Waxman V. Rothenberg

Every animal has a fundamental instinct when cornered by something trying to kill it. For some, it's to fight, while others attempt to flee, and still others freeze or cower in the corner.

This instinct is deep in the subconscious of all of us, too. It is the same reaction that causes you to instinctively lunge when you see a child dangling from a railing and her hand starts to slip. It has been finely tuned over hundreds of thousands of years of evolution, and works extremely well in most circumstances of modern life. Unfortunately, that visceral reaction can occasionally and unintentionally lead us down highly illogical paths.

The current fight about self-regulation of consumer privacy between Representative Henry Waxman (D-California) and the online ad industry is a shining example of when gut instinct can lead to fatal errors.

Make no mistake: we are teetering on the edge of sweeping regulations that will wipe out some questionable companies in our space, and do damage to most others.

We are in this position because our industry leadership is making a classic strategy error: believing that 100 good short-term tactical moves equate to a winning long-term strategy.

Driving Faster Doesn't Help When You're Lost
For the last several years, our industry associations, including the IAB and the NAI, have continued to lash out at all calls for regulation. They have made ridiculous technology arguments, job preservation arguments, and even dumped money into the ironically named NARC.

Perhaps most egregiously, they implied that somehow to not support behavioral targeting was akin to harming the future of "green cars, social investing, or charitable giving." This is appallingly intellectually dishonest, and as accurate as arguing that hating junk mail means you also want to shoot puppies.

To their credit, they largely have been successful (outside of Europe) arguing for "self-regulation." After all, who better to police them than themselves?

Sadly, as the World just learned, self-regulation is a lot like self-rehab.

It Was Colonel Mustard, in the Library, With the Candlestick
Not surprisingly, a recent Stanford report shows systemic abuse of their own policies. The report claims no fewer than eight members of the Network Advertising Initiative violate their own privacy policies.

One company accused in the report is 24/7 Media, a company whose own executive sits on the executive committee of the Internet Advertising Bureau.

If the members and leaders of the industry associations can't comply, just imagine what happens in the dark corners of the Web with advertising firms that think no one is looking.

After all, it should not be hard to comply with a policy that you wrote yourself.

The Waxman Cometh
All of this has caught the attention of Representative Waxman, who has rightly smelled blood in the water. "Self regulation isn't working," he said recently.

The industry efforts to distract, obfuscate, confuse, complicate and otherwise cloud the issue are no longer effective. The IAB and NAI need to stop their ridiculous shell game, and start taking accountability for the actions of their members and for the rest of the industry whom they claimed their self-regulation model would govern.

It has not worked. It will not work.

Make no mistake: significant government regulation is coming. Our leadership's role is to educate the public and bring forth intellectually honest arguments and propose reasonable regulations. These regulations will be beneficial in establishing consumer trust, and will help our industry long-term by eliminating the least ethical among us.

 The right strategy is for Rothenberg to step up, hat in hand, and acknowledge that we wasted four years and a lot of credibility beating the drum of self-regulation. He needs to admit that cheap propaganda like his 2008 HuffPo piece where he said "behavioral marketing... uses consumers' own choices to provide them more choices," rings hollow when his member companies are not honoring the most basic choice of consumers: not to be tracked in the first place.

Then, and only then, can he be a trusted partner at the table to guide the creation of a reasonable set of government regulations that balance the needs of consumers and advertisers.

Or, he can continue to chase his instinct; fighting a hopeless fight, surrounded by a growing set of statistics that don't support his argument.

As John Adams once said, "facts are stubborn things."

David Koretz (Twitter: @dkoretz) is the Chairman of Adventive.

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7 comments about "Waxman V. Rothenberg".
  1. Rick Monihan from None , July 28, 2011 at 1:58 p.m.

    Sometimes time is needed.
    Self regulation may not have "worked" so far because not enough people are engaged in the process, for one.
    For another, it's important to disengage from companies which flout the rules - but sadly, sometimes revenue seems to trump good behavior. Sometimes. Not always.

    If regulation comes, it will happen because a crisis (as is typically the case) centers attention on a perceived flaw. This will lead to recriminations, upset actors, and some decisions on how to best "fix" the perceived problem(s), which will allow the government to then step in and act like heroes here to save the day. We, as an industry, will rue that moment.

    Government intervention has worked in industries where severe loss of revenue and potential theft of goods or services can (or has) occurred. We are happy to have the government regulate banks and Wall Street (then falsely blame the market when those regulations fail or fail to be enforced properly). We are less happy when the government steps in and tells us how we should behave.

