Has Advertising Dodged the Privacy Bullet?

To hear the advertising industry tell it just a few months ago, the drumbeat of talk of stringent consumer privacy regulations would spell the demise of the entire industry, the fall of free Internet content and possibly even democracy itself.

That hasn’t happened — and won’t happen — especially now that the economy is on the precipice of a double-dip recession. The industry’s self-regulation steps, while widely derided as too little by privacy advocates, appear to have been enough to spare it any of the strongest Federal Trade Commission regulations that would represent a sea change to how the ad system works.

“The FTC has consistently been on the record that they are very pleased with the self-regulatory program,” said Scott Meyer, CEO of Evidon. “Up on Capitol Hill, there seems to be waning momentum for a privacy bill that would cover behavioral advertising. Nobody wants to do anything to slow down job growth, and ours is one of the relatively few industries that is growing as it is in our economy today. Plus, and this has been a theme within this issue throughout, nobody has put forth a harm case for [online behavioral advertising].”

Meyer believes that critics referring to low opt-out rates under self-regulation programs might not understand some basic principles about banner advertising, and consumer concerns about privacy. “Critics point at low opt-out rates and call the program a failure.  But, the opt-out rates are low even among those who click for more information! When consumers are more informed about [online behavioral advertising], they are less concerned. And consumers who then opt out are self-selecting because of this new transparency and identifying themselves as not likely to engage with marketers’ messages anyway.”

Companies with business models based on ensuring ad compliance naturally have a vested interest in supporting a self-regulation protocol, but their confidence is reflected in much of the industry press. Privacy icons exist on about 11 percent of ads served, so the program is far from universally adopted.
Oren Netzer, CEO of DoubleVerify, insists that the industry has successfully run other self-regulatory programs, such as the Children’s Advertising Review Unit, and that the existence of controversial ad technologies such as flash cookies doesn’t mean the program should be overhauled.
“The program in its current iteration is a big step forward and addresses the major principles outlined by the FTC in their prior reports,” he said. “We don’t think it is reasonable to expect all problems to be resolved overnight, let’s not forget that the program is still very young and still in adoption mode and the fact that there are still some issues such as zombie cookies, does not point to failure.”
The issue may be one of simple apathy. Although a large percentage of consumers might believe falsely that detailed personal information is being collected on them as they surf and delivered to brands, most still don’t opt out.  That goes to the idea of control, according to Chris Babel, CEO of Truste. Self-regulation might be enough to satisfy consumers, and those are the votes that count at the end of the day. He believes that self regulatory initiatives gives consumers sufficient tools to preserve their own privacy when receiving interest-based ads and “is a good initial step to educating consumers and giving them choice.”
That hasn’t stopped privacy advocates from stepping up their calls for federal action. A recent letter sent to the White House, ad industry journalists and David Vladeck, director of the Bueau of Consumer Protection at the FTC, decried the advertising industry’s efforts as far too weak to make any impact on new ad technologies, like flash cookies, which they consider threats to consumer privacy.

“With the White House soon to release a new privacy white paper that likely will rely on this flimsy self-regulatory system as a way to protect consumer privacy,” wrote Jeff Chester, executive director of The Center for Digital Democracy, a consumer privacy advocacy research institute. “The letter sent by U.S. and EU consumer and privacy groups sends a powerful message that such a plan will be insufficient and ineffective.”

According to Mike Zaneis, svp of the IAB, privacy advocates will have a hard time convincing legislators that self-regulation can’t handle the challenges of an expanding ad technologies industry.
“We are fortunate enough in the U.S. to have thoughtful regulators that take the time to understand our program and let it fully develop before preemptively deeming it inadequate,” said Zaneis in an interview with consumer privacy journal Last Watchdog.
That doesn’t mean the ad industry is completely out of the woods. According to FTC commissioner J. Thomas Rosch, however, the FTC ought to hold off full-scale endorsement of self-regulation until more information on the advertising ecosystem has been offered to congress.
“We could direct them under oath to answer questions about their information practices,” said Rosch at The Technology Policy Institute Forum. In February the FTC “instead of relying on third parties, the FTC could design disclosures and other consumer education materials in order to enable consumers to make fully-informed decisions when they select a Do Not Track option. We are the experts when it comes to determining what constitutes full and complete disclosure, and we will have the benefit of having collected the underlying information from the advertising networks.”
Although Rosch seems to be indicating that the FTC is reconsidering its allowance of the industry to maintain total self-regulation, most industry figures are confident that digital advertisers are out of the woods. Nonetheless, FTC chairman Jon Leibowitz gave the industry “six months or so” to develop an effective self-regulatory program in an interview last February.
According to Mary Hodder, a user-experience analyst, the reason privacy advocates are still up in arms is not just the existence of zombie cookies, its that consumers have been left-out of the equation all-together. Hodder believes that effective advertising and consumer privacy isn’t necessarily at odds, and that advertisers need to look at “the meaning of content” rather than to new ways of tracking consumers around the Web.
“What would happen if we marketed that way, keeping the users anonymous?” Hodder believes that focusing on audiences and content will improve the efficacy of advertising while preserving user anonymity and evading the privacy controversy altogether. “No one is really building for that yet,” said Hodder.
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