Winning With Authority

January/February 2008 Issue: Page 36

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Some see the increased involvement of the government in online marketing as Big Brother, while others say it's the reality of big business.

It's all good – from online advertising being up 25 percent, according to the IAB; to online commerce on the rise 23 percent, according to comScore; to Google search queries that are up 41 percent, per Nielsen//NetRatings. It's clear that online marketing grew strongly through the first three quarters of 2007.

However, as industries grow, so does the attention paid by state and federal legislators, regulatory bodies and enforcement agencies. From the Federal Trade Commission (FTC), to Congress, to state attorneys general, to the courts, those empowered to oversee online marketing took a more active role in 2007. While the focus was more on enforcing existing laws to protect privacy and eliminate fraud than expanding authority, the active deliberations over the government's role in guiding online marketing indicate that more rules could be on the way. Here is a rundown of the key governmental activities and what they mean to your future.

Targeting the Targeters

Behavioral targeting, which delivers relevant ads based on consumer interests as determined by prior online activities, is growing in popularity with online marketers, but privacy advocates are calling for government intervention. Marketers' ability to more closely track – and share – information about likes and purchases will likely lead to a showdown in the courts or the halls of Congress.

Privacy groups prompted the FTC – for the first time in seven years – to hold a "town hall meeting" to discuss behavioral targeting and consumer protection. More than a dozen privacy groups either spoke at the November event or issued statements calling for greater FTC oversight of behavioral targeting.

Pam Dixon, executive director of the World Privacy Forum (WPF), says more government intervention is needed because the industry has been unwilling to self-regulate, and because it must be made simpler for individuals to prevent their online activities from being tracked. "The oversight has not been there," Dixon says.

Opting out of cookie tracking through a Web browser doesn't guard against other technologies used in tracking, Dixon notes. The current system for allowing consumers to opt out of being tracked isn't working. Her organization issued a report criticizing the National Advertising Initiative (NAI) – a group that was formed after the last FTC meeting on targeting – as ineffectual because technology has far surpassed its requirements.

NAI has been criticized because of a lack of publicity and public awareness, and because many marketing organizations have not joined the voluntary effort. Advertising.com, Double- Click.com, Revenue Science.com and Yahoo are current NAI members, and Microsoft and Google submitted applications to join late in 2007.

Dixon says technologies such as Flash and Microsoft's Silverlight have grown well beyond the narrow definition of tracking by cookies as originally set up by the NAI. Deleting cookies and configuring a browser to protect against tracking are too cumbersome for most consumers, she says. According to the WPF report " … the opt-out is counterintuitive, difficult to accomplish, easily deleted by consumers, and easily circumvented."

The WPF and eight other organizations are calling for the FTC to set up a national "Do Not Track" list, where consumers could opt out of being tracked. The proposed system would require marketers to comply regardless of the technology being used. "It has to be a one-stop shop for consumers ... they should not have to opt out individually to different types of ads," according to Dixon.

Alissa Cooper, policy analyst at the nonprofit Center for Democracy and Technology, which joined in the request for a Do Not Track list, says legislative action might also be necessary to create and enforce the list. To make consumers more aware of how they are being tracked, Cooper suggests making the privacy controls in Web browsers more accessible to consumers, and to code information into the ads themselves about the tracking techniques. For example, right-clicking on an ad could provide details about the tracking mechanism and how to opt out, she says.

Cooper says marketers have a "tremendous amount of interest in behavioral targeting," but "it remains to be seen if the cost of building behavioral programs is worth it in the end."

Just days after the FTC meeting took place, the Center for Digital Democracy and the U.S. Public Interest Research Group filed a complaint with the FTC asking for more involvement in regulating behavioral marketing activities. New marketing technologies "have sharpened the precision with which Internet users are tracked and targeted," including "schemes on the part of both Facebook and MySpace, that make clear the advertising industry's intentions to move full-speed ahead without regard to ensuring consumers are protected," according to a letter from the groups to the FTC.

Mike Zaneis, the vice president of public policy for the Interactive Advertising Bureau, says a Do Not Track list is unnecessary and would be overly complicated to administer. Zaneis says the online marketing industry is "in near unanimity in opposition," to the government overseeing a Do Not Track website.

Government-imposed protections could "block large swathes of the Internet," Zaneis says. Sites that personalize e-commerce options or that customize content might be blacklisted under such a system.

What Consumers Want

Unlike the Do Not Call list, which was set up by the government because of frustrations with telemarketers, Zaneis says there is "not the same outcry from consumers." Research conducted by the IAB indicates that consumers would be willing to pay to receive more relevant ads, according to Zaneis.

One member of the U.S. House of Representatives believes more oversight is needed. Representative Edward J. Markey, a democrat from Massachusetts, urged the Federal Trade Commission to look into targeting practices. "The Federal Trade Commission should promptly investigate the privacy impacts of Internet tracking and targeting techniques to ensure that loss of privacy is not the price consumers must pay to realize the benefits of online commerce," according to a statement by Markey.

IAB's Zaneis believes that Congress should not draft new privacy laws, as the FTC currently has sufficient authority to enforce existing laws. "The FTC has enough precedent ... in defining the rules of the road."

Within days of the FTC meeting, social networks Facebook and MySpace unveiled plans for intertwining data about individuals and their purchases with online advertising that could prompt congressional action or litigation.

Facebook's "Beacon" program was altered in December after an outcry from users. The program originally alerted all of a member's online friends when a purchase, such as books, CDs or tickets, were made on a partner site. This feature was changed to an opt-in. Similarly, Facebook's Social Ads puts ads for related products near member's activities, such as when they rate or purchase music.

Some Facebook members have complained that delivering information to friends about purchases has interfered with gift giving, as significant others prematurely found out about holiday and birthday gifts.

Political action group MoveOn.org is using the social networking tools of Facebook to protest the behavioral program. MoveOn.org, which has successfully organized members to communicate en masse with their congressional representatives, has formed a Facebook group to petition the behavioral programs for what the group sees as an invasion of privacy.

Competing social network MySpace expanded its behavioral targeting program to search member pages for words indicating interest in specific categories (such as music or travel) and enables marketers to target the audience that will see its ads.

The European Union is also investigating behavioral targeting practices, and new rules there could ripple across to practices in the U.S. Continued on Page 2...

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