Baby Steps for Online Privacy: Why the FTC Self-Regulatory Principles For Online Behavioral Advertising Fails to Protect the Public

Statement of Jeff Chester, Exec. Director, Center for Digital Democracy:

The Federal Trade Commission is supposed to serve as the nation’s leading consumer protection agency.  But for too long it has buried its mandate in the `digital’ sand, as far as ensuring U.S. consumer privacy is protected online.    The commission embraced a narrow intellectual framework as it examined online marketing and data collection for this proceeding.  Since 2001, the Bush FTC has made industry self-regulation for privacy and online marketing the only acceptable approach when considering any policy safeguards (although the Clinton FTC was also inadequate in this regard as well).  Consequently, FTC staff—placed in a sort of intellectual straitjacket—was hampered in their efforts to propose meaningful safeguards.

Advertisers and marketers have developed an array of sophisticated and ever-evolving data collection and profiling applications, honed from the latest developments in such fields as semantics, artificial intelligence, auction theory, social network analysis, data-mining, and statistical modeling.  Unknown to many members of the public, a vast commercial surveillance system is at the core of most search engines, online video channels, videogames, mobile services and social networks.  We are being digitally shadowed across the online medium, our actions monitored and analyzed.

Behavioral targeting (BT), the online marketing technique that analyzes how an individual user acts online so they can be sent more precise marketing messages, is just one tool in the interactive advertisers’ arsenal.  Today, we are witnessing a dramatic growth in the capabilities of marketers to track and assess our activities and communication habits on the Internet.  Social media monitoring, so-called “rich-media” immersive marketing, new forms of viral and virtual advertising and product placement, and a renewed interest (and growing investment in) neuromarketing, all contribute to the panoply of approaches that also includes BT.  Behavioral targeting itself has also grown more complex.  That modest little “cookie” data file on our browsers, which created the potential for behavioral ads, now permits a more diverse set of approaches for delivering targeted advertising.

We don’t believe that the FTC has sufficiently analyzed the current state of interactive marketing and data collection.  Otherwise, it would have been able to articulate a better definition of behavioral targeting that would illustrate why legislative safeguards are now required.  It should have not exempted “First Party” sites from the Principles; users need to know and approve what kinds of data collection for targeting are being done at that specific online location.

The commission should have created specific policies for so-called sensitive data, especially in the financial, health, and children/adolescent area.  By urging a conversation between industry and consumer groups to “develop more specific standards,” the commission has effectively and needlessly delayed the enactment of meaningful safeguards.

On the positive side, the FTC has finally recognized that given today’s contemporary marketing practices, the distinction between so-called personally identifiable information (PII) and non-PII is no longer relevant.  The commission is finally catching up with the work of the Article 29 Working Party in the EU (the organization of privacy commissioners from member states), which has made significant advances in this area.

We acknowledge that many on the FTC staff worked diligently to develop these principles.  We personally thank them for their commitment to the public interest.  Both Commissioners Leibowitz and Harbour played especially critical roles by supporting a serious examination of these issues.  We urge everyone to review their separate statements issued today.  Today’s release of the privacy principles continues the conversation.  But meaningful action is required.  We cannot leave the American public—now pressed by all manner of financial and other pressures—to remain vulnerable to the data collection and targeting lures of interactive marketing.

FTC’s Behavioral Ad Principles–the last act of the Bush Administration? Why is the Obama White House Allowing the FTC To Remain Under the Leadership Appointed by Pres. Bush?

In a few hours, approximately between 10-11 am eastern, the FTC is expected to release its final “Online Behavioral Advertising Principles.” Originally released for comment in December 2007, the principles are a sort of Valentine’s Day present to the online ad industry from the (supposedly departed) Bush Administration.  From what we know, the FTC principles support self-regulation.  Online marketers will be told they should behave better–and here are suggestions.  It’s like a teacher telling a misbehaving student–‘behave better, dear,’ or else we will have to tell your parent (in this case, the guardian being potential congressional action).

My CDD urged Commissioners Harbour and Leibowitz to issue separate statements on the principles, and call for tougher requirements—especially in the area of so-called sensitive information.  This would include data connected to our financial and health related online activities (think mortgage and loan applications or queries for prescription drugs).  CDD and a coalition of groups also formally asked the commission to impose serious privacy safeguards for both children and adolescents.

But these principles were crafted within the narrow confines of the Bush Administration philosophy prevailing at the FTC.  Only self-regulation is permitted.  Consequently, such an approach likely means these rules leave the online data collection, profiling and targeted marketing system which comprise behavioral marketing off the privacy protection hook.

