Pitching Self-Regulation

A year ago, it looked as if the Internet would find itself in Washington’s crosshairs. A new Democratic administration was moving into the White House with a huge majority in Congress. A reckless Wall Street was blamed by many Americans for nearly destroying the economy. Regulation was hot. And besides, in the minds of many lawmakers, the Web was full of shady crooks and needed policing.
These days, fears of heavy regulation have abated somewhat, as the online ad market bounces back from a brutal recession, and lawmakers continue to be distracted by bank failures, wars and healthcare legislation.

But digital media leaders continue to work diligently to stave off damaging legislation and/or government enforcement — while at the same time trying to keep the industry’s eye on the ball. Essentially, the online ad industry faces threats from the government on two fronts: Congress, where Democrat Rick Boucher last year proposed legislation centered on consumer privacy and behavioral advertising, and the Federal Trade Commission, which can’t propose laws but can act as a watchdog — going after privacy abusers like it has gone after spyware companies in the past.

To date, the Interactive Advertising Bureau wins a lot of praise from industry leaders for effectively lobbying Washington and avoiding the passage of a blunt, potentially devastating regulatory bill. “There would have been a bill already if people hadn’t acted,” says Tanya Tan, assistant general counsel and head of privacy at ValueClick. Despite the action, Tan expects some sort of measure to be passed soon.

That’s all the more reason the IAB membership can’t afford to sleep on this issue, argues Mike Zaneis, the IAB’s vp, public policy. Zaneis believes his group has been successful in educating lawmakers about the complexities of the online ad business. The longstanding fear in the industry has been that Congress would pass a sweeping bill that would be touted as consumer friendly but would actually be business crushing.

“The business would be in a bad way if very serious legislation would be passed,” notes Bill Todd, general manager of ValueClick. “Targeted ads…return premium price for publishers. If all of a sudden you can’t offer that, publishers return fewer dollars. Some could go away.”

So could entire subindustries that rely on collecting user data, including exchange firms like BlueKai or analytics companies like Omniture. Adds Todd: “Innovations could be hindered in a terrible way.”

The worst-case scenario is a bill that would require users to actively opt in to receive virtually any form of ad targeting, from the most sophisticated (companies selling cookie data on the Web habits of recent apparel shoppers to publishers or advertisers) to the most basic (targeting based on user geography). That’s a requirement that would likely invoke fear among some, and apathy among others. “The idea of a ‘positive opt in,’ that’s very dangerous,” says Ed Montes, regional manager for Havas Digital North America.

The IAB has been hammering away at this point relentlessly and feels like it’s making some headway. According to Zaneis, many in Congress didn’t realize how many different third parties were integral to online advertising and how much “innocuous” — i.e. nonpersonally identifiable data — is collected regularly.

“There was a misperception in D.C. by key folks on the Hill that this was a straightforward ecosystem,” Zaneis explains. As that misperception has changed, “it has served to slow down the legislative process. They don’t want to pass a law that really hurts the business.” Especially not when the country is facing 10 percent unemployment. Even Boucher, who founded the House Internet Caucus in 1996, doesn’t want to be seen as killing the Web since he is viewed as one of the folks who showcased its value as a business platform.

Still, change is likely coming — possibly first from the FTC. “I think you are going to see a very rigorous enforcement agenda this year,” says Zaneis, who points to FTC charges filed against Sears last summer over the way the retailer collected personal data online. “We think they are building cases as we speak. They have some very talented investigators, and they want to really hammer home the point. This is not something you can lobby [like a bill].”

So what should Web publishers do? Zaneis says the IAB is urging members to follow the best industry practices, such as making sure it’s easy for users to opt out of having their data collected, and that sites are as secure as possible. To make its case, the IAB in December announced plans to launch a massive consumer awareness campaign, dubbed Privacy Matters, aimed at helping explain to the average Web user how online advertising actually works, and how consumers can benefit from more targeted ads without worrying about their privacy. Similarly, a collection of industry groups has created an icon — a lowercase I — that will begin to appear atop online banners, detailing how “interest-based ads” work.

But beyond ad campaigns, the online ad industry is pushing the FTC to let it regulate itself. Last summer the IAB joined forces with American Association of Advertising Agencies (4As), the Association of National Advertisers (ANA), the Direct Marketing Association (DMA) and the Council of Better Business Bureaus to announce a set of self-regulatory consumer privacy principles that went into effect this year. The FTC has been generally supportive.

“I am absolutely positive that self-regulation will work out,” says Joe Apprendi, CEO of ad network Collective. He believes that the more upfront the industry is about even the simplest forms of ad targeting, the more comfortable consumers will become with the entire concept of behavioral targeting, making it easier to employ more sophisticated techniques. “Things like that make us look more forthright,” he adds. “Everybody gets more educated.”

Even if a privacy bill is passed that provides more means for users to opt out of behavioral ads, Apprendi doubts most will do so: “My belief is, people are pretty busy.”

Others say it really depends on individual consumers. “Some people delete all their cookies, others broadcast themselves via Web cams,” observes Anne Toth, vp, global policy, chief privacy officer at Yahoo.

Every client also has its own level of comfort with online targeting as well. And a tougher regulatory environment could serve to scare away even more brands. “Clients are very concerned with this issue,” notes Montes. “For certain industries, where your brand stands for confidence and truth, being dinged for privacy is dangerous.”

It’s why Montes, along with the IAB and its constituency, hopes “we don’t create another reason not to market online.”