eView From the Floor: FTC Focusing on Behavioral Targeting
The Federal Trade Commission held a town hall meeting in Washington D.C., Nov. 1-2 titled "E-havioral Advertising: Tracking, Targeting and Technology" to discuss the consumer protection and privacy issues raised by the practice of online behavioral tracking.
The meeting brought together a large and varied group of panelists and attendees, including representatives from major technology companies such as Microsoft, Verizon, Google and Yahoo!, as well as online publishers, trade associations, consumer advocacy groups, state regulators and academics.
Online behavioral targeting is the practice of tracking a consumer's online activities, including searches conducted, pages visited and content viewed. That information -- currently considered to be non-personally identifiable information -- is collected and used to target online advertising intended to reflect a consumer's interests.
There was clear recognition at the meeting that advertising is a critical component of the Internet eco-system, and that behavioral marketing has benefits for the advertiser, the consumer and the Internet in general.
According to Randall Rothenberg, president and CEO of the Interactive Advertising Bureau, who was a panelist at the meeting, nearly $20 billion will be spent on online advertising in 2007 -- approximately one-third the amount spent on television advertising -- and spending, in particular on targeted advertising, is projected to increase. Numerous panelists noted that the success of online advertising is primarily responsible for the diverse, expansive and free content that consumers have come to expect from the Internet, and that when given a choice, consumers prefer to receive online advertising in exchange for not having to pay for online content. Furthermore, research indicates that consumers generally like the idea of receiving advertising that is pertinent to them.
Much discussion at the meeting centered on the growth of behavioral targeting, the corresponding privacy concerns, and the fact that the practice is largely invisible to consumers.
In his opening remarks, FTC Commissioner Jon Leibowitz acknowledged that there is a growing discomfort among the public as to the extent of behavioral tracking and that the current "don't ask, don't tell" approach should end. Many panelists argued that greater transparency and more uniform rules regarding behavioral tracking is critical so that consumers are clearly aware of the trade-off.
The FTC acknowledged that the current self-regulatory system of notice and choice might need to be modified. Notice and choice refers to the FTC's fair information guidelines that provide that online service providers or Web site owners provide Internet users notice about whether and to what extent they collect and use their personal information, as well as options regarding how the information collected may be used for purposes beyond those for which it was provided. There was general consensus that most consumers either do not read or do not understand privacy policies. Many industry panelists spoke of their recent efforts to make privacy policies more understandable and to provide clearer notice to the consumer. Ideas ranged from layered privacy policies, to consumer notices at the point behavioral tracking is about to occur, to a recent eBay practice that allows a customer to learn more about how the ad is served to them and to opt-out of future behavioral tracking by clicking on a link near the ad. Consumer groups also proposed a "Do Not Track" registry.
The FTC also expressed concern over the collection of sensitive information, such as health data, and noted that there currently are no regulations as to what types of non-personally identifiable behavioral tracking information a company could collect.
Consumer groups worried that behavioral tracking, especially of sensitive information, could lead advertisers to discriminate among consumers based on the information collected. Industry representatives responded that their businesses are built on consumer trust, and that because they see privacy protection as a competitive advantage, they are careful to not act in ways that would violate trust.
So what's next?
The FTC is open to receiving further comments until Nov. 16. It then will review all the information and determine what action, if any, it will take next.
Although it is too early to be certain, it is not likely that any proposed rulemaking will come directly from this meeting. In her closing remarks, Lydia Parnes, FTC's director of the Bureau of Consumer Protection, remarked that it was a good start to a very important discussion. She acknowledged the need for greater transparency about behavioral tracking and for greater consumer control over what behavior gets tracked.
However, Parnes expressed concern that over the course of the two-day meeting the FTC did not hear nearly enough concrete facts or suggestions on how behavioral tracking should be conducted and regulated. She stated that the FTC will continue to ask industry members for concrete information regarding this practice.
It is clear that the FTC is very interested in online behavioral tracking. It will monitor businesses and their practices, and will listen to consumers. The FTC also will focus on the industry's attempts to self-regulate through the Network Advertising Initiative, a cooperative group of online advertising companies engaged in behavioral tracking. With the massive changes in tracking technology, the FTC will work to find the right balance between stimulating competition and online innovation and protecting consumers.
Ronald Urbach is co-chair of the advertising, marketing and promotions department of law firm Davis & Gilbert LLP. Matthew Smith is an associate in the firm's advertising, marketing and promotions department. Reach Urbach at email@example.com, and reach Smith at firstname.lastname@example.org.