Why Industry Self-Regulation Can Work

It’s easy to be a cynic about the ad industry’s attempts to self-regulate on consumer privacy. Critics are quick to point to the current housing quagmire as a failure of Wall Street’s ability to “self-regulate,” and they then extrapolate this incredibly complex situation into a one-size-fits-all example of how any industry self-regulatory regime is a pipe dream at best and a dangerous aberration at worst.

That’s a mistake when it comes to the self-regulatory principles for online behavioral advertising. This is a good-faith effort to craft a legitimate, well-defined self-regulatory program — and it’s working. Congress and the Federal Trade Commission, hardly pushovers, have endorsed the approach. The ad industry has made a good start, but there’s more that needs to be done by just about every company in the advertising community.

First, a little history. In 2009, the advertising community, including the big trade associations AAAA, ANA, DMA, and IAB, jointly released the “Self-Regulatory Principles for Online Behavioral Advertising.” These principles were crafted in response to the FTC and Congress’ growing concerns with practices occurring in the digital advertising space, specifically the practice of online behavioral advertising.

The principles were designed in such a way as to serve as the framework to deploy a consumer-friendly notice and choice program, which would then be administered by the newly created Digital Advertising Alliance and enforced by a respected third-party entity with a long history of successful enforcement in the advertising space, the Council of Better Business Bureaus.

Now, some metrics. Since the DAA began administering the program, over 1.5 million consumers have visited www.aboutads.info , the industry site for information about self-regulation as well as the consumer opt-out page. Currently, over 10 million icon impressions are being served daily. On average, 60 billion icon impressions are being served monthly. Over 1,000 companies are already utilizing the icon, and 85 ad networks have opt-outs on the aboutads.info page.

This is a great start. But a successful self-regulatory program is a little bit like an insurance pool – there’s an element of cross-subsidization needed for the whole program to work. For industry self-regulation in this arena to truly stand on the podium with both arms up, there needs to be widespread industry adoption and implementation of the program.

A common criticism of self-regulation is that it doesn’t ensure that all parties will be in 100 percent compliance at all times. Posting a speed limit sign doesn’t guarantee that every motorist will always follow the law, and the same can be said for self-regulation. However, we know that most companies in our industry are responsible actors, and after just one year of operation, we estimate that at least 90 percent of all OBA ads are fully compliant with our program. And to drive further adoption, we have stationed a cop on the beat in the form of the Council of Better Business Bureaus.

This is the best approach to dealing with regulation of an industry marked by its rapid pace of technological changes. Market forces, not a regulatory fiat, are the only way to push the industry toward widespread adoption and implementation of baseline practices, such as consumer notice and choice, clear and concise privacy policies, and a clearer understanding of the value exchange between consumers and interactive advertising. As more and more publishers, ad networks and brand marketers adopt the self-regulatory program and begin utilizing the DAA “advertising option” icon, the clear visibility of the icon and what it means for consumers will evolve over time into a kind of “trustmark” for both consumers and parties in the online advertising ecosystem, signaling that this website or this ad network or brand marketer takes consumer privacy choices seriously — and is a preferred consumer destination or business partner.

Now is not the time to be the outlier. While Congress and regulators might be cautiously declaring industry self-regulation a success, it is still on the hunt for bad actors. In the past year, the FTC has announced a series of privacy-related settlements against several companies in this space. Several more are likely in the works. In November the CBBB announced its first round of enforcement actions against companies in violation of the Self-Regulatory Principles. It’s worth pointing out that these enforcement efforts aren’t tidied up in the dark – both the FTC and the CBBB make public announcements describing the violation in question and a statement as to whether or not the investigated company remedied the violation.

It’s easy for any company to quickly ensure they are fully compliant with the DAA program – just visit the DAA website and review the principles to see how they apply to your business practices. Now, grab a latte and get started, because it’s homework time.

Alison Pepper is senior director of public policy at the Interactive Advertising Bureau.



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