IBM PRIVACY POLICY DRAWS INDUSTRY CHEERS

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The online industry is applauding IBM Corp.'s plan to withhold advertising dollars from North American sites that do not post privacy policies, though some executives said the guidelines need widespread adoption, not just on ad-supported sites.

Last week, No. 2 Internet advertiser IBM said it will spend its $60 million Web-ad budget only on sites that display a clear statement on privacy, effective June 1. Web advertising now represents 10% of IBM's total media budget.

IBM, which says it spent $45 million on Web ads last year, has closely trailed Internet ad leader Microsoft Corp. But IBM this year could surpass Microsoft, which is expected to spend between $44 million and $52 million on Web ads in the year ending June 30.

STAKING AN EARLY CLAIM

IBM's stance could boost its efforts to sell e-business products and services, if it can stake an early claim as a leader on the issue.

IBM estimates just 30% of the 780 Web sites on which it advertises worldwide display a privacy statement, and it hopes the others will do the same.

"Our objective is not to cancel advertising, but to give people a financial incentive to do something that we think every site ought to be doing," an IBM spokesman said.

Web sites, trade associations and ad executives support the plan.

"I think it will have an important impact on the industry," said Rich LeFurgy, chairman of the Internet Advertising Bureau and chairman of FAST, a coalition of the IAB, the American Association of Advertising Agencies, Association of National Advertisers and the Advertising Research Foundation.

"[Ensuring privacy] is one of the four linchpins in accelerating online advertising," he said.

The other three are creating effective ad models, standardizing measurement and making online media easier to buy, areas now being targeted by FAST.

IBM LEVERAGES CLOUT

However, said Mr. LeFurgy, "IBM is taking advantage of its relationship with the online media community and leveraging it. We need to embrace the entire consumer spectrum," he said, noting that not only advertising-supported sites, but marketers, agencies and even research companies should post privacy guidelines on their sites.

To accomplish this goal, FAST in February endorsed recommendations of the Online Privacy Alliance, a coalition of companies including America Online, IBM, Microsoft Corp. and Yahoo!. FAST set a goal of doubling acceptance of the OPA's guidelines among the 875 companies that are members of its coalition organizations.

Each organization polled its members to find out how many now post privacy guidelines online. Total numbers were not available, but the ANA reports that while only 8% of its members had privacy policies posted in February 1998, 59% had privacy guidelines posted a year later.

Information on the OPA guidelines is available at a FAST information site (www.fastinfo.org).

"It's going to take a demonstration from the industry that they can regulate themselves," said Robin Webster, senior VP of the ANA. "That is what IBM is doing."

DMA BACKS 'PRIVACY PROMISE'

Robert Wientzen, president-CEO of the Direct Marketing Association, said: "We applaud IBM's initiative. It's consistent with what we're asking our members to do."

The DMA has urged members to adopt its "privacy promise" to consumers, which pledges marketers' compliance with fair information practices by posting privacy statements on their Web sites. By July, the DMA will deny membership to any company that does not comply to its privacy pledge.

One immediate ramification of IBM's announcement may be more prominent placement of sites' privacy policies.

LATimes.com, the Web site for Times Mirror Co.'s Los Angeles Times on which IBM advertises, has had a privacy statement since 1996. However, the statement is labeled as a "member agreement" and is buried in a visitor services area.

LATimes.com had been planning more visible placement of the privacy policy in a redesign scheduled for the fourth quarter, but will accelerate those plans because of IBM's announcement, said Carol Perruso, president of LATimes.com.

"It is in the best interest of all of us who have strong privacy policies to let consumers know about them," said Ms. Perruso.

In making its leadership statement that initially affects only North America, IBM isn't risking much. About three-fourths of its Web budget is spent in North America on 350 sites. Of those, more than half its U.S. Web budget is spent on just 13 sites. IBM notes those sites, mainly key portals and search engines, already have privacy statements.

POLICY LIMITED, FOR NOW

For now, IBM is holding off putting the ad policy into effect in Europe since the European Union is in the midst of developing Web privacy directives, the IBM spokesman said. IBM hopes to expand the policy to Asia and Latin America by year's end.

In a letter sent last week by its Web agency OgilvyOne, New York, IBM offered broad latitude as to how sites could meet privacy guidelines.

"We are not dictating to them what kind of privacy statement they have to adopt," the IBM spokesman said.

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