Publishers, Advertisers, Consumers Pick Sides in Online Tracking Debate

A firestorm of fury has erupted over behavioral tracking — the tracking of consumers online by marketing companies and advertisers to serve them up with targeted advertisements when they’re on the Web.

Both consumer organizations and trade and industry groups have responded to the Federal Trade Commission’s (FTC) call for comments on its proposal to control behavioral tracking.

Meanwhile, the Newspaper Association of America is contending that such restrictions breach its First Amendment rights, and some advertisers have agreed not to collect certain types of data in a bid to stave off government restrictions.

Breaking ranks with other online advertisers, Microsoft suggested the FTC examine regulations on all forms of data collection.

The battle has widened beyond the FTC’s call — a New York State assemblyman who has introduced a separate bill to protect consumers online has come under fire from a trade coalition.

In the Beginning

In December, the FTC called for every Web site where data is collected for behavioral tracking to clearly declare its information-gathering policies and provide consumers an opt-out capability. The group also proposed that companies get clearly stated agreements from consumers if they collect sensitive data or if they use data for purposes other than those stated on their Web sites.

The FTC also sought comment on the definition of the term “sensitive data” and on whether the use of sensitive data should be prohibited instead of letting consumers decide on that question. Additionally, it sought more information about whether tracking data is being used for purposes other than behavioral advertising and whether uses impacted for such other purposes needed more protection.

The window for comments closed last Friday, April 11.

Consumer Organizations Fulminate

The Consumers Union and the Consumer Federation of America are urging the FTC to create a “do not track” similar to the telephone “do not call” list that will let consumers prevent advertisers from collecting information about them.

Meanwhile, eight groups, including the Center for Digital Democracy, the American Academy of Child and Adolescent Psychiatry and the American Academy of Pediatrics have urged the FTC to completely ban the tracking of Web surfers under the age of 18.

Consumer organizations contend that consumers are poorly protected on the Web.

“User rights are critical,” Consumers Union senior counsel Chris Murray told the E-Commerce Times. “Is there a meaningful choice for an Internet user to say ‘Yes, this is OK, I find some benefit in these practices’ because some people may see some value in the free service or advertisement they find, or ‘No, I don’t want this’?”

Trade, Industry Groups Go Gaga

Members of various organizations representing online advertisers are up in arms over the FTC’s proposals, pointing out that self-policing and strong leadership in the industry are the best ways to protect the privacy of consumers.

Eleven trade groups, including the American Advertising Federation, the American Association of Advertising Agencies and the Consumer Bankers Association, have filed responses criticizing the FTC’s proposals on various grounds. These include the contention that there’s a relationship between a marketer and its customer, and that behavioral targeting helps consumers get information just in time, enables free services and content, and supports innovation.

The Free Speech Argument

Nobody is a stronger advocate of free speech than the American newspaper, and the Newspaper Association of America is contending that limits on behavioral advertising are breaching its First Amendment rights.

Its argument is that restrictions or limitations on what newspapers’ Web sites publish, and the basis on which editors and advertisers decide what to publish, can amount to a form of prior restraint.

That’s rubbish: “It is a specious connection between advertising and editorial, that somehow being able to target someone on personal information like financial and health data or sexual orientation or religious preference is free speech,” Murray said. “There’s a difference between the right to speak and the right to know every last thing about your audience.”

The First Amendment protects people’s right to speak in the town square, and the Web is today’s electronic equivalent of the town square. However, “the right to speak in the town square doesn’t give the speaker the right to shake down everyone in the audience and ask people to open their wallets and show their drivers’ licenses and share other private data,” Murray added.

Thou Shalt Not …

Fearful of strong government restrictions, some advertisers are already coming up with dos and don’ts for behavioral tracking.

The Network Advertising Initiative — which describes itself as “a cooperative of online marketing and analytics companies committed to building consumer awareness and establishing responsible business and data management practices and standards” and has developed standards for third-party ad networks, cookies, spam and Web beacons — has come up with a list of sensitive subjects that should not be tracked.

These include consumers’ HIV, AIDS or cancer statuses; sexually-related conditions; psychiatric conditions; abortion-related information; sexual orientation or identity; and whether they are victims of crime.

Microsoft Stands Alone

Alone among the ranks of online advertisers and marketers, Microsoft has called for even more regulation.

It urged the FTC to not just focus on behavioral advertising but to look at regulations governing all forms of data collection, such as that for contextual advertising. It has suggested a five-tiered structure to control online advertising.

Is Microsoft a white knight? Hardly: It is reported to have participated in several meetings of the State Privacy and Security Coalition (SPSC), a group of online advertising and marketing companies, including Google, Yahoo, AOL, Facebook, Comcast and eBay that fights data protection and privacy efforts.

Four years ago, coalition members opposed anti-spyware legislation introduced in Utah; last year, they targeted Utah’s Trademark Protection Act. Utah played ball, watering down the act in a move applauded by Google and other coalition members.

New York’s Gadfly: Assemblyman Brodsky

The latest target of the coalition’s wrath is New York State Assemblyman Richard L. Brodsky, who represents Westchester County and recently introduced a bill that would make it a criminal offense for anyone to use personal information for advertising.

The bill, A.9275, is called the “Third Party Internet Advertising Consumers’ Bill of Rights Act of 2008.”

Its introduction unleashed a whirlwind of opposition: Microsoft, AOL and Yahoo have sought meetings with Brodsky and the Interactive Advertising Bureau has warned that the bill will lead to the end of free services and content. Also, the SPSC wrote a letter to Brodsky dated April 7, warning that the bill “would subject advertising networks to an extremely detailed, unprecedented array of notice, consent, and access obligations relating to ‘personally identifiable information’ and ‘non-personally identifiable information’ that is used for ‘online preference marketing.’ Every Web site that an advertising network contracts with would be subject to detailed notice requirements.”

The bill, SPSC said, is unnecessary because advertising networks have already agreed to self-regulation and, if they fail to do so, the New York attorney general’s office and the FTC would act.

None of this fazes Brodsky. “I read the letter. That’s all,” he told the E-Commerce Times. “The bill is a good idea, there is a legitimate interest in privacy that these companies are invading and they seem to have no interest in the rational resolution of the problem so we’re going to proceed.”

Why the Fear?

Brodsky’s bill seems to be a relatively minor one, so why are industry members so terrified?

Well, if it passes in New York State, Connecticut may follow suit — it’s already looking at a similar bill — and who knows where the ball will stop?

That could lead to companies limiting their behavioral advertising practices throughout the U.S., which will lead to advertisers pulling out.

Already, marketers are complaining that customer analytics aren’t leveraged enough: According to a Chief Marketing Officer Council study of more than 450 marketers worldwide conducted in late 2007 and early 2008, inadequate sharing and integration of customer data and insufficient insight into customer behavior are hampering enterprises’ marketing efforts.

The Last Words

That’s just too bad: Brodsky’s efforts are focused on protecting consumers. “The bill will limit the ability of private companies to collect and use private data,” the assemblyman said.

He is willing to accept input from industry but won’t back down: “We’ve spoken to a number of people, we were having productive meetings until this coalition decided to have an absolutist position. So, we’ll proceed.”

The FTC, meanwhile, is staying out of the fray for now. “We’ve just received a bunch of comments, and we’re in the process of evaluating them,” Jessica Rich, assistant director in the FTC’s Bureau of Consumer Protection, told the E-Commerce Times. “We need to consider them before making any statements about the next step.”