THE PRIVACY AND ONLINE BEHAVIORAL ADVERTISING DEBATE

Prepared by Stephan Floyd

Distributed April 2, 2008

Prepared forThe American Association of Advertising Agencies (AAAA)

Table of Contents

EXECUTIVE SUMMARY…………………………………………………………………….....1

DESCRIPTION OF CURRENT PROBLEM…………………………………………………..... 2

PRESENTATION OF PROPOSAL……………………………………………...……………….4

REBUTTAL AND COUNTER ARGUMENTS………………………………………………….7Registry as a Foundation for Future Legislation…………………………………………..7Elimination of Profile Editing and Subsequent Loss of Consumers………………………7Public Concern and Potential Consumer Backlash……………………………………..…8

CONCLUSION AND CALL TO ACTION………………………………………………………9

REFERENCES………………………………………………………………………………..…10

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Executive Summary

This article summarizes the recent debate between privacy advocates and online advertisers over the practice of behavioral advertising. Privacy advocates claim that, through electronic monitoring, advertisers invade their privacy, often collecting as much information as possible about the user in order to profile them for specific online advertisements. Such advertising methods that result from this profiling are spam e-mail, adware and online advertisements. Users also claim that this affects the safety and security of the internet, especially when children are concerned. The Federal Trade Commission and other regulatory agencies are now looking into this debate in order to develop a solution.

The most promising solution, however, was proposed by the Center for Digital Democracy (CDD), an online privacy group. The proposal entails the development of a “do-not-track” registry. This registry is similar to the “do-not-call” registry previously set up by the government that was used to protect citizens from unwanted calls from telemarketers. In effect, the “do-not-track” registry would allow citizens to voluntarily deny, or “opt-out”, online advertisers from tracking their movements online. The main argument in favor of online advertisers is that their practices are what keep the internet free, so over regulation to protect privacy may result in grave consequences for the internet.

I propose that online advertisers should support this registry. As unorthodox as this proposal seems, it will actually help online advertisers rather than harm them. Through supporting this registry, online advertisers can regain a positive public reputation, a reputation that has been smeared by accusations of endangering the privacy of internet users. This improvement in reputation can also lead to better business and public relations. Most importantly, however, is that, through supporting and ensuring the implementation of this registry now, online advertisers can avoid more stringent legislation that may occur in the future.

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Description of Current Problem

Within the field of advertising there is a fairly recent yet popular debate among online advertisers and internet users. Many users claim that, through electronic monitoring, advertisers invade their privacy, often collecting as much information as possible about the user in order to profile them for specific online advertisements. Such advertising methods that result from this profiling are spam e-mail, adware and online advertisements. Users also claim that this affects the safety and security of the internet, especially when children are concerned (Driscoll, 2006). Privacy advocates are pushing for federal legislation that will regulate and minimize the intrusion of online advertisers on internet users’ privacy (Story, 2007).

A town hall meeting was held on November 1, 2007 by the Federal Trade Commission (FTC) regarding the online privacy concerns of internet users. Specifically, the FTC targeted online advertisers in this meeting, suggesting new methods that they could implement in order to improve their standing among concerned internet privacy advocates. More radical participants in this meeting, however, called for stronger legislation and “’injunctive relief’” to counter the tactics used by online advertisers (Mitchell, 2007). These participants are represented primarily by the Center for Digital Democracy (CDD) and the U.S. Public Interest Research Group. The CDD is the most involved internet privacy advocacy group within this debate. They urge the government to take action through legislative measures, including legislation that would create a “do-not-track” registry. This registry is similar to the “do-not-call” registry previously set up by the government that was used to protect citizens from unwanted calls from telemarketers. In effect, the “do-not-track” registry would allow citizens to deny, or “opt-out”, online advertisers from tracking their movements online (Kelley, 2007). The online advertising industry is expressing little concern over these recent regulatory forces and doubt that they will hamper advertising endeavors in the future (Brooks, 2007).

One reason why online advertisers, including Atlas, DoubleClick and the Interactive Advertising Bureau, are expressing little concern over these opposing forces is their previous track record with online behavioral advertising (Story, “Web Marketing”, 2007). Privacy advocates have not been able to provide the government with substantial evidence citing that the practices of online advertisers are harmful or in any way damaging to online consumers. The FTC shares this view as well, addressing the “absence of any evidence of consumer harm”, that would support the grievances of privacy advocates as well as provide a need for government regulation (Kelley, 2007). The FTC is also “mindful of the need to maintain vigorous competition in online advertising,” so that any policies or legislation that they develop do not harm the online advertising industry and will allow it expand (“FTC Staff”, 2007).

