Tuesday, August 4, 2009

Targeting Ads, Behavioral Marketing, and the FTC

I want to come back to the issue of behavioral targeting on the web and the likelihood that we may actually get legislation to better regulate the practice. Let's begin with what to look for first in legislative efforts to protect privacy: Does it include the holy grail of the privacy movement: establishing "OPT-IN" as the standard and precedent, rather than OPT-OUT?

This is most certainly what too look for, and demand, in any legislative attempt to crack down on behavioral marketing and aggressive industry data collection practices. Jeff Chester, executive director of the Center for Digital Democracy (CDD) has been at the forefront of exposing all kinds of invasive online and mobile marketing practices as well as offering concrete regulatory measures that would more adequately protect consumer privacy.

So, before I get to the article about some positive signals being sent by Jon Leibowitz, Obama's top consumer watchdog, let me give you a few choice clips from Chester's testimony before Congress a few weeks back urging it to pass legislation that would ensure meaningful online privacy protections.

This from CDD's press release on his testimony:

As more consumers increasingly rely on the Internet to obtain such sensitive services as financial products or health information...it is especially critical that the public be assured they will be treated fairly when engaged in online commerce. Chester pointed to the failure of the regulatory system that should have protected Americans from irresponsible business practices that led to the current financial crisis.

“As with our financial system, privacy and consumer protection regulators have failed to keep abreast of developments in the area they are supposed to oversee,” he explained. “In order to ensure adequate trust in online marketing—an important and growing sector of our economy—Congress must enact sensible policies to protect consumers.” “Whether using a search engine, watching an online video, creating content on a social network, receiving an email, or playing an interactive video game, we are being digitally shadowed online,”

Our travels through the digital media are being monitored, and digital dossiers on us are being created—and even bought and sold.” Singling out behavioral and “predictive” targeting for their violations of user privacy, Chester noted that the “consumer profiling and targeted advertising take place largely without our knowledge or consent, and affects such sensitive areas as financial transactions and health-related inquiries. Children and youth, among the most active users of the Internet and mobile devices, are especially at risk in this new media-marketing ecosystem.”

Chester called on Congress to enact meaningful regulations to protect consumer privacy in the online and mobile arenas, effectively bringing the FTC’s Fair Information Practice Principles fully into the digital age. “Americans shouldn’t have to trade away their privacy and accept online profiling and tracking as the price they must pay in order to access the Internet and other digital media,” Chester declared, adding that far from being an impediment to continued growth in the online sector, meaningful privacy safeguards will actually stimulate the digital economy.

“The uncertainty over the loss of privacy and other consumer harms will continue to undermine confidence in the online advertising business,” he explained. “That’s why the online ad industry will actually greatly benefit from privacy regulation. Given a new regulatory regime protecting privacy, industry leaders and entrepreneurs will develop new forms of marketing services where data collection and profiling are done in an above-board, consumer-friendly fashion.”

Now that you have some background and understanding of the issue and topic, let's take a look at what's happening at the Federal Trade Commission and Jon Leibowitz...one of the truly positive steps the Obama Administration has taken on the privacy issue.

Business Week Reports:

Now, Leibowitz wants to terminate—or at least rein in—a different practice he finds no less harmful to consumers: delivering ads to individuals based on the Web pages they visit and searches they carry out. Appointed by President Barack Obama in February to run the country's top consumer watchdog, Leibowitz has made so-called behavioral targeting a top priority.

How far he goes in regulating the practice could have big implications for a host of companies that depend on Web advertising and engage in some form of targeting. These include Google (GOOG), Facebook, and Microsoft (MSFT), which on July 29 announced a plan to partner with Yahoo! (YHOO) in the area of Internet search. It would also affect the way legions of companies and advertisers craft marketing campaigns.


Researcher eMarketer estimates that advertisers will spend $960 million on personally targeted ads next year, accounting for about one-fifth of all display ads on the Web, up from $705 million this year, when they accounted for 15% of the total. The average Web surfer benefits, too: An array of free services, from Google's Gmail to social network Facebook, are partly supported by targeted ads.

But the FTC and a growing chorus of consumer advocates warn that online advertisers are not always forthcoming about their use of targeting. And some are downright deceptive, Leibowitz said in an interview with BusinessWeek. "There's a critical issue about whether consumers have notice of what companies are doing with their information and whether they're making informed choices about [sharing] information," Leibowitz explains. For example, if an advertiser sends an ad based on sensitive information about a person's health, "you might want to take that off the table."


But Leibowitz hints that he's growing impatient with marketers' efforts. "It's not clear that they're moving far enough or fast enough, even though they're making some progress," Leibowitz says. He supports the controversial approach of making more of the targeted ads on the Internet "opt-in"—meaning they would require consent from Web users before collecting data—and is in talks with members of Congress intent on drafting legislation for online ads.


Although the FTC has no direct sway over legislators, Leibowitz is building alliances in Washington. In recent weeks he's met with Representative Rick Boucher (D-Va.), who plans to introduce a bill by September that may require opt-in consent for certain types of online ads. "My overall purpose is not to interfere with the legitimate practice of people who are doing targeted advertising," Boucher says. "My goal is to try to create a greater sense of confidence on the part of consumers."

So there you have it. An FTC chairman that's actually looking out for our interests rather than those of the corporations that profit off our private information. Nice. This is a bill I'll definitely be following closely on this blog.

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