By: Wendy Melillo

Will the Industry Fight Back?

from Adweek magazine’s IQ section:

(Adweek) The Internet is no longer the wild, wild West. Settlers have
arrived and the gentrification process is having a chilling effect on

E-commerce sites now face a barrage of proposed bills by lawmakers
skeptical of the industry’s ability to police itself when it comes to
protecting consumer privacy on the Net. The Federal Trade Commission
also is compiling its own report, focusing on how consumers access
their personal data collected by commercial Web sites, and how that
data is protected.

Advertisers are bracing for the worst possible outcome: a law that will
prevent them from using the Web to effectively deliver messages to the
most interested customers. ‘The whole question of target marketing is
at risk here,’ says Dan Jaffe, executive vice president of the
Association of National Advertisers.

Given the stakes, critics argue that the ad industry has been slow to
fight back. ‘This screams for a campaign to tout the benefits of
targeted marketing,’ says one source who requested anonymity. ‘The
industry is doing nothing to protect that right.’

Advertising lobby groups such as the American Association of
Advertising Agencies, the Association of National Advertisers, and the
Direct Marketing Association have discussed the idea of launching a $15
million to $25 million ad campaign to educate the public about privacy
issues. But the groups would have to raise the money first. ‘We are
seriously looking for ways to address consumers directly about
privacy,’ says John Kamp, a senior vice president for the Four A’s.

So far, only IBM has been willing to offer $1 million toward such a
campaign. It’s not the first time the company has been willing to step
up to the plate on privacy issues. In an attempt to head off
legislation last year, IBM pulled its Internet advertising from any
commercial Web site that did not post a clear privacy policy.

What’s driving the public’s fear, and consequently Capitol Hill’s
interest, are plans by Web ad networks such as DoubleClick and 24/7
Media to link a consumer’s personal identity to the anonymous data it
collects from Internet users. The debate has been so heated that
DoubleClick announced March 2 that it will halt its plans to merge such
data ‘until there is agreement between government and industry on
privacy standards,’ said DoubleClick CEO Kevin O’Connor.

Just ask

Advertisers are particularly worried by a bill introduced Feb. 10 by
Sen. Robert Torricelli (D-N.J.). The Secure Online Communication
Enforcement Act of 2000 would require commercial Web sites to get a
consumer’s permission to collect personal information. What that means
is Web sites would have to get agreement first before placing a cookie-

stored text file that allows e-marketers to view a history of a user’s
online behavior-on a browser. Users can already set their browsers to
notify them when a cookie is placed, but that can be very disruptive.
Cookies are everywhere on the Net, so the warnings would constantly pop

‘Rather than opting-out of having personal details shared, the burden
should be placed on companies to contact consumers so that they have
control over whether or not personal information is disclosed,’
Torricelli said in a ‘Dear Colleague’ letter sent to other Senators to
gather support for his bill. ‘Consumers have a right to know why Web
sites are collecting personal information, the extent to which it will
be put to other uses, whether it will be shared with others, and how
long they intend to keep it.’

Advertisers counter that users will quickly become frustrated if they
have to click on a permission box first before entering any commercial
Web site. ‘You are going to turn a superhighway into a residential
street with numerous bumps and stop lights every few feet,’ Jaffe says.
‘You can turn the Internet experience into a nightmare.’

A bill by Torricelli, chairman of the Democratic Senatorial Campaign
Committee – the party fundraising arm for the Senate – could signal
that the Democrats are interested in making privacy a platform issue in
the upcoming election. While Senate Democratic Leader Tom Daschle (D-

S.D.) has not endorsed any specific privacy bill, he has put together a
Senate task force to examine what should be done to protect the
public’s privacy.