But one question looms at the moment.  Why has the new Obama administration allowed the FTC to remain under the leadership of Bush-appointee William E. Kovacic? The principles being issued today, in fact, reflect the “old” FTC, not one run under the philosophy of President Obama.  Why is the Obama White House failing to ensure a change of leadership at the FTC?  The agency is responsible for overseeing a huge portion of the economy, including critical financial issues.  It’s also supposed to be the leading agency on consumer protection issues.   The Obama White House should have–by now-found someone who would led the FTC, so it can better protect the public.

The principles being released today were only made possible because of the Bush FTC give-away to Google, when it approved its takeover of online ad giant DoubleClick.  CDD, the Electronic Privacy Information Center (EPIC), and USPIRG fought the merger, including on privacy grounds.  FTC Commissioner Pamela Harbour played a key role forcing the agency (then run by Chairwoman Majoris, whose husband’s law firm represented DoubleClick) to address the privacy concerns. As a consequence of the political pressure from its failure to seriously examine the consumer privacy issues of the Google deal, the FTC staff were told to develop these principles.

The next chair of the FTC needs to take privacy and online consumer protection issues seriously.  The agency does need more resources, but also a new spirit.  If the FTC had been on the job, and was examining how lending institutions were recklessly promoting loans and mortgages, maybe today’s mess wouldn’t be as tragic as it is.  More to come after the commission releases the principles.

Facebook ad targeting system is using the “keywords in people’s status messages”–Tales of Behavioral Targeting

Fresh proof that Congress has to prohibit behavioral targeting unless consumers opt-in appears in the new issue of Brandweek. Facebook is “experimenting” with the targeting by “keywords in people’s status messages,” according to “Tim Kendall, director of monetization at Facebook.” Here are some other choice excerpts from the article:

“Advertisers are extremely interested in all new developments in the behavioral targeting space,” said Emily Riley, senior analyst at Forrester Research, Cambridge, Mass. “We’re seeing a big uptick in the use of [these] tactics.” According to Forrester data, 24% of advertisers used behavioral targeting in 2008. Last year it was only 16%…Almost half of advertisers say, ‘Even if I didn’t use behavioral last year, I definitely want to this coming year…”…

“…said Jeff Berman, president of sales and marketing at MySpace. “… the more data you have, the smarter you can be with your media… but if you want to focus on . . . 25-40-year-old mom Nascar fans who love romantic comedies and live in 12 specific zip codes, we can do that.”

…”as BT becomes more invasive at social networking sites, the technology should improve and thus serve up more relevant ads based on our true site behavior…Revenue Science, one of the biggest independent BT networks, is using forward-to-friend behavior to allow advertisers to target virally oriented people. Bebo, the social networking site AOL bought earlier this year, works with Elkridge, Md.-based Lotame, an agency that helps brand advertisers target unique users, such as new moms, who spend a lot of time on social sites.”

source: Behavioral Targeting: A Tricky Issue for Marketers. Becky Ebenkamp. Brandweek. Oct. 21, 2008

MySpace, Social Networks, Massive Data-Mining, Privacy & Interactive Advertising

Policymakers–including state attorneys-general, the FTC and EU officials– are failing to examine how social networks such as MySpace are utilizing advanced data mining techniques to track, analyze, and target millions of unsuspecting users (including, likely, adolescents). For example, MySpace (and other Fox Interactive Media properties, FIM) are using data warehouse and parallel computing techniques that “is enabling a new set of applications and services that previously were simply neither possible nor practical at this scale.”

MySpace and other FIM entities are engaged in daily “real-time” analysis of massive data sets from its 190 million active users. Such data analysis is driving FIM’s “advanced targeted advertising systems.” So all the MySpace “user-generated content” becomes fodder for the analytical ad-targeting. Such data collection must be under the full control of the user–they need to know how and what is being collected, how its used, what inferences are made, the range of ad and marketing targeting linked to the data, etc. It’s time social media marketing, as the industry calls it, draws the attention of policymakers, including the U.S., Canada, and in the EU.

Interactive Ad Bureau to Congress and Public: If Your Privacy is Protected, The Internet Will Fail Like Wall Street!

It’s too disquieting a time in the U.S. to dismiss what a lobbyist for the Interactive Advertising Bureau said as merely silly. The IAB lobbyist is quoted in today’s Washington Post saying: “If Congress required ‘opt in’ today, Congress would be back in tomorrow writing an Internet bailout bill. Every advertising platform and business model would be put at risk.” [reg. required]

Why is the IAB afraid of honest consumer disclosure and consumer control? If online ad leaders can’t imagine a world where the industry still makes lots of money–while simultaneously respecting consumer privacy–perhaps they should choose another profession (say investment banking!).

