There is a storm brewing in the online behavioral-advertising world, where consumer clicks are tracked and tabulated to help online advertisers better target promotional messages.
At this point, the argument boils down whether the rapidly evolving industry that makes its money advertising to people surfing the Web-and by figuring out exactly which ads those people want to see-should continue to be self-regulated with respect to consumer privacy rules, or whether state or federal legislators should step in to limit the amount of information that online advertisers such as Microsoft, Google and Yahoo can collect and use.
There are a number of factors at play. One is that the online advertising world has morphed dramatically since industry self-regulations were initially introduced in 2002, as has the technology that helps companies track consumer clicks (a consumer can be anyone online, not just shoppers).
For example, newer companies like Phorm have developed tools that can track every single click a person makes online by collecting clicks from a user’s Internet service provider, which Phorm has been able to do through contracts with British telecommunications companies, to much consumer uproar. At the same time, consumers have become more aware of privacy issues related to Internet surfing-in every area from identity theft to outted shopping secrets on Facebook.
The question boils down to this: How much information-and what type of information-should companies be able to collect and utilize about people while they are online? The answers are not as forthcoming.
New York Assemblyman Richard Brodsky said behavioral advertising snips away individual privacy rights and should be regulated. He has introduced a bill in New York that would, in effect, establish an Internet advertising bill of rights for consumers. And because it would be difficult for online companies to adhere to legislation in one state without impacting interactions with consumers in other states, the New York legislation could well turn into a de facto national standard.
Brodsky said the bill is being sponsored in both the Senate and Assembly halls in Albany, N.Y.
“We’re talking to people about it,” he said. “This is a clear and pressing issue.”
While it’s difficult to determine the timeline of the legislation, Brodsky said the bill will likely change from its original form once he hears back from Microsoft, Google and Yahoo. “We want to see what their views are and what changes they want,” he said.
The legislation has several main tenants geared toward online advertisers: To limit the use of “personally identifiable information about sensitive medical or financial data, sexual behavior or orientation, or social security number” for online preference marketing; to make “all reasonable efforts” to ensure information is collected from reliable sources and that the data is protected from “loss, misuse, alternation, destruction or improper access”; that any entity that collects or uses personally identifiable information post a “clear and conspicuous notice” on their Web site telling consumers about their data collection; and that consumers have a clear option for opting out of personal data collection activities.
Opponents of the New York legislation-there is a similar bill cooking in Connecticut-say the bill is lifted almost word-for-word from the prevailing self-regulation standards put forth by the Network Advertising Initiative, which are not adequate in the first place. NAI’s mission it is to provide both information and a mechanism for consumers to monitor and control their online experience and to provide a platform for the development of standards and policies for online marketers, according to the group’s Web site.
“The bill tracks extremely closely to the NAI initiative,” said Alyssa Cooper, chief computer scientist with the Center for Democracy & Technology. “It looks to take self-regulation and put it into legislation. Is that appropriate? It depends on what the status of the self-regulatory scheme is.”
A Lot Has Changed in Eight Years
Cooper said the NAI’s regulations grew out of an incident in 1999 when DoubleClick-which is in the process of being acquired by Google-wanted to merge with Abacus, a company that tracked offline what DoubleClick tracks online: consumer response to ads.
“That was eight years go,” Cooper said. “In those years a lot has changed-the business model, the technology, the players have changed. The whole landscape has changed dramatically. We feel that those eight years of change have caused NAI’s standards to not hold up. In some ways [some people] didn’t think they were adequate in the first place.”
Like Brodsky’s bill, the NAI’s Self-Regulatory Principals suggest that advertisers not use personally identifiable information-such as medical or financial data or social security numbers-for online preference marketing. In January, NAI, working with the Federal Trade Commission, came out with a proposal to upgrade the regulations. The new rules would cover a number of areas, including: scope and enforcement; sensitive consumer characteristics; choice enabling technologies; consumer education; standards for use of personally identifiable information; and membership outreach.
Membership outreach is a key issue for the CDT’s Cooper, who said that legislation-federal rather than state-needs to be in place to protect consumers, rather than relying on self-regulation.
“The [NAI] regulatory body is suggesting [updated] self-regulation, which suggests to us that self-regulation isn’t working,” she said. “It’s only covering a quarter of the industry. There are many more advertisers than there are members of NAI. How can it be enforceable when you can’t convince people to join the group?”
Assemblyman Brodsky bristles at the suggestion that his consumer bill of rights amendment mirrors NAI’s regulations.
“It’s not [like NAI’s]. We talked to a lot of people. There are a lot of people with good ideas,” he said.
Brodsky said the bill should become a de facto national standard, though he is unsure of the legislation’s timeline through Albany’s political process. “I’ve said to the industry that it makes sense to try and turn this into something that other states can do as well,” he said.
Mike Zaneis, vice president for public policy for the Interactive Advertising Bureau, an industry group that represents online advertisers like Google and Yahoo, along with a good number of online media companies, said any legislation would be harmful to both online companies and consumers. IAB, which helped draft regulations around decreasing pop-up ads and supported federal legislation to increase enforcement against spyware, said industry self-regulation is the better option.
“We’re not averse [to legislation] if we can identify real concerns and come up with real solutions,” Zaneis said. “But there are people with ulterior motives that want to regulate advertising because they don’t like advertising.”
Zanies said the bill introduced by Brodsky is a solution searching for a problem.
“There is no demonstrable consumer harm,” he said. “Our customers are not telling us that relevant advertising is bad. Actually it’s the opposite. They’re telling us it’s better than getting random ads.”
From the IAB’s perspective, there is a tradeoff for a free Internet, with online advertising a by-product of non-subscription based content-news, videos, blogs, search engines and almost anything else-that is supported through advertising revenues.
“There is a direct consumer benefit [to online advertising],” Zaneis said. “What we’re not hearing is consumer harm.”