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Proposed Online Behavioral Advertising Policy - what are the impacts?

Yesterday the FTC released a set of proposed guidelines related to online behavioral advertising and how it impacts consumer privacy. Here are the major points as listed in the FTC release:

Concern:
greater transparency and consumer control regarding privacy issues

Proposal: Every Web site where data is collected for behavioral advertising should provide a clear, consumer-friendly, and prominent statement that data is being collected to provide ads targeted to the consumer and give consumers the ability to choose whether or not to have their information collected for such purpose.

Concern: data collected for behavioral advertising may find its way into the hands of criminals or other wrongdoers, and concerns about the length of time companies are retaining consumer data

Proposal: Any company that collects or stores consumer data for behavioral advertising should provide reasonable security for that data and should retain data only as long as is necessary to fulfill a legitimate business or law enforcement need.

Concern: companies may not keep their privacy promises when they change their privacy policies

Proposal: Companies should obtain affirmative express consent from affected consumers before using data in a manner materially different from promises the company made when it collected the data

Concern: sensitive data – medical information or children’s activities online, for example – may be used in behavioral advertising

Proposal: Companies should only collect sensitive data for behavioral advertising if they obtain affirmative express consent from the consumer to receive such advertising

The FTC has approved these proposals as guidelines for potential self-regulation. They are seeking comments on the policy. They are also seeking comment on what constitutes “sensitive data” and whether the use of sensitive data as described in the last proposal should be prohibited, rather than subject to consumer choice.

What are the impacts?

The common thread running though many of the proposals is consent. The concept of "opting in" is common on the web when it comes to receiving marketing email and the like. The proposals suggest that consumers have the opportunity to opt-in to allow their online behavior or "sensitive data" to be tracked and used for advertising purposes. Besides making the web sites and the user experience more complicated, one can only imagine how many web surfers will elect to opt out of being tracked.

If web site operators/advertisers are unable to collect behavioral information, it does not mean that advertising will diminish. What it does mean is that advertising will not be as effective and click-through rates will decline. This could reduce what marketers are willing to pay for online advertising. One can imagine this having negative impacts for Google (GOOG), Yahoo (YHOO), Microsoft (MSFT), Facebook, et al. For Google in particular, though, the impact might be more on DoubleClick whereas Google's search advertising and AdSense program would be relatively unaffected.

The FTC has not yet revealed what comments it has received but it is assured that the major web portals and online advertisers will not be too enthusiastic to embrace these proposals in their entirety. The FTC does realize that more precisely targeted advertising may actually benefit consumers and that it supports many online services that are otherwise free of charge. Look for a lively debate and lots of spin from advertisers.

Who might benefit? Maybe advertisers will return to newspapers, who knows?

Comments

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