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Privacy Legislation’s Potential Impact on Online Media April 18, 2011

Posted by David Card in Uncategorized.
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Last week, the bipartisan Kerry-McCain bill proposed legislation on a Commercial Privacy Bill of Rights that would put the Federal Trade Commission in charge of policing the online collection, sharing and use of personal information. Because the legislation is watered down relative to prior proposals, the Kerry-McCain bill will face the least industry resistance and is more likely to be passed this year. Passage would shift some power in online media, and force changes in the way online ad networks and other targeters work with content sites.

The proposed bill is relatively business-friendly, so much so that it’s drawing criticism from privacy rights activists. The bill:

  • Focuses explicitly on the use of personal information for behavioral ad targeting — and particularly on data sharing between companies — rather than information collection in general.
  • Mandates opt-out policies for personal information use, but only requires tighter opt-in permission for sharing “sensitive” personally identifiable information related to religion, health and finances.
  • Enables what some are calling a Facebook loophole that imposes lighter restrictions on web-wide information collection and use by companies where the user has an account. This would favor Facebook Connect over ad networks.
  • Is strict about data-sharing for behavioral targeting via third parties (data collectors and ad networks), but much looser on ad targeting done by a publisher that collects the data on its own site.
  • Does not address “Do Not Track,” the concept of a universal opt-out mechanism that users broadcast to sites popularized by the FTC last December. In February, Congresswoman Jackie Speier, D-Calif., proposed that the FTC create and manage a Do Not Track framework.

Although advertising industry groups are predictably resistant to any kind of regulation, their initial reactions to Kerry-McCain seem more muted than concerns they had prior to the bill’s introduction. Big tech companies like Facebook, Microsoft, eBay, Hewlett-Packard and Intel expressed support for the bill. The trade groups are probably relieved about the absence of Do Not Track, which they fear encourages users to block all cookies and customization indiscriminately, and requires potentially costly support from ad servers, ad networks and sites. Apple is the latest browser maker to experiment with Do Not Track support, after Mozilla and Microsoft; Google favors an alternative approach that maintains user opt-outs.

Privacy Legislation Impact Scenarios

The promise of online advertising has been the potential combination of television-like reach with precision targeting. Passage of the Kerry-McCain bill or something similar will have the following effects on the online media landscape:

  • Online content sites: Don’t call me a conspiracy theorist, but some traditional publishers like the Wall Street Journal might be perfectly happy without web-wide behavioral targeting. They could tout the value of their online/offline audience and promote contextual targeting and sponsorships. As noted, publishers would able to follow and target a user within their own site, which would benefit portals like Yahoo and AOL, which have huge audiences and broad variety of content.
  • Online advertising ecosystem: The bill’s restrictive approach to behavioral targeting favors search advertising over display ad formats. It also weakens industry efforts to deliver attribution, i.e., understanding and valuing the longer-term effects of seeing brand advertising. The data sharing guidelines could force data miners (Experian, Audience Science, BlueKai) and ad networks (DoubleClick, ValueClick, 24/7 Real Media) to secure more formal contractual relationships with content sites that have registered users. And the legislation seems to leave room for third parties to take user info and create anonymized groups of targetable customer “types” based on demographics and behavior.
  • Social targeting: Today, most third-party social targeters (Lotame, 33Across, Media6Degrees, Rapleaf) base their analysis on tracking user behavior with their own cookies, rather than getting access to API data from Facebook or Twitter. Legislation may make them pay for access, and even then, Facebook to-date has been stingy about data sharing. Likely it’s saving that targeting opportunity for itself.

Question of the week

How could potential privacy legislation affect online advertising?
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Social and Online Media Need Privacy Plan Now October 25, 2010

Posted by David Card in Uncategorized.
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Privacy isn’t just Facebook’s problem. In fact, the whole consumer Internet and media industry had better get its collective act together on the privacy front or get ready to face serious consumer backlash and, perhaps worse, government regulation.

For the second time this year, Facebook is at the center of a privacy controversy. Many apps on the network have been transmitting Facebook user IDs to third parties, some of which are data aggregators or miners that create profiles of users or groups and sell them to marketers. This user ID leakage was the same problem Facebook “fixed” in May.

Although wiser heads pointed out that both times represented fairly common practices online, and that personal email addresses are potentially much more dangerous in terms of identifying and exposing consumers, the stuff hit the fan. “Is Facebook evil or merely incompetent?” asked one critic. Has it “lost control of its platform?” wondered another.

Consumers Care — At Least They Say They Do

Regardless of their behavior as consumers, many say they care about privacy. A Zogby poll showed that 87 percent of respondents were concerned with the security of their personal information online, and 80 percent were bothered by advertisers tracking them. In another survey, 96 percent said online companies shouldn’t be allowed to share or sell personal information to third parties without permission — though nearly half admitted they don’t read privacy policies. And if they’re annoyed enough, consumers will take action: The Federal Trade Commission says that 200 million phone numbers have been registered in its Do Not Call registry that clamps down on telemarketers.

What’s at Risk for the Industry?

Social media companies should be wary of potential government regulation. If legislators were to impose strict rules on information sharing or opt-in practices, the usefulness for consumers and companies of social graphs could be drastically reduced.

And then there’s advertising.

Alcohol advertising on television, for instance, is self-regulated; it’s the TV networks’ own standards that kept booze off the non-cable airwaves until recently. It’s not illegal to promote liquor, just the networks playing it safe. In contrast, advertising on kids’ TV shows is a matter of law, as is the tobacco advertising ban that’s been in place since 1971.

Members of Congress are questioning Facebook on its current snafu. They’re the same ones that went after the “zombie cookies” highlighted by the Wall Street Journal. Even before that, online privacy bills had been proposed in the House, and European regulators are passing fresh proposals around the European Commission. I doubt the online media industry wants to rely on congressmen understanding the nuances between zombies and other cookies — a ban on cookies would completely destroy ad targeting and optimization.

How Should the Industry Respond?

The online media industry needs to rev up its lobbyists (Google spent $1.2 million on lobbying this quarter; Facebook $120,000), explain what’s going on to legislators and to the public, and seriously consider self-regulation. Additionally, social media companies should:

  • Explain what they’re already doing with consumer information, and not just on developer blogs. These stories need to be on home pages and in ad campaigns.
  • Go after real bad guys publicly. Facebook, for instance, is suing spammers.
  • Use the publicized information outlined in the first two points to create a set of best practices and an audited seal of approval.
  • Use an organization like the Online Publisher’s Association — rather than the Internet Advertising Bureau or the Direct Marketing Association — as a hub for public campaigns. It would be better PR coming from the publishers, who shouldn’t be afraid to play the “democracy needs a viable press, and the press needs viable advertising” card.

It would be too hard for Facebook to “give up on privacy” and expose all existing posted information everywhere, with the idea that its users would gradually move that info into a new, “private Facebook.” Longer-term, we may see consumers evolve private and public identities, but the industry can’t count on that right now.

Question of the week

How can social media solve its privacy problem?