Advertisers argue the point that, without online advertising, the internet would not be free (Story, 2007). It could then be argued that too much or too stringent regulation on online advertisers could have a negative or counterproductive effect on the internet, causing it become a price

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regulated domain This insight has profound effects on all internet users, not just those that are concerned with their privacy. Also, most online users are pleased to trade certain personal information in return for special services (Brooks, 2007). This argument provides a defense for online advertisers as well as a primary step toward a proposal.

The issue of ethics in regards to online privacy provides another topic of argument for online advertisers, stating that if electronic monitoring is preformed ethically then it should be allowed. Electronic monitoring is considered ethical when the individual that is being monitored has provided consent (Charters, 2002). This argument also provides reasoning as to why internet users should work with online advertisers in order to form a relationship that is conducive to both party’s needs.

Some advertisers have taken proactive measures in order to retain healthy relations with internet users and privacy advocates and to combat the recent wave of disdain that faces them. Search engine Ask.com’s recent maneuver is an example of these pioneering online practices. The search engine has included an “AskEraser” privacy button that online users can press to delete their records of past searches on the search engine. Therefore, the user has direct input as to whether or not they wish to be monitored and subject to behavioral advertising. This measure, however, can be seen as a financially driven technique used by websites, such as Ask.com, to act on the recent concerns of privacy advocates in order to gain a competitive advantage over competing websites (Brooks, 2007).

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Presentation of Proposal

In order to mitigate between the two conflicting parties in this debate, privacy advocates and online advertisers, I propose the development and implementation of the “do-not-track” registry. Through the establishment of this registry by the federal government, those that are most concerned with their online privacy can take an active role in its protection. Similar to the “do-not-call” registry, those concerned would add themselves to this list, making them invulnerable to online observation by advertisers (Kelley, 2007). As of now, the registry proposed by the CDD and other advocacy groups entails not only an opt-out registry for those seeking to avoid behavioral advertising, but also the ability for consumers to “view and edit the profiles” that online advertisers develop and base their advertising off of (Story, 2007). With this solution, the most vehement proponents of online privacy can take action to ease their privacy concerns by participating in the “do-not-track” registry.

This simple proposal serves as a minimal regulation on online advertisers that, if implemented, will impact them very little. Because of this, online advertisers should support this registry in order to resolve the conflict that exists between them and privacy advocates. If advertisers do support this regulatory measure now, they will be able to stop continued pressure on the government from privacy advocates, thus, avoiding more stringent regulatory legislation that may result in the future. The “do-not-track” proposal is an optional opt-out program that minimally regulates advertisers. It simply gives the consumer the opportunity to act on their personal preference to be monitored or not. Therefore, privacy advocates and other concerned individuals will be able to opt-out. Meanwhile, those that belong to the majority group of those that are “blissfully unaware” of the details of behavioral advertising, or those that are willing to be monitored in exchange for certain privileges will still be retained as a marketable group to online advertisers (Brooks, 2007).

Supporting the “do-not-track” registry is also savvy in regards to business relations for online advertisers. According to Charters (2002), advertisers would actually be acting more ethically through this registry by placing the control over monitoring directly in the hands of the consumers. Charters then argues that advertisers act ethically in their electronic monitoring practices and are, therefore, finding a common ground between themselves and privacy advocates. Through supporting this registry, advertisers can be viewed as accommodating, compromising and fair to their consumers, as well as to privacy advocates. They may also be recognized engaging in good business practices to serve their consumers more justly. Through this, online advertisers can take an active role in positively altering the perception the public has of them, rather than being viewed as online predators as privacy advocates have characterized them in the past. This also helps to improve the standing of behavioral advertising itself so as “to avoid unfairly labeling behavioral targeting as an evil technique” and to recognize its value as a beneficial aspect of the internet (Brooks, 2007).

