May 29, 2009, 12:00 AM

What Obama means for e-commerce

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That involves the retailer sharing consumer data with an outside company, the ad network, and the FTC made clear that’s the kind of data-sharing that most concerns it. The FTC report said it was not concerned with a retailer using its own data about consumer behavior to present offers on the retailer’s own site.

While that first-party exemption is helpful, there remains the question of how the FTC defines a third party. Depending on that definition, large companies may be limited in how they can share consumer data among their subsidiaries, says Dennis Dayman, chief privacy officer at online marketing automation company Eloqua. Industry executives also have varying opinions about whether an analytics vendor or other technology provider that collects data on behalf of a retailer would be considered a third party; counting those as third parties would greatly extend the reach of any new regulation.

And while the focus has been on Obama moving into the White House, the new Congress that was seated in January put many congressmen in new and influential positions. Among them is Rep. Rick Boucher, D-Va., chairman of the House Energy Subcommittee on Communications, Technology and the Internet, a key body on Internet issues.

Boucher has expressed concerns about online privacy and is said to be drafting a bill that would allow marketing based on behavior only to consumers who opt in to have their web activity tracked, a move that could cripple behavioral targeting.

“We strongly believe that would be death to online marketers,” says the DMA’s Woolley. “Most people wouldn’t have any clue what they’re opting into, so if you gave people a choice most would say, ‘I don’t know what this means, so no.’”

Best behavior

In addition to behavioral targeting, the FTC report in February also addressed web site privacy policies. The commission made clear that privacy policies should be prominent, clearly written and provide an easy way for consumers to choose not to have their online activity tracked.

Given that the FTC is clearly watching how the industry acts, online retailers should follow that advice on presenting their privacy policies clearly, and make sure they adhere to their promises, Goodmail’s Cohen says. “If you say you can opt out, make sure they can,” he says. “If you say you don’t share information, make sure you’re not sharing information.”

Industry executives are encouraged that the FTC is giving the industry a chance to regulate itself, rather than leaping to impose new rules. And some major Internet players are addressing consumer privacy concerns by being more open about their ad policies, says Mike Zaneis, vice president for public policy at the Interactive Advertising Bureau, one of several organizations working together on voluntary online privacy guidelines.

For instance, ads on eBay now have an “about” link that explains that eBay “may use information we have about you to make sure that the ads you see, on the eBay site or elsewhere, are as relevant to you as we can make them.” It adds that eBay sends Yahoo, its ad network partner, anonymous information about a user’s eBay search terms, demographics and categories of interest, which Yahoo uses to present relevant ads. The eBay AdChoice program allows consumers to opt out of being targeted with ads in that way.

Zaneis is also encouraged by the Obama team’s understanding of online marketing. He notes Obama was the first presidential candidate whose campaign used behavioral targeting, retargeting visitors to the Obama campaign site when they went to other web sites.

“You have a president and people close to him who understand the power of relevant marketing and spent a lot of money in this area,” Zaneis says. “They have to understand it can be done in a consumer-friendly way, just as they did it.”

More broadband

While sales tax and behavioral targeting are issues of concern for online retailers, they figure to benefit from Obama’s promise to extend high-speed Internet access.

Obama’s economic stimulus package, which he signed into law in February, allocates $7.2 billion to be spent by the end of 2010 to extend broadband Internet access, especially to rural areas.

That can only help e-commerce, as shopping online becomes more appealing at broadband speeds. But the impact is likely to be limited, as 93.1% of the nearly 167 million U.S. Internet users already have broadband at home, according to research firm Nielsen Online. Moving that percentage to 100% would add about 11.7 million new broadband users.

The act is largely aimed at rural areas not reached by broadband. Only 16% of the U.S. broadband homes are in rural areas, whereas 21% of the population is rural, according to Netpop, a research firm that tracks broadband Internet trends. With the average rural user of broadband spending $86 per month shopping online, bringing rural broadband penetration up to the level of U.S. cities and suburbs could mean an additional $4.5 billion per year in e-commerce sales, says Netpop president Josh Crandall. That would add 3.4% to the $133.6 billion U.S. consumers spent online last year.

Bringing broadband to more homes would mostly benefit online retailers like Amazon with a reputation for low prices, says analyst Sucharita Mulpuru of Forrester Research Inc. “The consumers who don’t have broadband now tend to be later adopters and are unlikely to be big spenders,” she says.

Only 55% of U.S. homes now have broadband access, according to the Pew Internet and American Life Project, and the Obama administration has taken another step, beyond the stimulus package, to expand high-speed Internet access. The stimulus plan also mandates that the Federal Communications Commission come up with a plan by February 2010 for faster Internet service and access to more Americans. The FCC began taking comments on that subject last month.

Sending a message

Other issues of interest to online retailers are starting to bubble up in Washington.

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