Seriously, online ad leaders need to acknowledge that reasonable federal rules are required that safeguard consumers (with meaningful policies especially protecting children and adolescents, as well as adult financial, health, and political data). The industry doesn’t need a bail-out. But its leaders should `opt-in’ to a responsible position for online consumer privacy protection.

Google studies the online behavior of tweens (10-14 year olds) with message to target them via search advertising

When Google acquired DoubleClick last year, they also took over its search marketing division called Performics. A new study commissioned by Performics focuses on the media behaviors of 10-14 year olds, so-called tweens. The aim of the study is basically to get more online targeted marketing aimed at young people. The senior VP of search operations at Performics–Stuart Larkins–recently wrote an article on the new study that appeared in Chief Marketer. Here are some excerpts.

At DoubleClick Performics, we sought to better understand the online search and purchase behaviors of seven influential demographic segments and commissioned ROI Research to study these habits across 10 different product categories. Results just arrived for one of the most dynamic segments – Tweens, consumers between the ages of 10 and 14…Tweens consume information through many channels, but the Internet leads. When asked how much time they spent with various media types, 83% said they spend at least an hour per day online, and 68% reported at least an hour per day watching TV. Radio, magazines and newspapers came in much lower…

Nearly half of respondents go online many times per day (more than three), and 87% usually spend at least a half hour each time. Looking closer at this time spent online, the survey found:

72% have a profile on at least one social networking site
· 54% have a MySpace profile
· 35% have a Facebook profile…

For search engines, Google was the overwhelming choice among tweens, with 78% indicating they use Google most frequently…

Tweens reported varying levels of involvement across product categories…

To capture the demand generated in complementary channels, marketers should incorporate search ads into other online and offline marketing campaigns. While a nice rule of thumb for any marketing program, this golden rule is especially true when targeting tweens.”

A story on the Performics study in today’s Marketing Daily noted the research came just as kids were getting ready to get their back- to- school gear. As reporter Tameka Kee explained, the study showed that “search marketing in the media mix is crucial to snagging the attention and influence of tweens, as they are increasingly using search to make product recommendations and find pricing info for their parents...Peformics also found that tweens were using search to find specific product information and store locations across multiple product categories. Nearly half of all respondents said that they used search to find product Web sites in the electronics, telecom, apparel and CPG categories, while nearly half said that they used search to find out where to purchase said products online.”

Marketing is a fundamental part of our lives–and will be increasingly so with digital media. But researching the online media behaviors of young people so they can be targeted with interactive digital marketing raises a number of policy issues, as well as parental concerns. We know that Google has announced plans to sell Performics, although it will incorporate some of its activities within its business operations. But Google’s senior executives should play a leadership role in addressing how to ensure the healthy development of young people. Consumer and childrens’ advocates in the U.S. and the EU-among other places–will be watching closely.

Update. The announcement just came from the Google press office that global ad giant Publicis will acquire Performics. Of course, Google and Publicis are also working together and announced an alliance earlier this year.  Here’s an excerpt from today’s email to the press: “Publicis Groupe and Google (NASDAQ: GOOG) announced today that Publicis Groupe has agreed to acquire the Performics search marketing business (Performics) from Google. Chicago-based Performics, one of the leading search marketing services providers, helps to improve the performance of advertisers’ investments and maximize
client campaign effectiveness. Its profit-driving suite of marketing solutions includes Performics’ reporting platform, local platform, advanced market expertise and active account management….Publicis Groupe has been a leader in the advertising industry for decades, and we believe Performics’ growing business will benefit from being part of it,” said Eric Schmidt, Chairman and CEO, Google. “We look forward to working with Performics as a partner.”