    I see little good the government can provide by stepping in to our industry. We have managed to grow tremendously in an environment where the government has (wisely) acted to keep a "hands off" approach. So it SHOULD be up to us to clean our own room.

    Whether publishers and agencies can act in this fashion is another question. But to imply they aren't trying, or can't do it, is incorrect.
    Sometimes the government's best weapon isn't immediate action, but the threat of future action. Unfortunately we live in a world of short term memories. The last thing I'm interested in is a government that applies the same rules that were applied to Fannie Mae, or the Fed's overreliance on low interest rates, to create a ridiculous housing bubble. I know some people CLAIM that was "market driven". But that's only honest if you believe the market wasn't coerced by badly managed government regulation.

  2. Paula Lynn from Who Else Unlimited , July 28, 2011 at 4:40 p.m.

    Until ALL people are honest and trust worthy and greed totally disappears, laws are necessary. If self control and self regulation worked, there would not be the housing crisis there is now. Better you should help with descriptions and information to aid in regulation so fewer errors are made.

  3. Keith Huntoon from LiftEngine , July 29, 2011 at 12:24 p.m.

    If we agree non-PII can become PII very easily (read http://cyberlaw.stanford.edu/node/6701), individuals must have a clear and easy way to protect their privacy and opt out of tracking.

    We have 2 options: self-regulation by the industry and gov't regulation.

    Can self-regulation work? If only 60+ Ad nets participate in NAI, approximately 90% of the ad-industry players (650 or so in totoal) do not want to abide by self-regulation terms.

    Therefore, what choice exists other than govenment regulatation? The answer seems pretty clear to me.

  4. Rick Monihan from None , July 29, 2011 at 1:20 p.m.

    Paula, funny that you mentioned the housing crisis - yet so did I. Please review the Fed's role in this disaster, as well as the role of Fannie Mae and Freddie Mac. Moral Hazard is something that exists with or without government regulation.
    However, with government regulation, you can systematize and make endemic moral hazard. But because you have regulations you will assume everything it taken care of. It's complacency at its worst.

    I have yet to meet anyone who really views government beneficially or sees politicians who they feel do anything "right". But I meet alot of people who assume that even though they have little or no trust in government, they want the government to fix things. It's an odd conundrum that we, as people, openly and frequently criticize the one thing we hope to "fix" something.

    Remember who the government will turn to when they want experts to make the rules. The same people you complain about today who can't get self-regulation right. What makes systematizing it better?

    Some systems are self emergent (a good article today in Mediapost about that in Online Spin). Emergent systems are complex and develop rules over time. They are more efficient. They are more productive. Self-regulation, in almost every effective situation when it has occurred (and it does happen frequently) takes time. You can't force perfection, and even if you try you won't get it.

  5. Rodney Mayers from Proximic , July 29, 2011 at 6:11 p.m.

    Regulation in general suggests an understanding of the intent of the players and the methods that need to be regulated. Self-regulation suggests that the parties agree on the likely intent of the players but misses on the outcome if a "member" winds up not following the rules.

    Government regulation will make matters worse because it will likely be written by people who know little about the issue, informed by people who know something about the issue who direct people that know everything about the issue.

    The real question on the table is what is the penalty for violation? Irrespective of where the regulation comes from, what is the penalty for non-compliance?

    Any regulation without a) a compliance mandate, b) a non-commercial entity as the neutral 3rd party to test compliance, c) no severe economic repercussion to the offending member, is an empty promise.

  6. Paula Lynn from Who Else Unlimited , July 29, 2011 at 6:28 p.m.

    Yes, RIchard, it is a combination. People were offered alligators for free. They took them and they were eaten. If there was a government mandate regarding the teaching of basic household economics in every grade level from 1-12, perhaps Freddie and Fannie would not have had to be developed or had the steam to do or not do what they were intended to do.

  7. David Koretz from Adventive, Inc. , July 29, 2011 at 7:11 p.m.

    REALLY excited to see this turn into a thoughtful debate. Thank you all for elevating the dialogue to the next level.

    I agree strongly with Rodney that regulation has to come with economic penalties to keep people in check.

    @Richard

    1. I'm not implying that publishers aren't trying to protect user privacy... I'm stating it explicitly :) Publishers have proven repeatedly that they can't even follow the rules they set for themselves.

    2. I'm also definitely not saying they "can't" do it. That would imply the constraint is capability. It's not.... it's pure economic incentive not to.

    I feel odd as a small government, fiscally conservative guy arguing for government regulation, but I truly believe our industry is acting in a masochistic way without realizing it.... and they are only harming themselves.

    David.