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Statistics on the amount of spam present on the internet helps support these conclusions. According to SoftScan, an award-winning e-mail and online security service that is present in over 100 countries and serves over 900,000 people, the amount of spam e-mail is increasing. In June 2007, the company recorded that the average percentage of scanned spam e-mail was in the nineties, with a record of 96.55% (2007). Statistics like are startling to many online consumers that value their privacy and security while online. Evidence like this is readily available to the public and shows that online behavioral tactics, like spam, are on the rise. Therefore, advertisers that support or go along with the “do-not-track” registry can be viewed as beneficent and progressive by the general public, allowing advertisers to gain public support.

In order to address the magnitude of this problem, I will cite statistics from the Pew Internet and American Life Project of 2002. This project was a study to ascertain the American public’s value of trust and privacy online. The Pew report concluded that 84% of participants are “very” or “somewhat concerned” about the threat of their personal information making it into the wrong hands. Currently, the registry does not provide parameters regarding the punishment of those who violate it. I propose that those that violate this mandate would be subject to federal prosecution, fines and even imprisonment. This registry would derive its power to do this primarily from the Third Amendment to the Constitution, which guarantees an individual’s right to privacy. According to the Pew report, the general public holds the same sentiments in regards to the punishment of privacy violators, stating that “94% of internet users want privacy violators to be disciplined”. In the report, “discipline” takes several forms, including jail time (11%), fines (27%), shutting down the violating website (26%) and placing the website on a list of fraudulent websites (30%) (Starke-Meyerring, Burk, Gurak, 2004). These statistics are substantial and extremely prevalent to the behavioral advertising and online privacy debate. They also signify that there is a significant outcry for online privacy protection. So, again, by supporting the “do-not-track” registry, advertisers will be appealing to a large percentage of the American consumer, leading to a positive view of the online advertiser by the general public.

As all-solving as the “do-not-track” proposal may seem, one element of it needs to be eliminated. This element concerns the online advertisers’ profile editing by consumers. Allowing consumers complete authority over these profiles is unfair to the advertisers. With this aspect of the registry, consumers can engage in unjust regulation that may not be beneficial to the advertiser and may inhibit the full potential of online advertising as a whole. Also, these profiles can be considered critical business information that the organization needs to survive competitively in their market and is entitled to confidentiality and is protected by law. With this aspect in place, there is no opportunity for advertisers to develop and reap the benefits of a competitive advantage. If made available to the public, this information could open threats from competitors and severely affect the business of the advertiser.

With the elimination of this feature of the “do-not-call” registry, an all-or-nothing precedent is established. Consumers can simply add themselves to the registry or not depending on whether

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they wish to be subject to behavioral advertising or not. Therefore, the power of the consumer is checked and there is no in between where consumers are given unbridled reign and can choose exactly what they want marketed to them. Most importantly, advertisers will not lose the individuals that value the additional perks they receive in exchange for their online observation and subsequent behavioral advertising. With this solution, internet users that value behavioral advertising will remain content and loyal to online advertisers while those that do not value behavioral advertising may be able to opt-out of it (Brooks, 2007).

A caveat to this proposal does exist. As discussed earlier, it is online advertisements that keep the internet free (Story, 2007). Therefore, if online advertisement is regulated too heavily and to such a degree that it cannot perform adequately, the internet may no longer remain free. Also, if there is a mass exodus of online users that opt-out of behavioral advertising via this registry, the internet will be negatively impacted. The proposal above must satisfy both online advertisers and privacy advocates to function correctly, but not to such a degree that one of these groups suffers. Therefore, this proposal must remain fair to both parties so as to not ruin the internet that they both value.

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Rebuttal and Counter Arguments

Registry as a Foundation for Future Legislation

It can be argued that the “do-not-track’ registry is the first of many potential steps in the regulation of behavioral advertising, a step that could easily lead to more stringent legislation on online advertising as a whole. Online advertising is a consistently growing industry that Randall Rothenberg, President and CEO of the Interactive Advertising Bureau, refers to as a recent “extraordinary pattern of innovation” (Story, “Web Marketing, 2007). The industry is growing rapidly, with $6 billion in revenue in 2002 and expected revenue of $20 billion in 2007 (Kelley, 2007). As discussed above, the government must then not over-regulate and, consequently, negatively affect this growing sector of the economy. A sector of the economy that may very well be the future of advertising. If the government does regulate online advertising too much, it will lower revenues, which may lead to alternate ways of funding the internet. These alternate ways may be more harmful and dangerous to consumers than behavioral advertising.

