Commentary

Gotta Take This: The FTC Is Calling

Anyone in the mobile industry who felt that the data privacy issue was focused primarily on Web and targeting practices should guess again. It has been only hours since the Federal Trade Commission issued its report on "Protecting Consumer Privacy in An Era of Rapid Change." But even a cursory glance at its contents suggests that mobile is not only touched by the proposals -- but the Federal Trade Commission's research into mobile media, technology and data collection practices deeply informed some of the overall thrust and urgency of the report. As has been widely reported, the FTC finds that recent efforts at digital advertising self-regulation have been slow and incomplete. Our expert on marketing and policy, Wendy Davis, has the full run-down.

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The full 122-page report is available here.

Clearly the FTC is opening the door to legislative and regulatory solutions in a way it hasn't before. Earlier privacy self-regulation "guidelines" issued by the FTC were aimed at the online behavioral targeting industry, but this report is also meant to inform policy-makers. In fact, the FTC has now come out proposing a general "Do-Not-Track" mechanism that lets consumers opt out of any data collection from the browser. While implementation of such a plan onto mobile would be technically different, the overall tenor of the FTC report suggests that it is neither overlooking nor excluding mobile from any of these proposals. In fact, it is the emergence of location-based services that seems to be triggering a heightened concern about data collection.

I haven't read the full report yet, but have scanned for specific references to the mobile industry. Let me tease out some topline mentions that will be cause for industry focus. One oft-overlooked area of mobile content and marketing involves one of the only strict regulations around online data, the COPPA rule for serving children. According to the report, the Commission is now evaluating whether COPPA rules need to be extended to cover teens and to address their intense use of mobile technologies. This certainly adds a new wrinkle to mobile app development and could add whole new set of considerations for how brands deploy and target their mobile content. This is going to be an issue well worth watching.

The FTC seems to recognize that mobile poses everyone, including regulators, a new level of challenge. Throughout the report, the FTC staff refers to the especially complex technology chain at work on mobile and how it makes disclosures, opt-outs, and transparency difficult. While recognizing that mobile technologies and LBS have tremendous benefits for consumers, the FTC also seems struck by how these technologies greatly enhance the marketing and media industries' ability to collect data and so increase the risks that "data will be shared more broadly than understood or intended by consumers or used for purposes not contemplated or disclosed at the time of collection."

The presence of a unique device identifier on a phone (usually associated with a single person) that can then be tied to location-specific information, seems to be of particular concern to the FTC. In its "Proposed Framework" of guidelines for business and policymakers, for instance, the report singles out mobile. "If a mobile application is providing traffic and weather information to a consumer based on his or her location information, it does not need to collect contact lists or call logs from the consumer's device."

But even more to the point for most app developers and the rest of the mobile value chain, the FTC is looking for greater transparency in the new app ecosystem and disclosures. "When a consumer downloads an application to his smartphone, he may not know whether his wireless carrier shares his personal information with the application. He also may not know if the application

shares his information with advertisers or other third parties. All companies involved in information collection and sharing on mobile devices - carriers, operating system vendors, applications, and advertisers - should provide meaningful choice mechanisms for consumers."

But the FTC does seem to recognize that where and how to gather "informed consent" from the user to collect data is especially thorny on a cell phone. They ask whether a uniform icon or graphic would be advisable, for instance. In fact, they are requesting that market and academic research be done in this regard. They are also exploring whether any restrictions, disclosures, opt-outs for online advertising should be automatically extended onto mobile applications. The report says explicitly that the mobile context have been "a particularly strong illustration of where privacy notices have been ineffective." They are asking for simplified and standardized declarations of data collection policies and for mobile providers to figure out a way to give their customers access to these disclosures.

The bottom line is, mobile platforms are no longer a sideshow in the emerging issue of privacy and data collection. The FTC has made teen use of mobile and LBS technologies in particular central concerns in its overall focus on the issue. At the very least the various mobile marketing groups, carriers and publishers should take as a lesson the FTC's comments on self-regulatory efforts from the online advertising industry. They took too damn long to launch. Getting ahead of this issue with firm proposals, research and tests of standardized disclosures and opt-outs will be critical.

In the data collection controversy, mobile operates with distinct advantages and disadvantages. The down side is that like all things on mobile, privacy is taken more personally here. I think consumer responses to privacy lapses will be deafening here. Personally, I think agencies and lawmakers will be even quicker to legislate/regulate data collection on phones than they have been on the Web. This is the price of the intimacy we have with this medium.

On the upside, I think mobile providers are likely in a better position to make the case with consumers that data collection pays off in better services. The effect of detecting one's location in an app is immediate and obvious when it benefits the user with relevant information. This is the dividend mobile could enjoy from its focus on service, not just more content. The exchange of value can be made clearer, and mobile marketers are not left making the same mealy-mouthed argument as online advertisers: the ads will be more targeted to your interests, yadda, yadda.

The inordinate opportunity of mobile also poses significant risks.

This is a call that can't be returned later.   

1 comment about "Gotta Take This: The FTC Is Calling ".
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  1. Gene De Libero from Digital Mindshare LLC, December 2, 2010 at 5:17 p.m.

    This whole bruhaha under the guise of "consumer protection" is simply FUD [fear, uncertainty and doubt] and a dose of good old fashioned ignorance rearing their ugly heads once again. The FTC needs a crash course in what online advertising really is and how it works and our industry has to work harder to self-regulate. If the FTC folks need a hobby, they should pick something else. There's nothing to see here...

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