• by Steve Smith , Staff Writer @popeyesm, November 23, 2007

If Thanksgiving is about anything, it is about family bickering. And so in that festive spirit this week we knock back a few too many eggnogs and reopen that family sore spot -- privacy. In early November the Federal Trade commission held public hearings about consumers protecting their personally identifiable information and online habits from corporate scrutiny. We asked some of the Behavioral Insider's many cousins, uncles and aunts, fellow travelers and drop-ins to reflect on the current status of privacy and behavioral profiling online. Are we any closer to government regulation of how user data gets handled? Any closer to circumventing regulation with better industry self-regulation? Does the introduction of new targeting models from MySpace or Facebook inflame the issue? Like a good T-Day repast, there was no shortage of turkey, stuffing and family opinions.

Complaints about behavioral targeting were filed last year by the Center for Digital Democracy and the U.S. Public Research Group, which led to the Town Hall meeting in early November where industry executives explained their privacy practices and plans. CDD director Jeff Chester came away unimpressed. "It was clear, however, from the Town Hall that few industry leaders are willing to seriously address consumer privacy and related concerns," he says. "But there is still an opportunity to move beyond a narrow protectionist approach and confront the public interest issues honestly. A failure to deal candidly with these concerns will fuel further advocacy and eventually lead to an appropriate intervention from policymakers."

He continues, "It's clear we have placed this issue on the radar of the commission. Our [Nov. 1] amended complaint filing and subsequent Nov.12, 2007 letter to FTC Chairman Deborah Majoras, asking the agency to broaden its investigation to include the expanded targeted marketing to user profiles on Facebook and MySpace, has placed more pressure on the agency to act. So has our outreach to European Union privacy authorities. CDD intends to press for a regulatory outcome that protects privacy and ensures meaningful consumer protection."

Let's get our house in order or the government will do it for us, warns Dave Morgan, newly minted executive vice president of global advertising strategy at AOL. He has testified before Congress on the issue of privacy in the past and as former Chair of TACODA has been among the most vocal proponents of industry self-regulation. On the heels of the FTC hearings, Morgan says, "The protection of consumers is soon going to emerge, if it hasn't already, as one of the two or three most important issues in digital marketing. Delivering relevant ads to consumers online can create enormous value... but only if users are presented with notice, transparency and choice. We as an industry need to police the conduct of both ourselves, and the bad actors out there. We didn't do that in spyware. We didn't do that in lead generation. If we don't do that here, we will find ourselves saddled with bad laws, bad regulations and, most importantly, the loss of the trust of our users and our advertisers."

And many companies remain outside the purview of industry oversight, says consultant Alan Chapell, president, Chapell & Associates, and leader of privacy and legislative relations committees for the Direct Marketing Association and Mobile Marketing Association. "I've said for a while now that the biggest threats to the future of behavioral targeting lay with those who don't self-regulate," he notes. "There are well over 40 companies that hold themselves out as online preference marketers. Yet, only 13 of them are members of the Network Advertising Initiative, the industry self-regulation program. It's pretty simple. Either the industry unites behind a common set of standards, or a set of standards will be forced upon us. Whether that ultimately happens at the federal or state level is almost beside the point. It will happen.

It may be too late for self-policing, however, warns Mike Cassidy, president of Intercept Interactive, which runs the Undertone Network. Cassidy was at the hearing and says, "I would consider it a near certainty that the government will begin regulating online advertising within the next twelve to eighteen [months]. The FTC commissioners were noticeably concerned about behavioral targeting, and in my opinion, are mistakenly more focused on perceptions regarding consumer privacy rather than maintaining a free and entrepreneurial marketplace."

Among the proposals from advocacy groups is a "Do Not Track" registry that lets consumers opt out of some or all online tracking technologies in much the same way the popular Do Not Call registry removes us from telemarketer lists. Bill Gossman, president and CEO of Revenue Science, is skeptical. "The idea of a Do Not Track list has serious challenges from an implementation standpoint, and it's not clear what the benefits are over existing solutions, such as users turning off cookies," he says. Gossman also warns that overregulating online advertising may also kill consumers' own golden goose, the driver for free content. "The meeting demonstrated that it is important that the government proceed carefully in this area," he says. "Consumers have benefited greatly from these services, and we question if consumers are prepared to pay for all of the content that they are now getting for free. It is not clear that those asking for government regulation have significantly answered the questions of who is being harmed by targeted advertising, and how great is that harm?"

Online ad executives worry that the digital realm is being asked to reach a higher threshold of privacy guarantees than previous platforms. As David Moore, chairman and CEO, 24/7 argues, "The innovations developed to enable online targeting are analogous to tactics used by direct mail firms for years. It seems unfair that the offline industry, which tends to provide consumers with no content other than marketing materials and sales brochures, would be able to target in this manner, while online marketers, many of whom provide free content, would be restricted. Ultimately, for content to remain free on the Web, marketers need the ability to monetize it." If consumers won't allow the content providers to target advertising in a certain manner so that they can sell their advertising profitably, then consumers must be prepared to pay for that content."

And so far, only 4% of consumers say they are worried about Web sites spying on them, and many prefer the targeted ads that tracking allows, says Jupiter analyst Emily Riley. "Consumers should be allowed to opt out of behavioral targeting, particularly for sensitive topics," she argues. But on the other hand, "Regulations on the use of online behaviors should be in place to protect consumers from fraud and identity theft, but should be flexible enough to allow companies to provide consumers with more accurate, less cluttered online experiences."

Rob Graham of LearningCraft puts some of this debate in perspective by comparing online with offline tracking. "To begin, I think that the recent concern with online privacy is based on bad science. Advertisers have been able to track consumer based on a number of criteria for years... and most of these factors are as non-private as can be. Direct marketers alone represent the worst threat in that they can actually hop in the car and come visit us with the info they have on hand! Obviously I'm being tongue-in-cheek here -- but the point I want to make clear is that most of the online BT tracking that's taking place today is anonymous and certainly less of a direct threat to privacy than many of the more traditional marketing techniques."