CDD Memo to President-elect Obama’s FTC Transition team

My organization provided the FTC-transition team of President-elect Obama a brief memo on what the agency should do as it changes leadership. With a new majority, the FTC should be in the forefront of addressing how the financial and marketing system has evolved in ways which threaten our fiscal well-being and privacy, among many other concerns.  Here’s an excerpt:

The Federal Trade Commission has a potentially extraordinary role to play in the new Administration.  The agency should be engaged in developing and promoting policies that protect privacy, ensure consumer welfare, and stimulate economic development.  Unfortunately, in recent years the commission has largely failed to comprehend the threats to consumer privacy arising from the data collection-based online marketing system.  It ignored, for example, the role that data collection and behavioral targeting played in the marketing of subprime loans and other consumer financial products…
Under new leadership, the FTC should view its role as a champion of consumers…. in consumer protection, privacy, and online-related competition policy, the agency has failed to conduct the kind of serious inquiry that would enable it to make sophisticated recommendations or decisions.  It has not developed a 21st century framework that will protect consumers in the digital marketing “ecosystem.”  We saw this with behavioral advertising and privacy policy, protecting children and youth from marketing linked to the obesity crisis, and in the approval of the Google and DoubleClick merger, for example.
If the FTC is to help the country move forward during this crucial period of economic transition, it should:
•    Make Consumer Protection its highest priority
•    Recruit new staff for consumer protection with a background and commitment to consumer interests
•    Engage in a serious and ongoing analysis of the digital marketplace, with a focus on the impact of interactive advertising/behavioral targeting on financial products, health and medical services, product purchasing, and children and adolescents
•    Propose new policies to protect consumer privacy and welfare online…
•    Work with the FCC and state authorities to create a new Mobile Marketing, Consumer Protection, and Privacy Task Force (with annual reports to the public, and, where appropriate, new legislation recommended to Congress).

The “Revised” Network Advertising Initiative Principles: Ghost-written by Bernard Madoff?

That was really what we felt reading the “NAI Response to Public Comments” released yesterday.  It accompanied the 2008 principles announcement by the self-regulatory trade online marketing trade group.  The “response” is worth reading, because it really reveals the inability of the group to meaningfully address how to protect consumers online.  You would think that an organization which has Microsoft, Google, Yahoo, Time Warner and many others as paying members could at least clearly state what happens to our data in the online marketing process.  But the real goal of the NAI is to prevent the enactment of serious state and federal privacy policies that would protect consumers. My group put out a statement yesterday discussing the new principles.

The credibility of Google, Microsoft, Yahoo and Time Warner are at stake.  They should be able to ensure that their own organization can honestly address the implications of online advertising.  But it’s time to abandon any call for self-regulation.  That has been a failure.  It’s clear that a growing number of consumer and privacy groups are calling for a legislative solution, as well as a more effective FTC.  Responsible online ad companies will support such regulation.

Google’s Doubleclick Using Widgets to “give advertisers the ability to tap into the incredible power of potential brand evangelists”

Google’s Doubleclick division is working with social media and widget advertising company Gigya so marketers can “integrate a viral component into any campaign to allow consumers to “snag” or “grab” the ad onto their personal homepage or social network page.” We think the Doubleclick release is very revealing. So here are some choice excerpt excerpts:

“Widgets are part of a fundamental change within the online marketing arena,” said Ari Paparo, vice president of advertiser products for DoubleClick. “Widget Ads provide audiences with the ability for self-expression and identification with well-loved brands while providing marketers the benefits of virality and engagement along with the measurability of traditional online channels.”…

“Incorporating viral functionality helps give advertisers the ability to tap into the incredible power of potential brand evangelists,” said Ben Pashman, vice president of business development with Gigya,…enabling great creative to enter a user’s social circle, where it may become an even more powerful, user-endorsed ad unit.”

Widget Ads may be distributed in a multitude of ways including branded websites, word-of-mouth outreach and even through another rich media ad… integration with the industry-standard DART platform allows for valuable Widget Ad metrics including impressions, interactions, video metrics, viral “grabs” for different social networks, and reach and frequency…”

Google’s “Policy Fellowships”–Self-Serving Efforts to Help Ward Off Privacy and Online Marketing Protections?

