Sensing Coming Regulation, Online Ad Groups Unite

Obama Administration, New Congress Likely to Side With Critics of Behavioral Targeting

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NEW YORK ( -- Four groups representing ad networks, portals, publishers, internet-service providers, ad agencies and advertisers announced today they've joined forces in a bid to head off government regulation of online advertising.

The groups involved -- the American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association and the Interactive Advertising Bureau -- are hoping to convince Washington it can police itself, and stop efforts to regulate behavioral targeting, an issue gaining steam on Capitol Hill.

The groups envision a set of guidelines for how online advertisers can collect and use data, as well as standards for notifying users when and how their data are being used. The joint effort is at an early stage, but some see a system similar to the Children's Advertising Review Unit, which reviews advertising that targets children and can refer cases to the Federal Trade Commission for review.

Decided to go public
The groups have been in talks for several months but decided recently to go public with an alliance just as President-elect Barack Obama is sworn in and a new Congress takes over on Capitol Hill. Industry's lobbyists say behavioral targeting, once a niche issue, is set to become the No. 1 privacy issue in Congress, as well as key states such as New York and Connecticut.

"There are no immune companies or business models from Capitol Hill or state regulation," said Mike Zaneis, VP-public policy at the IAB. "The self-regulation needs to impact the entire industry. We have set the table broadly enough where we can bring search engines and portals together with ISPs and ad agencies."

Since 2000, ad networks, ad exchanges and ad servers such as Microsoft's Atlas and Google's DoubleClick have adhered to a set of rules created by the Network Advertising Initiative. But the new rules would broaden that to new players now engaged in behavioral targeting, such as ISPs, publishers and ad agencies such as WPP and Havas.

"Behavioral marketing provides enormous benefits to consumers, but it is our responsibility as marketers to ensure the web-surfing public's privacy interests remain protected," said Bob Liodice, ANA president-CEO.

Political winds have shifted
The new alliance is a sign of how fast the political winds have shifted. The House, led by Rep. Joe Barton (R-Texas) and Rep. Ed Markey (D-Mass.), has long been sympathetic to privacy advocates' calls for federal regulation and conducted hearings on the issue last year. Now, with eight new Democratic allies in the Senate, an online privacy bill has a real chance of passing both houses.

Democrats picked up key seats in the New York legislature, and any tough law in a big state such as New York would effectively bind the entire industry.

"This is a transparent attempt to head off any meaningful consumer safeguards for online advertising," said Jeff Chester, executive director of the Center for Digital Democracy and a leading critic of behavioral targeting. "Clearly the advertising industry is now facing a threat: a more regulatory-focused Obama administration, a Democratic majority in Congress and an awakened FTC from eight years of slumber."

But even before the election, pro-regulation forces were gaining the upper hand. NebuAd, a behavioral-targeting firm that signed up ISPs to track the web-surfing behavior of their users, asked for a hearing last year and got a bit more than it bargained for. Led by Mr. Markey, the House Energy and Commerce Committee asked 33 portals and ISPs to describe their tracking activities and whether they gave users the opportunity to opt out of the program. Several ISPs, including CableOne, Embarq and WOW, did little to notify users they were being tracked. Others argued ISPs should be able to track users at least to the same extent as search engines and portals such as Google and Yahoo.

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