Online-Ad Industry Tries to Stave Off Government Regulation

Issues Its Own Set of Advertising Tracking and Disclosure Rules

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NEW YORK (AdAge.com) -- Online advertising's biggest players to government: Please stay out of our business.

Google, AOL, Yahoo and Microsoft, along with a host of other advertising, agency and marketer associations, took another step in pressing their case that the government doesn't need to regulate the collecting of data for ad-targeting purposes by search engines, websites, advertisers and ad networks. They've crafted their own set of rules in the hope of heading off potential regulation in Congress.

For months, a wide-ranging group of marketers, portals, publishers and ad networks represented by industry groups -- such as the Interactive Advertising Bureau, the American Association of Advertising Agencies, the Direct Marketing Association and the Association of National Advertisers -- have been working on "self-regulatory principles," which were released today. They require sites to provide prominent disclosure of who is collecting information and the ability to opt out, inform consumers of any change to a site's privacy policy, and offer special protections for sensitive data connected to health and financial issues or children, among other things.

The Counsel of Better Business Bureaus and the Direct Marketing Association will develop a compliance and enforcement mechanism for the industry rules, which would go into effect in 2010. The effective date would be preceded by a public-information campaign to which 500 million online ad impressions have been committed.

The groups also sought to draw a bright line between the tracking activities of, say, Yahoo or Google and internet service providers such as AT&T or Charter Communications, some of whom were caught red-handed tracking consumers with little or no notice last summer through now-defunct web-tracking firm NebuAd.

Rallying point for privacy groups
That flap has become a rallying point for privacy groups and an example of the need for government oversight. "It took the intervention of Congress in order for Charter and NebuAd to admit what they were doing. Without that who knows if that would have caught anyone's eye," said Lee Tien, staff attorney for the Electronic Frontier Foundation.

The industry thinks internet service providers should be held to a stricter standard than websites and ad networks and "obtain the consent of users before engaging in online advertising" rather than simply notifying consumers that data collection is going on and offering them the ability to opt out.

The "principles" come as the staff of Democratic Rep. Rick Boucher of Virginia is drafting proposed internet-privacy legislation, though congressional observers doubt such a bill would make it to vote before the full Congress, as it is tied up dealing with energy and health care. It also comes months after the Federal Trade Commission issued its own proposed guidelines and drew some measured praise from members of its staff.

"We commend their efforts," said Jessica Rich, acting associate director of the FTC's division of privacy and identity protection. "There are a lot of privacy policies out there, but our report calls for transparency and consumer control that is more accessible -- a link that says, 'Why did I get this ad?'"

Alternative to legislation
Stuart Ingis, a Venable LLP lawyer representing the online-ad industry, positioned the principles as an alternative to legislation or at least a potential influence on the process.

"We have a document that is going to be binding faster than any law could be passed," Mr. Ingis said. "The reason legislators are acting is they are reflecting what they hear from constituents; if we offer additional transparency and choice that people have been calling for, this helps us, law or not."

Indeed, some of the group's members, such as Google and Microsoft, would like to see some kind of legislation, though not the type advocated by privacy watchdogs. Privacy groups in general don't believe the industry is capable of regulating itself and see the latest effort as an attempt ward off regulations with real teeth.

"Online advertisers know the behavioral-targeting system they've created is very far-reaching and complex, incorporating outside databases and a range of targeting applications," said Jeff Chester, executive director of the Center for Digital Democracy. "What's required is full disclosure of the range of targeting techniques that any website uses and to give individuals control from the get-go."

Mr. Ingis argued that the industry has a strong incentive to get it right on its own. "If anyone gets this wrong, look at what they're risking," he said. "This is the whole internet model we're talking about. You can't just blast this apart."

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