May 21, 2010, 2:46 PM

New privacy bill could lessen the potency of online ads, marketers say

If a discussion draft of a new federal privacy bill for targeted online ads becomes law as it is currently written, online ads based on consumers’ shopping behavior will become less effective, marketers say.

If a discussion draft of a new federal privacy bill for targeted online ads becomes law as it is currently written, online ads based on consumers’ shopping behavior will become less effective, marketers say.

“This bill would make direct marketers get permission from consumers before targeting them with online ads,” says Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, a trade group for direct marketers. A consumer visiting a golf equipment retail e-commerce site, for example, would have to opt in to that site’s marketing program before the e-retailer could present the consumer with golf-related ads as she visits other web sites, Cerasale says.

Cerasale notes that a recent study by marketing experts at the University of Toronto and the Massachusetts Institute of Technology found that in Europe privacy regulations have reduced the effectiveness of online ads, as measured by purchase intent, by 65%.

The committee will be accepting comments on the draft bill through this month. Cerasale says the DMA will suggest making it friendlier to marketers, such by letting marketers offer online consumers the chance to opt out of targeted ads. Experts believe few consumers would opt in to receive targeted ads, but that many consumers would not bother to opt out because of privacy concerns.

Despite DMA’s stance that the bill is too restrictive, several consumer groups, including Consumer Watchdog, will press for stronger consumer protections, a spokesman says. One concern among privacy advocates is that, as initially written, the draft proposal preempts any local state laws that might offer stronger consumer privacy rules, says Consumer Watchdog privacy analyst John Simpson.

He adds that consumer groups would like to see the privacy rules place a stronger emphasis on requiring consumers to opt in to receiving targeted ads, instead of allowing marketers to simply let consumers opt out after receiving them.

The draft proposal, which is before the U.S. House Subcommittee on Communications, Technology and the Internet, presents several rules regarding how online retailers collect visitor information and use that information to target advertising at them. It would be up to the U.S. Federal Trade Commission and state attorneys general to enforce the law, if it passes.

The sponsors of the draft bill contend that it is intended to support an online marketing environment that would make consumers more receptive to online ads. The committee will be accepting comments through June.

“Our goal is to encourage greater levels of electronic commerce by providing to Internet users the assurance that their experience online will be more secure,” says subcommittee chairman Rep. Rick Boucher (D-VA), who submitted the draft with Rep. Cliff Stearns (R-FL), the subcommittee’s ranking Republican.

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