Industry prepares for FTC scrutiny of behavioral ads

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As the online advertising industry scrambles to assure government regulators and the public that it values consumer privacy in the use of behaviorally targeted ads, two significant events will take place next week. First, on March 15, a coalition of marketing associations will officially begin requiring members to display a distinctive icon with ads served up based on viewers' previous online activities. Advertisers hope the icon—a white “i” with a circle around it against a blue background—will demonstrate the industry's commitment to advertising transparency. Second, on March 17, the Federal Trade Commission's third and final workshop on Internet privacy takes place in Washington, D.C. The session is expected to deal with collecting Internet user data for purposes of behaviorally targeted ads and how to treat threats to consumer privacy. While the FTC has so far bowed to the advertising industry's pledge that it can self-regulate its use of Internet advertising and consumer data, some feel the commission is inching closer to recommending some form of regulatory law. “The focus is absolutely on our industry here in Washington, and we do expect legislative proposals to be floated very soon—there is no question about that,” said Mike Zaneis,VP-public policy at the Interactive Advertising Bureau. But Zaneis said he feels that, if the advertising industry adequately demonstrates it can safeguard consumer data and offer user-friendly opt-outs from behavioral ads, new laws might be avoided. “Self-regulation is the key here,” Zaneis said. The new icon is an example. IAB—together with the American Association of Advertising Agencies, Association of National Advertisers, Council of Better Business Bureaus and Direct Marketing Association—approved the notification symbol to heighten consumer's awareness, and lessen their fears, about how behaviorally targeted advertising works. Mousing over the icon will display a note, such as, “Why did I get this ad?” Clicking on the icon takes the viewer to a page that explains how the advertiser used the viewer's online history and demographic information when it served the ad. “The idea is to go global with this icon, to place it in and around ads everywhere, so consumers will see it and know what it means,” said Linda Woolley, exec VP-government affairs with the DMA. “It's up to the industry to show that we want to be responsible.” The icon was developed out of seven online-ad principles the same group of organizations approved last year. In addition to providing advertising transparency, other guidelines include giving Internet users a choice to opt out of having their online behavior collected and making sure organizations that collect such data keep the information secure. Currently, only members of the DMA are required to adhere to those principles, but the other organizations are expected to mandate the same or similar practices for their members. Despite regulatory suspicion of the practice, the use of behaviorally targeted ads is increasing robustly. Digital marketing research company eMarketer forecast that online advertisers in the U.S. will spend more than $1.1 billion on behaviorally targeted ads this year, up 21.6% over 2009. Such spending will continue to rise 20% to 25% annually, reaching $2.6 billion by 2014, the company said. By then, behaviorally targeted ad expenditures will have risen to 19.8% of all online display spending, compared with 14.2% projected for this year. EMarketer noted that federal regulations governing the practice might not be such a bad idea. “In that case, traditional brand marketers would be less concerned about giving a black eye to their brand image through what some consumers see as privacy violations from behavioral targeting,” said eMarketer Senior Analyst David Hallerman. “And many consumers would wind up more educated about the essential anonymity of behavioral targeting.” The advertising industry isn't buying it. “The inability to target relevant ads assures an ineffective marketing system,” said Dan Jaffe, exec VP-government relationships for the ANA. “Nothing is less interesting than a youngster hearing about retirement benefits. And if you don't have a pool, you're not interested in ads for deck chairs. “We just need to keep moving forward and hope, at the end of the process, people will say there is no need for legislation,” Jaffe said. Another development expected this month is designed to regulate the self-regulation. The Council of Better Business Bureaus will select a technology vendor to develop a monitoring and compliance system to ensure that advertisers adhere to the ad organizations' approved principles. “The criticism of self-regulation is that it's good for those who do it voluntarily, but if an advertiser doesn't do it, there are no consequences,” said Lee Peeler, president of the National Advertising Review Council, which under the auspices of the CBBB monitors the advertising community. The FTC has said it will issue a final report to Congress on Internet privacy in June or July. It's possible that recommendations for new legislation will be made at that time. Even then, Peeler feels that continuing self-regulation is valuable. “What we are learning as we implement our self-regulatory guidelines will be fundamental in fashioning a workable program, whether it's self-regulation or regulatory,” he said. “And even with government regulation, we can provide very valuable enforcement compliance.” Peeler cited NARC's own monitoring of violations of the Children's Online Privacy Protection Act, which oversees children's privacy and safety online. NARC, he said, flags up to 30 violations a year, compared with the FTC's one or two. “But most importantly, I think everyone is hoping that we will be able to demonstrate a robust-enough voluntary program so both Congress and the FTC will give us a chance to make it work,” he said. M
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