The IAB (US) “mobilizes” to Fight Against Consumer Protections for Online Media

Watch this online video of Randall Rothenberg speaking before a June Federated Media Publishing event. In Mr. Rothenberg’s worldview, demon critics of advertising (such as myself) are deliberately trying to undermine democratic digital media. This would be absurd, if it wasn’t so sad. Mr. Rothenberg is using scare tactics to whip up his members into a frenzy-all so they can fight off laws and regulations designed to provide consumers real control over their data and information. Luckily, Mr. Rothenberg will be on the losing side of this battle to protect consumers in the digital era. Regulators on both sides of the Atlantic understand how the digital marketing ecosystem raises serious concerns about privacy and consumer welfare. We have to say we are disappointed in John Battelle, the CEO of Federated (who wrote a very good book entitled The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture). Mr. Battelle should know that the online marketing system requires a series of safeguards which protects citizens and consumers. There is a balance to be struck here. Online advertisers have unleashed some of the most powerful tools designed to track, analyze, and target individuals–whether on social networks, or watching broadband video, or using mobile devices. We have never said there shouldn’t be advertising. We understand the important role it must play, including for the underwriting of online content. But the online ad system should not be designed and controlled solely by ad networks, online publishers, trade groups and online ad lobbying groups. It must be structured in a way which promotes as much freedom for individuals.

IAB’s Lobbying Against Privacy Safeguards: Trade Group Will Add New Members to Help Fight Consumer Protection Legislation

The trade lobbying group Interactive Advertising Bureau (IAB) plans to add new members to help it generate “grassroots support against proposed legislation in New York and Connecticut that would ban the collection of data about online consumers without a person’s specific consent.” According to ClickZ, the IAB will create a new low-dues membership structure which will enable smaller online advertisers to swell its ranks. What is IAB’s pitch to its prospective members about privacy safeguards offered by state legislators in New York and Connecticut? ClickZ says that “[T]he IAB contends that the proposed measures would have a disproportionate negative impact on small publishers that rely on ad networks to manage advertising sales.”

The IAB’s leadership is off on a irresponsible mission to persuade online marketers and the public that privacy rules would “kill the web.” Such an self-serving view of why privacy rules are required in the age of online marketing will only further diminish the credibility of the IAB.

MySpace expands ability for marketers to track and target "community" members

MySpace has launched what it calls its “community builder platform for [the] advertising community.” Here’s what they say it does (our emphasis):

The new platform gives MySpace advertisers the ability to build, maintain and customize brand profiles while also providing guaranteed valuable analytics to help them gauge campaign performance and make real-time adjustments to maximize effectiveness. The platform is currently being beta tested by Deep Focus

“Community Builder allows our clients to connect with potential brand evangelists in an unprecedented way,” said Ian Schafer, CEO of Deep Focus. “The flexible platform provides access to solutions and value propositions that enable brands to engage with a new generation of consumers and the freedom to update and manage communities in real-time. It’s a powerful tool that can help build community literally — and figuratively.”

The Community Builder advertising platform will be available in the US and builds upon MySpace’s industry leading advertising model, which includes customized communities, multi-platform integrated marketing campaigns, and the new advertising platforms HyperTargeting and SelfServe which empower users such as small business owners, bands, and politicians to purchase, create and analyze the performance of ads throughout the MySpace network.”

Red Herring reports that “… Community Builder…allows marketers to analyze the impact of their online ad effort and respond to it by doing things like updating blogs, studying finely tuned traffic data, changing videos, shifting ads, or testing messages…“One of the major complaints about social network ads has been the metrics, as marketers complain that they have no return on investment to show for their campaigns,” said Ian Schafer… “This gives us 24/7 access to the process of building communities.”

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U Penn Prof. Joseph Turow responds to the

Randall Rothenberg of the Interactive Advertising Bureau lobbying group wrote a commentary where he made a number of misleading statements. He incorrectly characterized the work of Professor Joseph Turow. Prof. Turow, a leading academic expert of the online marketing industry, is on the faculty of the Annenberg School for Communication, University of Pennsylvania. Here is Professor Turow’s response:

In one sentence, Mr Rothenberg manages to make two fundamental misrepresentations. What I really say on page 2 of my 2006 book Niche Envy (where the quote originates) explicitly relates to marketers use of surveillance technologies without consumers understanding: “Over the long haul, however, this intersection of large selling organizations and new surveillance technologies seems sure to encourage a particularly corrosive form of personal and social tension.” Nor do I anywhere lament the passage of the three network universe. For example, I explicitly state in Breaking Up (on page 199, for example) that three network era had its own forms of social exclusions and state that “that “the proper response to this hypersegmentation of America is not to urge a return to the mass-market world of the 1960s and 1970s.” My conclusion: when I see Mr Rothenberg quote someone I will be sure to check the source to make sure the passage has not been wrenched from its context. I should add, too, that I accept the need that digital interactive media have for target marketing and database marketing. But there are many creative ways to meld data analytics and their implementation with openness and public engagement. I fear that Mr Rothenberg”s policies and writings indicate he will lead this important organization in directions that are misguided for marketers and for society.

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