Meanwhile, in the House, Congressmen Asa Hutchinson (R-Ariz.) and Jim
Moran (D-Va.) introduced a bill March 15 to create a 17-member
commission to study online privacy, identity theft and the protection
of personal health, medical, and financial records. ‘The purpose of
this commission is to find solutions that will aggressively protect
individuals’ privacy without enacting narrow-focused, helter-skelter
laws that could result in unintended harmful consequences,’ Hutchinson

Two privacy bills were also introduced last year. The Online Privacy
Protection Act of 1999, introduced April 15 by Sen. Conrad Burns (R-

Mont.) would require the FTC to develop regulations to protect an
adult’s privacy on the Web. On the House side, Rep. Edward Markey (D-

Mass.) introduced the Electronic Privacy Bill of Rights Act of 1999 on
Nov. 10. This bill also would require Web sites to get permission
before collecting private data. They must also notify users if their
personal information has been sold to another party.

The FTC established an Advisory Committee on Online Access and Security
in January. FTC chairman Robert Pitofsky will use the 30-member
committee’s final recommendations to determine if industry self-

regulation is doing enough to address concerns over privacy. Among the
issues being considered: What procedures should Web sites follow to
allow users access to personal information collected about them? Should
Web sites provide users with a way to correct mistakes in their data?
What security measures are being taken to protect confidential data,
and what notification is required if a Web site plans to release or
sell private data to a third party? The final report is due to Pitofsky
May 15.

Pitofsky, who has been supportive of industry self-regulation in the
past, is troubled about merging data about a user’s online surfing
habits with information that exists on them in the offline world, such
as retail catalogue purchases. What alarms advertisers is Pitofsky’s
desire to give offline data collection procedures the same level of
scrutiny now being applied to online techniques.

‘It is at least worth considering why the same arguments that lend such
force to efforts to protect online privacy do not apply with roughly
equal weight to information gathering in the offline world,’ Pitofsky
said in a recent speech. ‘A recent survey reiterates consumers’ ongoing
heightened concerns about online privacy, but makes clear that
consumers have high levels of privacy concerns in the offline
marketplace, as well. We should not ignore these concerns.’

To make advertising effective on the Web, advertisers need to present
messages that consumers are likely to respond to. The average
percentage of users who click on single banner ads has been declining.
At the end of last year, less than 1% of users clicked on an ad
compared with 2% in 1998.

‘Advertisers are saying we are getting less out of it so we should pay
less,’ says Nick Nyhan, president of Dynamic Logic, an online research
company in New York. And, he notes, as click-through rates have fallen,
more emphasis has been placed on profiling. The assumption is that the
more targeted the ad, the more likely someone will click on it.

Nyhan argues, however, that advertisers have erroneously focused on
profiling as the answer to declining click-through rates, when they
should instead focus on applying some of the traditional ways
advertising is measured to the Web. ‘Click-through is the equivalent of
seeing the ad on the top of a taxi cab and jumping into the cab and
saying to the driver: ‘Take me to the store advertised on top because I
am going to buy something,” Nyhan says. ‘How realistic is this?’

Awareness levels, purchase intent, message association, and advertising
recall are all traditional measurements that advertisers have used for
years. To make online advertising effective, Nyhan says the industry
has to embrace branding and attitude measurements. Once that happens,
he says, the privacy debate will disappear.

‘To do attitudinal research, someone has to give us permission to
survey their opinion,’ Nyhan says. ‘I can’t force them to do it and I
can’t force them to do it without their explicit agreement.’

Nyhan’s company promotes a research tool called AdIndex, which surveys
consumer exposure to a banner ad to measure awareness. Clients include
Procter & Gamble and, the online sporting goods site.

The cookie trade

David Moore, CEO of 24/7 Media, an ad network based in New York,
maintains that users will accept profiling provided their permission is
asked for first. 24/7 has a data-gathering method similar to
DoubleClick’s. Through an agreement with Naviant, which handles online
product registrations for companies including IBM, 24/7 can place a
cookie when a user provides personal information in return for
receiving product offers. Moore says the key is a strong privacy policy
that fully discloses to consumers how their personal information will
be used before they register.

In the end, Moore thinks commercial Web sites have not done a very good
job of telling consumers what they are doing with the data. ‘The
philosophy is, you have to be overt, not covert,’ he says. ‘To the
extent you are doing things the consumer is unaware of, that is what
creates the problems. The solution is, let consumers make the choice.’


(c) Copyright 2000, Editor & Publisher

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