Pressure Mounts for Better Rules on How Web Advertising Targets Consumers

By: Brian Morrissey For years, the online ad industry has fought off periodic calls for tighter regulation of its consumer tracking practices with a two-pronged argument. After all, cookie-based tracking doesn't include personally identifiable information, only a number assigned to a computer. What's more, industry reps hasten to add, the practices of Internet marketers are child's play compared to the direct-mail crowd, which combs through financial records and other sensitive information to fine-tune their pitches.

But now, as it has periodically over the past decade, pressure is mounting from privacy groups, federal regulators and lawmakers for stricter rules governing how Internet advertising targets consumers. The proposals all vary, but a consensus is building that change is coming. The outstanding question is whether that change will come via a government regulatory regime or through industry policing.

Last week, 10 privacy and consumer advocacy groups banded together to release a proposal for new legislation that would alter many commonplace practices in online advertising.

"We want consumers to be able to take advantage of all of the new technologies without the technologies taking advantage of the consumers," said Pam Dixon, executive director of the World Privacy Forum. "Right now, that balance is not there."

Jeffrey Chester, executive director of the Center for Digital Democracy, said industry self-regulation, in the form of the Network Advertising Initiative, has failed, as tracking from all directions besets consumers with opt-out notices buried in legalese on hidden privacy statements.

"The one thing that's crystal clear that's emerged so far is that, as in almost any industry, self-regulation doesn't work," he said.

For its part, the Internet ad industry representatives are treating the proposal as the latest salvo in a long-running war against businesses making money on the Internet. Mike Zaneis, vp of public policy at the Interactive Advertising Bureau, says the real goal of the groups is to eradicate behavior-based advertising, one of the most promising areas of innovation.

"They don't believe in behavioral advertising," he said.

The privacy groups' suggestions, however, step back from what the industry has fought most fiercely: a blanket requirement for consumers to opt-in to cookie tracking and a ban on third-party cookies. Instead, the privacy groups propose a shorter time frame for using behavioral data -- 24 hours -- after which ad networks and sites would need to get consent from consumers to collect and use information about their activities online.

While Dixon painted the proposal as a compromise to industry, Zaneis called the proposal a "red herring" that is intellectually dishonest because on the one hand the privacy groups believe tracking consumer behavior for advertising requires consent, but on the other hand say it's OK for a set period.

"Business doesn't work on 24-hour cycles," he said. "It's arbitrary and meaningless and it doesn't meet the real world. It becomes a de facto opt-in. They know that."

Instead, the IAB has joined forces with the American Association of Advertising Agencies, Association of National Advertisers, Direct Marketing Association and Council of Better Business Bureaus to propose a revamped self-regulatory regime to come into force next year. The cornerstone of the proposal is more notice to consumers and an easier way to opt-out of data collection.

That is the crux of the matter for Congress to decide. Up until now, consumers have needed to opt-out of tracking. But under the proposed framework laid out by privacy groups, the weight would shift to advertisers to get permission. Dixon did not shy away from the possibility of behavioral advertising becoming something that consumers must choose to allow. She said the industry, like others faced with regulation, would adjust.

"The sky will fall if advertising becomes opt-in," she said. "We think it's important to go beyond that debate."

The guidelines also call for sites and networks to purge all behavioral data after three months, and a blanket ban on "sensitive information" for behavioral targeting. This would include health, financial condition, sexual orientation and other information.

Such concerns have surfaced periodically over the years, yet this time is different, according to privacy advocates, as the industry has become mature. Privacy groups are pushing for Congress to act after it returns from the summer recess. They are buoyed by the concerns shown by influential legislators like Rick Boucher, the Virginia Democrat who chairs the House Subcommittee on Communications, Technology and the Internet.

"There's a mood in Congress they'll have to do something," Chester said. "There really is a receptiveness on the Hill."

Zaneis disagreed with that assessment, noting that legislators are unlikely to monkey with an area of the economy as dynamic as the Internet. What's more, privacy groups have been unable to unearth compelling cases of consumer harm from Internet tracking tactics, warning instead against theoretical abuses. Still, he believes changes are on the way in the form of tighter disclosure rules by companies tracking consumers.

"It's a fair criticism to say the industry became complacent on privacy," he said. "We focused all our efforts on growing the industry and didn't keep our eye on the privacy ball. But we're back and refocused."

-- Nielsen Business Media


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