Online publishers and advertisers aren't moving fast enough to protect consumer privacy, according to the Federal Trade Commission.
Behavioral targeting ― an essential element of the online advertising ecosystem ― came under renewed scrutiny this week in Washington when the FTC released guidelines to protect online privacy (pdf). The agency is advocating new methods to let consumers opt out of being tracked online, which some industry experts say could jeopardize online publishing's ad-supported business models.
The guidelines are just guidelines ― they still would have to be enacted by Congress ― but it's another sign (dreaded by some in the media) that Washington is moving toward regulation of online privacy. The FTC proposal, presented today in a Congressional hearing, pushes for a national “Do Not Track” list to allow consumers to opt out of all tracking, similar to the National Do Not Call Registry for telemarketing.
Self-regulation not enough?
In the past year, publishing and advertising industry groups have made strides toward self-regulation in order to protect business models of serving targeted advertising while also protecting consumer privacy. The resulting Digital Advertising Alliance is designed to give consumers the option to opt out and control the number of targeted ads served to them on the Web.
But those efforts haven't been enough for the FTC.
“Despite some good actors, self-regulation of privacy has not worked adequately and is not working adequately for American consumers,” said FTC Chairman Jon Leibowitz, according to The New York Times. “We’d like to see companies work a lot faster to make consumer choice easier.”
There's lack of clarity about how expansive the proposed Do Not Track list would be. Media industry groups are concerned about how the proposal could be detrimental to their revenue streams.
American Business Media said in an e-mail sent to members that it will be preparing comments for the FTC. “If implemented, [the proposal] could have negative impacts to ABM members,” the industry group said, outlining how it would limit the aggregating and sharing of audience data by online publishers.
Steve Sullivan, vice president of digital supply chain solutions at the Interactive Advertising Bureau, noted that the Do Not Track provision could prevent fundamental tracking by the publishing industry, such as frequency caps that prevent consumers from viewing the same ads over and over again.
“There's no clear definition around what we're not allowed to track,” Sullivan said in a phone interview.
Pam Horan, president of the Online Publishers Association, is also concerned about the proposal, primarily because she’s unclear if it would apply to the first-party relationships between publishers and consumers. “We’re still looking for clarification on that,” Horan said in a phone interview. “If first-party data is included, then there are significant unintended consequences.” In addition to restricting publishers' ability to collect information for frequency caps, it could limit the ability for publishers to measure audience size and makeup.
There are even potential compliance issues: A pharmaceutical company, for example, needs IP data to distinguish between a U.S.-based user and one from the U.K., since those countries regulate direct-to-consumer pharmaceutical advertising differently, she said.
Horan noted that other elements of the FTC report were “encouraging.” For example, the guidelines “clearly distinguish the collection and use of first-party data as accepted and valuable,” she said.
Contextual advertising is "acceptable"
The report also acknowledges that contextual advertising should fall within accepted industry practices. “That’s something we’re incredibly encouraged by,” said Horan, and with good reason: most of the advertising that OPA member companies run is contextual. Only a small portion is behavioral advertising ― the real target of the FTC’s guidelines.
“Our main concern is the sites and services that are connecting the dots between different times and places that a consumer is online and building a profile of what a consumer is doing,” Leibowitz said in The New York Times.
The FTC said in a press release that the Do Not Track list “would probably involve the placement of a persistent setting, similar to a cookie, on the consumer’s browser signaling the consumer’s choices about being tracked and receiving targeted ads.”
In addition to the Do Not Track recommendations, the FTC offered a few examples of tactics that fall outside its “accepted practices” for behavioral targeting. They include:
a retailer collecting purchase information directly from a consumer and then selling it to a data broker or other third party that may be unknown to the consumer;
behavioral advertising in which an online publisher allows third parties to collect data about consumers’ use of the website;
social media services where the service or platform provider allows third-party applications to collect data about a consumer’s use of the service;
using deep packet inspection to create marketing profiles of consumers.
The FTC report also recommended that companies adopt a “privacy by design” approach ― in other words, they should build privacy protections into their everyday business practices. “Such protections include providing reasonable security for consumer data, collecting only the data needed for a specific business purpose, retaining data only as long as necessary to fulfill that purpose, safely disposing of data no longer being used, and implementing reasonable procedures to promote data accuracy,” the report states.
A call to action for publishers?
For publishers, the FTC proposal could be a sign to ramp up privacy efforts and make a case for behavioral targeting. The media industry has a chance to weight in: Comments are being accepted by the FTC until January 31.
From a consumer standpoint, ad targeting can be beneficial, noted Todd Teresi, chief revenue officer of audience management platform Quantcast, which works with many major publishers. After all, targeting enables ads to be more relevant.
He's optimistic that the government will strike a balance between protecting privacy while preserving the benefits of ad targeting. “You need to ultimately make sure we're not shutting down that opportunity for consumers,” he said in an interview at a media conference in New York.
The IAB also supports efforts to allow consumers choice, rather than taking away tracking altogether. “There's a need for us as an industry to recognize the value of consumers as being the lifeblood of our industry and provide them with a need to exercise choice when they want to ― that is something that can be done with self-regulation,” Sullivan said.
DoubleVerify CEO Oren Netzer said the FTC proposal serves as a motivator to the media industry to adopt self-regulation measures.
“If you don't adopt [self-regulation privacy efforts] quickly ... this could eventually be government-run,” Netzer said in a phone interview. “Getting this implemented is very important to show the quick progression and the adoption of the industry.”