Online Privacy: Why Marketers and Consumers Need Common Ground

In June of 1998, the world at large got its first taste of the challenges of online privacy, when the Federal Trade Commission issued a ground-breaking study called “Privacy Online: A Report to Congress.”

Fastforward to the present, and privacy in general has become everyone’s favorite topic.

Since the FTC’s 1998 report, the “issue” of online privacy has bloomed into a full-fledged debate with both sides seemingly unwilling to find common ground. Congressmen Rick Boucher and Bobby Rush have introduced similar privacy laws (penned, interestingly, by the same FTC staffer), calling for sweeping privacy reform, and Sen. John Kerry is expected to soon do something similar. At the same time, periodicals have attacked marketers for failing to offer any semblance of transparency to consumers around how data is collected, what it is used for, and how to reliably stop marketers from using their data.

Marketers have, not surprisingly, defended the use of the data as both a key driver in the online world, and something that benefits consumers. Marketers counter the criticism by arguing that little, if any, harm is being perpetrated upon consumers by the use of their data, and the balancing of the concerns clearly favors the added benefits over the harm. In short, marketers continue to argue that a self-regulatory scheme is the best way to both protect consumer interests and the thriving-Internet economy, and marketers’ inherent trustworthiness makes regulation unnecessary.

Interestingly, the lack of middle ground between the two sides highlights the obvious issues of this debate. On the one hand, companies engaging in behavioral targeting are NOT doing enough to assuage consumer concerns over the use of their data. And on the other hand, consumers are, in fact, benefitting from both the increased relevance brought on by behavioral targeting and access to the free content that comes from behavioral targeting. In every back-room discussion I have participated in, both sides seem to agree, in some form, with these basic tenants.

The problem, of course, is that we are heading for what appears to be a disastrous legislative outcome. The refusal of either side in this privacy debate to acknowledge the other side’s argument is, as evidenced by the proposed legislation, leading us to a law that will severally impact the most innovative and lucrative industry in America, while severally affecting consumers’ access to free content and material on the Internet.

Clearly, there has to be a better approach to the privacy issues facing this industry.

In truth, addressing the privacy “crisis” requires some basic acknowledgements by both sides.
First, it is true that consumers are concerned about how their data is being used online, and it is also fair to say that marketers have done a lot to drive this environment of fear by explaining their use of consumer data in privacy policies that are usually 6-7 pages long. Moreover, marketers’ lack of willingness to “out” bad practices makes distinguishing “good” players from “bad” players very difficult.
Second, it is true that the self-regulation has largely failed to deliver piece of mind to regulators and consumers alike. Frankly, a lack of an effective opt-out mechanism, coupled with demonstrable enforcement, has left legislators and regulators saying that self regulation is the proverbial fox in charge of the hen house, and something needs to be done.

Finally, it is true that some form of legislation or regulation of behavioral targeting, which will likely have far-reaching implications across both online and offline data, is coming. Attempting to stop the momentum behind a legal framework around behavioral targeting is somewhat silly at this point, and it seems clear that, whether it is regulation or legislation, 2012 will likely be the year that behavioral targeting and online privacy is controlled by a new legal framework.

Given the above, the industry needs to embrace the concept that a new legal framework for behavioral targeting is coming, and the industry should look to the FTC’s proposal for industry self-regulation as a legal framework to champion.

The FTC’s “Self-Regulatory Principles For Online Behavioral Advertising,” released in February 2009, establishes both clear notice and opt-out requirements for behavioral targeting; in short, this framework creates a “robust notice tantamount to consent” standard that marketers have largely said they would embrace. It serves as the ideal model for a regulatory approach meets the needs of America’s marketers while satisfying the privacy demands of both consumers and law makers.

In a nutshell, the law or regulation the industry should be pushing for is one that embraces the four concepts embodied in the “Self-Regulatory Principles For Online Behavioral Advertising:”

• Transparency and consumer control—Let the consumer know, in a clear and easy-to-understand way, what your collecting and what you will do with the information, and provide the consumer with an opt-out mechanism;
• Reasonable security, and retention, for consumer data;
• Affirmative express consent for material changes to existing privacy promises, when those changes will be applied retroactively; and
• Affirmative express consent to use sensitive data for behavioral advertising.

Naturally, marketers should expect that the regulation will include a standardized and ubiquitous solution for consumer preference management, but this concept should be supported as it allows consumers to truly exercise choice. Further, this form of a law or regulation will likely include requirements around privacy-policy form, but, again, this is something the industry should embrace as a way to keep consumers informed.

In the end, the FTC’s Chairman Leibowitz has provided the marketing industry with a workable framework for the regulation of behavioral marketing. As an industry that has missed the window on self-regulation, we should embrace the FTC’s approach to privacy protection because it both protects the consumers we hope to attract and the industry we have built. More importantly, legislation or regulation is a inevitability at this point, and, if we are forced to chose, choosing a well-thought-out regulatory scheme that serves all interests simply makes sense.

Quinn Jalli is vice president of deliverability at Epsilon.