February 19, 2009, 12:00 AM

Feds give online marketers one more chance on behavioral targeting

The Federal Trade Commission says marketers have not done enough to protect consumer privacy, but will be given another chance to regulate themselves. Retailers should make clear how consumers can opt out if they don’t want to be tracked, an expert says.

Katie Evans

Managing Editor, International Research

The Federal Trade Commission is not yet prepared to regulate online ads that target consumers based on their Internet activity-but the regulators warn that such regulations could be coming if marketers do not step up efforts to protect consumer privacy.

“Industry needs to do a better job of meaningful, rigorous self-regulation or it will certainly invite legislation by Congress and a more regulatory approach by our Commission,” wrote commissioner Jon Leibowitz in an opinion concurring with the FTC’s decision. “Put simply, this could be the last clear chance to show that self-regulation can-and will-effectively protect consumers’ privacy in a dynamic online marketplace.”

Commissioner Pamela Jones Harbour also wrote an opinion that, while concurring with the commission report, warned that regulation could be coming if abuses are not curbed. “Self-regulation has not yet been proven sufficient to fully protect the interests of consumers with respect to behavioral advertising specifically, or privacy generally,” Harbour wrote. While the commission did not say how long it would give the marketing industry to show progress, Harbour proposed reviewing the issue in 18 months.

The FTC adopted the report entitled “Self-Regulatory Principles For Online Behavioral Advertising,” by a 4-0 vote Feb. 12. The report revises a statement of principles the commission adopted in December 2007 in responses to 60 public comments that had been submitted.

Among the changes, the FTC made clear that the principles it lays out are not aimed at web operators, including retailers, that use data about a consumer to deliver targeted advertising on its own site, or that present ads based upon the pages an individual is viewing. Such practices present fewer privacy concerns, the commission said in the latest report.

The FTC is primarily concerned with web sites that present ads to web users based on information the sites have obtained from other sources. A common example occurs when retailer A puts an anonymous cookie on a consumer’s computer to show that she has visited that retailer’s site; an online ad network that the retailer employs can recognize the consumer from the cookie and present her an ad from retailer A, says John Ardis, vice president of corporate strategy at online marketing firm ValueClick Inc., which offers such ad targeting to online retailer clients.

“Once data is shared, it cannot simply be recalled or deleted-which magnifies the cumulative consequences for consumers, whether they realize it or not,” FTC commissioner Harbour wrote in explaining her concerns about the data collection and sharing that facilitates that targeting. She also added that disclosures about data collection on web sites are often hard to understand.

To address such concerns, Ardis advises retailers to make sure they have someone on staff who is knowledgeable about privacy principles and to make it easy for consumers to understand the retailer’s policies and to opt out if they don’t want their behavior tracked as they move around the web. “Instead of page after page of tiny type and legalese, say it clearly, ‘Here’s what we do,’” Ardis says. “Make it clear and make it in big type and make it easy for consumers to say, ‘I don’t want to do this.’” He says the FTC is also concerned about web sites that collect personal information about consumers and sell it to others, but he says that online retailers rarely do this because they are mainly focused on building good relations with their own customers, rather than making money by selling data.

While noting that the FTC report is a clear warning that regulation or legislation will come if marketers do not protect consumer privacy, Ardis says the industry is taking steps to show it is serious about privacy. That includes a joint task force on behavioral advertising announced last month by four major marketing groups-the American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association and the Interactive Advertising Bureau. “The fact they’re all working together is telling and important,” Ardis says.

Consumers, meanwhile, remain concerned about how their personal information is disseminated on the Internet, suggests a survey released today by online media and technology company Burst Media. 80.1% of online users say they are worried about the privacy of their personal information such as age, gender, income and web use. 62.5% say it is likely a web site they visit collects information on how they interact with the site. And, responding to a question directly relevant to behavioral advertising, only 23.2% say they would not mind if non-personally identifiable information was collected in order to show them more relevant ads.

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