Google has selected 15 organizations for its 2009 “Google Policy Fellowship.” Fellows are funded by Google and will work on “Internet and technology policy” issues over the summer. Take a look at some of the groups it selected and what they say the projects will be (and their positions on Internet issues). And then ask–is Google working to help undermine the public interest in communications policy? Think online privacy and interactive marketing as you read these following excerpts from a number of these groups:

“The Competitive Enterprise Institute is a 501(c)(3) non-profit public interest organization dedicated to advancing the principles of free enterprise and limited government. We believe that individuals are best helped not by government intervention, but by making their own choices in a free marketplace…Electronic privacy: CEI seeks to reframe the online privacy debate in terms of the potential benefits to consumers of greater information sharing, transparency, and marketing. Fellows will explore competing privacy policies and how they are evolving as the public grows more aware of privacy risks. This research will also encompass privacy-enhancing technologies that empower consumers to safeguard personal data on an individualized basis.”

“The Progress & Freedom Foundation (PFF) is a market-oriented think tank that studies the digital revolution and its implications for public policy… Online Advertising & Privacy Policy Issues: PFF defends online advertising as the lifeblood of online content and services, particularly for the “long tail,” and emphasizes a layered approach to privacy protection, including technological self-help, user education, industry self-regulation, and enforcement of existing laws, as a less restrictive—and generally more effective—alternative to increased regulation.”

“The Technology Policy Institute is a think tank that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world… Privacy and data security: benefits and costs to consumers of online information flows, and the effects of alternative privacy policies on consumers and the development of the Internet.”

“The Cato Institute’s research on telecommunications and information policy advances the Institute’s vision of free minds and free markets within the information policy, information technology, and telecommunications sectors of the American economy…Information Policy: Examining how increased data sensing, storage, transfer, processing, and use affect human values like privacy, fairness and Due Process, personal security, and seclusion. Articulating complex technological, social, and legal issues in ordinary language. Promoting the policies that protect these human values consistent with a free society and maximal human liberty.”

Google is also funding fellowships at other groups, including the partially Google funded Center for Democracy and Technology. The CDT connected Internet Education Foundation (which helps run the Congressional Internet Caucus, where Google is a corporate Advisory member) also will house a Google Fellow. There are a few public interest groups hosting Fellows that have an independent track record, including Media Access Project, EFF, and Public Knowledge. But awarding Fellowships to groups which will help it fight off responsible privacy and online marketing safeguards provides another insight into Google’s own political agenda.

New AT&T-funded “Future of Privacy” Group: Will it Support Real Privacy Protection or Serve as a Surrogate for Self-regulation and Data Collection?

A new group co-directed by former DoubleClick and AOL chief privacy officer Jules Polonetsky, called the “Future of Privacy Forum,” has been announced. It is connected to the law firm representing AT&T–Proskauer Rose–which has a considerable practice in the online marketing and data collection area. Other backers include Intel, General Electric, IBM and Wal-Mart.

We are concerned, however, that the role of the Forum is to help discourage Congress from enacting an opt-in regime for data collection. Both ISPs–such as AT&T, Verizon, Comcast and Time Warner–as well as online advertising companies such as Google/DoubleClick, Yahoo, and Microsoft must be governed by privacy laws which empower and protect consumers. The role of ISPs in any data collection for targeted online marketing, in particular, requires serious analysis and stringent safeguards. AT&T, Google, Microsoft, Comcast, the online ad networks, and social media marketers (to name a few) must be required to provide meaningful disclosure, transparency, accountability and user control (with special rules governing health, financial and data involving children and youth). Self-regulation has failed. If the Future of Privacy group is to have any legitimacy, it will work to support serious federal rules. But if it trots out some sort of voluntary code of conduct as a way to undermine the growing call for real privacy safeguards, this new group may soon be viewed as beholden to its funders and backers.

Google, the Global Youth Obesity Crisis & its “Branded Entertainment” Division Deals with Pepsi and Burger King

Google’s top executives and corporate-responsibility concerned investors should consider the consequences of the online ad company’s major promotion of Burger King and Pepsi. Google is broadly distributing two new online programming series backed by either Burger King and Pepsi via its “branded entertainment” division. A new Pepsi-backed show called Poptub, notes, “resides on its own YouTube channel and is distributed through Google AdSense (via “Gadgets” or widgets), increasing the number of eyeballs for potential advertisers. Ad revenue will be split between Google, Pepsi-backed Embassy Row, and the website that hosted the clip.” CNET reports that Poptub features “perky hosts, amusing videos, promotional interviews, and a prominent Pepsi sponsorship.”

