much. What part was due to an increase in click-through rates versus the number of searches and how much Google charged advertisers for more prominent placement of ads?
Incidentally, as much as feasible, I use the Brave browser, search engine DuckDuckGo, and AdBlock Plus to minimize the barrage of advertising and other attempts at grabbing my attention when online. (Sometimes I use Google because it allows more detailed search terms and shows more results than DuckDuckGo.)
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