The digital ad industry is feeling pretty good about the White House's proposed "consumer privacy bill of rights." Along with the unveiling of the long-awaited Commerce Department report came accolades for the four years of work the industry invested into self-regulation under the Digital Advertising Alliance.
The DAA's program — which is now serving up 900 billion in-ad privacy icons that direct viewers to a page where they can opt-out of behaviorally targeted ads — will be expanded to include a Do Not Track browser header later this year.
However, this new era of co-regulation may turn out to be more than the industry has bargained for.
While the ad industry gets a seat at the table in crafting a voluntary code of conduct, the government still retains oversight. Companies that commit to the guidelines have to comply, or the Federal Trade Commission can take enforcement actions.
Jon Leibowitz, chairman of the Federal Trade Commission, had the most positive things to say about the industry's self-regulation efforts, but sent a clear signal his agency would be watching to make sure that companies that have adopted the code stick to it.
"If they don't enforce it, we will," he said.
"This top-down model will require a lot of companies to get the blessing from Washington before they innovate and offer new services," said Adam Thierer, a senior research fellow with the Mercatus Center at George Mason University. "It's voluntary, but with a lot of government nudging and looking over the shoulder. That's costly, both directly and directly. At the end of the day, there's no free lunch. Something has to give."
Right now, the ad community isn't concerned that co-regulation will upend the behavioral advertising apple cart because there is a clearer direction of what the government expects in consumer privacy.
"Things have been fuzzy and that's kept advertisers on the sidelines," said Chris Babel, CEO of Truste, a privacy management firm. "Now they know what's OK and what's not."
What will be OK depends on what stakeholders, government regulators, the advertising industry, and consumer and privacy groups agree to when drafting a voluntary code.
"If it's very restrictive, it will slow down venture capital inflow into the business and that will slow down innovation and job growth," said John Montgomery, COO of GroupM Interaction, adding that he finds it encouraging that the government has acknowledged the industry's self-regulation and is treading lightly.
Though regulators didn't emphasize trying to get new privacy laws passed — probably because it's an election year and the chances of privacy legislation getting through Congress is small — it still remains a goal of the administration.
"We will be working with Congress to implement [privacy rules] through legislation," said Commerce Secretary John Bryson.
Some in Congress are already skeptical about the efficacy of letting the business police itself.
"It's terrific that the advertising industry plans voluntarily to strictly and honestly comply with Americans' wishes not to be tracked. But voluntary compliance does not replace the need for a new law," Sen. John Kerry (D-Mass.) said in a statement. Kerry used the opportunity to push the bill that he co-sponsored with Sen. John McCain (R-Ariz.) that codifies the White House's paper.
On the House side, Reps. Ed Markey (D-Mass.) and Joe Barton (R-Texas), co-chairs of the Congressional Privacy Caucus, also don't want to leave privacy to self-regulation. "Voluntary, self-regulatory efforts are not a substitute for laws that keep consumers' information safe from prying eyes," Markey said.
The ad community is optimistic it can keep new privacy laws at bay. "There are 5,000 companies that are part of the DAA pointed in the same direction," said Montgomery. "We're motivated to take it to the next step."