Google’s Burger King backed “Seth MacFarlane’s Cavalcade of Cartoon Comedy” is a huge online hit, Mediaweek reports. The YouTube based series “generated 14 million total views since their Sept. 9 debut across various syndication partners…One short, Super Mario Rescues The Princess, has amassed over 6 million views on YouTube alone…the Cavalcade channel was YouTube’s most popular during the week ending Sept. 12, generating millions of views in less than 48 hours… The first 10 of the MacFarlane-produced shorts are being sponsored by Burger King. The fast food company’s branded channel,, is now the second most popular sponsored channel of all time on YouTube.”

Hollywood Reporter explains that “Over at Burger King’s YouTube channel, a new application allows consumers to dub their voices in over the animation of select “Cavalcade” videos.”

Google role as a facilitator of unhealthy food products will become part of the global youth obesity and public health debate.

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.

Behavioral Targeters Use Our Online Data to Track Our Actions and, They Say, to “Automate Serendipity.” Attention: FTC, Congress, EU, State AG’s, and Everyone Else Who Cares About Consumer Welfare (let alone issues related to public health and ethics!)

NPR’s On the Media co-host and Ad Age columnist Bob Garfield provides policymakers and advocates with an arsenal of new material that support the passage of digital age consumer protection laws. In his Ad Age essay [“Your Data With Destiny.” sub required], Garfield has this incredibly revealing–and disturbing–quote from behavioral targeting industry leader Dave Morgan (Tacoda) [our emphasis]:

“Now we have the ability to automate serendipity,” says Dave Morgan, founder of Tacoda, the behavioral-marketing firm sold to AOL in 2007 for a reported $275 million. “Consumers may know things they think they want, but they don’t know for sure what they might want.”

Garfield writes that “In 2006 Tacoda did a project for Panasonic in which it scrutinized the online behavior of millions of internet users — not a sample of 1,200 subjects to project a result against the whole population within a statistical margin of error; this was actual millions. Then it broke down that population’s surfing behavior according to 400-some criteria: media choices, last site visited, search terms, etc. It then ranked all of those behaviors according to correlation with flat-screen-TV purchase…“We no longer have to rely on old cultural prophecies as to who is the right consumer for the right message,” Morgan says. “It no longer has to be microsample-based [à la Nielsen or Simmons]. We now have [total-population] data, and that changes everything. With [those] data, you can know essentially everything. You can find out all the things that are nonintuitive or counterintuitive that are excellent predictors. … There’s a lot of power in that.”

There’s more in the piece, including what eBay is doing. As the annual Advertising Week fest begins in New York, we hope the leaders of the ad industry will take time to reflect on what they are creating. You cannot have a largely invisible system which tracks and analyzes our online and interactive behaviors and relationships, and then engages in all manner of stealth efforts to get individuals (including adolescents and kids) to act, think or feel in some desired way. Such a system requires rules which make the transaction entirely transparent and controlled by the individual. The ad industry must show some responsibility here.

Behavioral Targeting Lawsuit Illuminates How Data is Collected From You

Look for a moment at an excerpt from a legal tangle between behavioral targeting companies Valueclick and Tacoda (the latter now owned by Time Warner). Valueclick filed suit on July 15 claiming patent infringements, including for one entitled “Method and Apparatus for Determining Behavioral Profile of a User.” Read the “Abstract” and part of the “Summary of the Invention” for this patent and think about your privacy (and that this is based on 1998 technology!):“Abstract: Computer network method and apparatus provides targeting of appropriate audience based on psychographic or behavioral profiles of end users. The psychographic profile is formed by recording computer activity and viewing habits of the end user. Content of categories of interest and display format in each category are revealed by the psychographic profile, based on user viewing of agate information. Using the profile (with or without additional user demographics), advertisements are displayed to appropriately selected users. Based on regression analysis of recorded responses of a first set of users viewing the advertisements, the target user profile is refined. Viewing by and regression analysis of recorded responses of subsequent sets of users continually auto-target and customizes ads for the optimal end user audience.”

Summary Of The Invention: …Over time, the tracking and profiling member holds a history and/or pattern of user activity which in turn is interpreted as a users habits and/or preferences. To that end, a psychographic profile is inferred from the recorded activities in the tracking and profiling member. Further, the tracking and profiling member records presentation (formal) preferences of the users based on user viewing activity. Preferences with respect to color schemes, text size, shapes, and the like are recorded as part of the psychographic profile of a user…The tracking and profiling member also records demographics of each user. As a result, the data assembly is able to transmit advertisements for display to users based on psychographic and demographic profiles of the user to provide targeted marketing.”
source: Complaint for Patent Infringement: Jury Trial Demanded. Valueclick, Inc. v, Tacoda, Inc. Case No. CV08-04619 DSF. U.S. District Court, Central District of California, Western Division.

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.