Will The FTC’s Privacy Initiative Undercut $51 Billion Plus In Projected Ad Spend?
The online privacy issue just will not go away, and it may well come to a head next year. In May, I wrote about the fact that the U.K. was mirroring the U.S. in terms of its concern about online privacy and, more specifically, the use of behavioral targeting without an opt-out provision.
Now the Federal Trade Commission of the U.S. has sprayed lighter fluid on the charcoal fire by issuing a document titled â€œA Preliminary FTC Staff Report on Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers.â€ While the general direction the FTC is taking is laudable, there is a ticking time bomb embedded in the report: a federally run â€œDo Not Trackâ€ mechanism.
The FTC describes this mechanism as â€œlikely a persistent setting on consumersâ€™ browsers â€“ so consumers can choose whether to allow the collection of data regarding their online searching and browsing activities.â€ As the Interactive Advertising Bureau (IAB) points out, the name â€œDo Not Trackâ€ is reminiscent of the National â€œDo Not Callâ€ Registry, which was instituted as a result of a law passed in early 2008. The law created the registry to protect consumers who did not want to receive telemarketing calls.
â€œDo Not Trackâ€ and â€œDo Not Callâ€ are Not Alike
Essentially, â€œDo Not Callâ€ is an uncomplicated opt-out service. The consumer registers a phone number and the telemarketer avoids calling that number. While the FTC surely knows that the Internet is a very different animal (at least one hopes so), it has characterized â€œDo Not Trackâ€ in a similar fashion by its nomenclature and its description.
The IAB’s response to this is right on target:
â€œDo Not Trackâ€ is a misnomer because you cannot turn off data sharing online and, if you could, consumers would encounter a severely diminished experience since they would lose out on the remarkable benefits provided by data sharing. Policy makers should not promise a â€˜consumer protection programâ€™ they cannot deliver without disenfranchising the American public.â€
The IAB suggests that the industryâ€™s â€œSelf-Regulatory Program for Online Behavioral Advertisingâ€ already addresses the issue and allows the consumer the ability to opt-out without the need for government regulation.
Two Sides to the Issue
Itâ€™s easy to see both sides of the issue from opposing perspectives. On the one hand, government regulators are increasingly concerned about protecting consumers in what they may perceive to be a hostile online world in which advertisers prey on unknowing consumers and obtain far too much personal information about them. This may sound paranoid, but in an era of airport pat-downs and cyber-terrorism, heightened awareness of the dangers associated with the Internet is to be expected.
On the other hand, those companies whose very existence depends on online advertising and e-commerce have reason to be extremely concerned when the government looks at them cross-eyed, especially when it could lead to some kind of broad control that could directly impact revenue.
A New York Times analysis of the issue suggests that a â€œDo Not Trackâ€ system:
â€œWould cause major harm to the companies like online advertising networks, small and midsize publishers and technology companies like Yahoo that earn a large percentage of their revenue from advertising that is tailored to users based on the sites they have visited.â€
However consumer watchdogs groups are quick to point out the flaw in the IAB’s stance. First, the IAB does not represent the entirety of online marketers. Second, â€œself-regulationâ€ rarely works and in a coalition of marketers all competing for their share of a projected $51 – $72 billion in revenue, the chance of them successfully self-regulating is even less likely.
Itâ€™s All About Money
Now weâ€™re getting to the real heart of the matter. It all comes down to the financial implications of â€œDo Not Track.â€
John Montgomery, Chief Operating Officer for GroupM Interaction, digital division of ad agency WPP, told the Times, â€œIf a number of consumers opt out, it might limit the ability for companies to monetize the Internet.â€ An even more serious argument surrounds the fact that advertising basically supports all the free content on the Web. Montgomery adds, â€œThink about the number of times you access the Web and how many times you have to pay for the content you look at. This is about a value exchange.â€
Dilip DaSilva, chief executive of Exponential Interactive, which owns the Tribal Fusion online advertising network, agreed. â€œIf you remove tracking, you remove advertisers,â€ he said, adding that if â€œDo Not Trackâ€ is implemented, much of the free content on the Internet could become unavailable.
The FTC has asked for comments on the report over the next two months. Needless to say, the IAB and its members will offer significant feedback. It is likely that, even if the FTC moves forward with the â€œDo Not Trackâ€ initiative, Congress will have to be involved for any substantive legislation to be enacted. That could end up being a good thing â€“ we all know how long it takes for them to get anything accomplished.