Ad groups hail privacy pact, rivals voice fears

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The Federal Trade Commission's endorsement of the Network Advertising Initiative's self-regulatory proposal confirms the Internet's viability as an ad-supported medium, ad networks said.

"This is a tough but fair agreement that protects consumer privacy online in an unprecedented manner and allows Internet advertising to thrive," said Josh Isay, director of public policy at DoubleClick, a member of the NAI coalition along with other third-party ad servers such as 24/7 Media and Engage.


But even as supporters embraced the pact, privacy advocates grumbled that the rules agreed to by the online ad groups and the Clinton administration don't go far enough to ensure that personal information collected online about consumers won't be misused by marketers.

On July 28, privacy groups sent the Senate Commerce Committee a letter and report written by Jason Catlett, president of Junkbusters, and Marc Rotenberg, executive director of the Electronic Privacy Information Center. The letter asked the committee to reconsider its endorsement of the FTC/NAI agreement. It also recommended regulatory measures be taken to address privacy problems created by online profiling.

Among other things, the NAI members agreed to give consumers the chance to opt out before the services combine information collected online with offline databases. But Mr. Catlett said it's "an unreasonable burden to expect consumers to opt out" and that ad groups shouldn't be able to track users, anonymously or otherwise, unless consumers first opt in to such data collection.

"The FTC has clearly caved in to the online advertiser lobby . . . [and] failed to adequately protect consumers," said Jeff Chester, executive director of the Center for Media Education.


Rich LeFurgy, chairman of the Internet Advertising Bureau, hailed the agreement but said more details need to be worked out. He also noted that new privacy concerns will arise as Internet access moves to handheld wireless devices and other digital platforms.

"This is the start of the beginning in terms of consumer privacy," Mr. LeFurgy said. "It's an absolutely great bedrock from which we can build. But we have to get into some of the specifics that aren't outlined."

In a report issued July 27, the FTC supported the NAI's proposal but still called on Congress to enact legislation to guarantee compliance by non-NAI members. NAI members agreed to put their self-regulatory principles into effect immediately as Congress considers the FTC's legislation recommendation.


In addition to giving consumers the chance to opt out of having information collected, NAI members agreed not to collect sensitive, personally identifiable information such as medical histories, and to post clear and conspicuous notice on publishers' Web sites when other information is being collected. The coalition also will establish a Web site where consumers can go to opt out of data collection by any ad-serving company that is an NAI member.

The agreement follows legislation introduced by Sen. John McCain (R., Ariz.) that would require Web sites to disclose how they use consumer data. Sen. McCain, who chairs the Senate Commerce Committee, said he plans to proceed with privacy legislation this year.

Companies such as DoubleClick had seen steep declines in their market value earlier this year as privacy concerns grew. In the wake of last week's pact, the share prices of leading ad-serving companies showed mixed results. DoubleClick closed July 28 at $36.88, up 10.9%. for the week. Engage closed at $10.44, down 10.2% for the week; and 24/7 Media closed at $11.94, down 8%.

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