Commentary

Self-Regulation is Key to Managing Internet Privacy

In the last few weeks, we have seen Congress and the Federal Trade Commission begin to explore Internet privacy issues. This was followed by a chorus of concerns regarding user privacy on social networking sites in light of new advertising vehicles.

As an industry, is it not in the best interests of consumers, online publishers and ad networks, and ad agencies and marketers if we instead regulate ourselves?

Let's look at the alcohol industry. For many years, marketers of hard liquors refrained from advertising on TV, on their own without government intervention. This made the industry look child friendly, enabling marketers of hard liquors to avoid the strict regulation imposed on the tobacco industry. This also enabled them to reduce their marketing budgets by focusing on lower cost advertising vehicles. It would be interesting to compare liquor consumption in the US with a country where TV advertising of liquor is done regularly, but I suspect that the US liquor marketers have done their homework and understand that they have maximized their long-term ROI through abstinence (from TV advertising.

Much of the uproar today focuses on behavioral targeting. For marketers, the ability to target their marketing message to a finite and focused audience is a dream come true. As noted department store owner John Wanamaker said, "Half the money I spend on advertising is wasted; the trouble is I don't know which half." With behavioral targeting, however, we know which half is being wasted.

And truth be told, behavioral targeting is also good for users. If you're in the market to buy a new car, wouldn't you rather see ads for new cars than for products that do not interest you? The greater degree of relevancy between the ad and the content is good for all players in the online advertising eco-system: Users, Publishers and Advertisers.

But the issues with privacy are in the details. Users that would be comfortable if the marketer knew that they were in the market for a new car might feel less comfortable if the marketer also knew what college they attended, where they work, in what city they live and the names of their 37 closest friends online.

The questions we have to ask ourselves collectively as an industry is how to define fair privacy and how much information is too much information.

Let me be honest with you and say that I don't personally have all the answers. But I'd like to start this dialogue by exploring an issue that has served as a lightning rod for attacks on online privacy - User Profiling.

If the negative perception of online advertising in general and behavioral targeting specifically is being driven by the fear of "big brother", then user profiling is shooting us in the foot (and maybe even higher.

There are a number of other targeting approaches which provide a behavioral targeting solution to satisfy marketers without utilizing user profiles or other user-specific information. One such approach is Event-Based Targeting.

With Event-Based Targeting, instead of following users and aggregating data with every triggering action, we just associate a cookie to a single event and later target according to that event. With this approach, we treat every event as a single targeting unit and don't try to create the big picture profile that results when one connects all of the dots.

I think this approach saves us from creating the "big brother" feeling, but it still remains to be seen how much value targeting this way will yield in the form of conversions. The bigger picture issue beyond this example is that as an industry, we owe it to ourselves to develop other privacy-friendly behavioral targeting opportunities.

The world of marketing is changing. Even with the best advertising targeting, the user will ultimately determine whether or not to engage with our product or service. By making our products more engageable, we will win the marketing battle, and not through more sophisticated targeting.

As with the liquor industry, we will all benefit from self-regulation. Let's get started before someone else does it for us.

Meir (Iri) Zohar is the founder of eXelate (www.exelate.com), the creator of the eXelate Targeting eXchange.

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