Elimination of Profile Editing and Subsequent Loss of Consumers

With the elimination of the profile editing aspect of the original “do-not-track” proposal and the subsequent all-or-nothing precedent that is established, advertisers will lose consumers. The consumers that they will lose are those that are on the fence or torn between the issues. These online users recognize the benefits of online advertising and want to utilize them, but also want their sensitive information and privacy to be guarded. Without a middle-of-the-road solution, advertisers will lose these marketable individuals and will only be left with those that are “blissfully unaware” or those who do not mind or value behavioral advertising (Brooks, 2007).

Those that are most actively pushing for the “do-not-track” registry are also the ones that are most concerned with protecting their privacy. This registry is an opt-out registry which means that only those that are most uncomfortable with behavioral advertising will add themselves to the registry and be lost to advertisers. Many other individuals do not mind or are unaware of the exchange of their personal information for perks and privileges and will therefore not join the registry that will stop their flow of perks. As Brooks (2007) asserts, “…most [consumers] are content to trade personal details for services…” With these individuals accounted for, there are very few consumers that will be on the fence about this issue. There are two extremes in this debate: vehement privacy advocates (a minority of those that advertisers will lose to the registry) and indifferent or unknowledgeable consumers (a majority of those that the advertisers will keep despite the registry).

Public Concern and Potential Consumer Backlash

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Why raise public concern and risk potential consumer backlash with a national effort to stop behavioral advertising when most consumers are “not savvy enough to opt-out” and many fail to see that behavioral advertising is harmful or dangerous (Brooks, 2007)?

If most consumers are “not savvy enough to opt-out”, then there is no harm in advertisers openly supporting this proposal (Brooks, 2007). This is especially true when, as discussed above, supporting the registry will improve the standing of the advertiser in the eyes of the public and prevent further, more stringent actions against advertisers in the future. Also, there is no immediate threat that advertisers will lose a significant amount of consumers if the registry is implemented.

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Conclusion and Call to Action

The “do-not-track” registry is solution to the ongoing debate between privacy advocates and online advertisers over the practice of behavioral advertising. By supporting this registry, advertisers will be viewed more favorably in the public eye and will prevent further, more stringent legislation to arise. This is the first step in implementing this proposal. Advertisers must support the registry and demonstrate their favor of it to the Federal Trade Commission and other regulatory government agencies in order for the registry to come into action. To do this, advertisers must attend town hall meetings like the one held by the FTC in November 2007, and other similar open forums on the topic to voice their support of the “do-not-track” registry. At the same time, however, advertisers must also voice their concerns over the profile editing aspect of the original registry proposed by the Center for Digital Democracy. The recent increase in this topic in government discussion and consideration shows that the government is actively involved in this issue and will readily take action to establish a “do-not-track” registry if it is supported by individuals other than extreme privacy advocates. This opportunity allows advertisers to step in and voice their approval, yielding a quick government response and ultimately, government action through the development and implementation of a “do-not-track” registry.

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List of References

Brooks, G. (2007, December). PRIVACY ISSUES: Secret Society. New Media Age, 17.

Charters, D. (2002). Electronic Monitoring and Privacy Issues in Business-Marketing: The Ethics of the DoubleClick Experience. Journal of Business Ethics, 35, 243-254.

Driscoll, R.J. (2006, August). Current Privacy Issues Facing Marketers. Privacy & Data Security Law Journal, 1-(9). 848-857.

FTC Staff Proposes Online Behavioral Advertising Privacy Principles. (2007, December 20). Retrieved March 29, 2008, from http://www.ftc.gov/opa/2007/12/principles.shtm

Kelley, B. (2007, December). Privacy and Online Behavioral Advertising. Journal of Internet Law, 11-(6). 24-26.

Mitchell, D. (2007, May 12). Online Ads vs. Privacy. The New York Times, p. C.5.

SoftScan: Spam on the rise again; June’s spam and virus statistics from SoftScan. (2007, July 2). M2 Presswire, 1.

Starke-Meyerring, D., Burk, D.L., Gurak, L.J. (2004). American Internet Users and Privacy: A Safe Harbor of Their Own? In Howard, P.N., Jones, S. (Eds.), Society Online: The Internet in Context (pp. 275-293). Thousand Oaks: Sage Publications.

Story, L. (2007, November 1). F.T.C. to Review Online Ads and Privacy. The New York Times, p. C.1.

Story, L. (2007, November 2). F.T.C. Takes a Look At Web Marketing. The New York Times, p.C.8.

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