December 12-15, 2010  |  Phoenix, Arizona
Published: December 15, 2010
3 ways privacy could play out for marketers
 

How might new privacy laws affect your brands and their targeting strategies? Explore these plausible scenarios to see how popular opinion and potential legislation could reshape our industry.

Well, we're finally talking more about privacy -- a nagging topic for our industry for more than a decade. Increased press attention -- often misleading and over-hyped -- plus a highly charged and unclear regulatory environment in Washington, D.C., are creating consumer fear. That, in turn, is making clients wary of participating in interest-based advertising (better known in the industry as behavioral targeting, or BT) out of fear of a backlash. Digital's incredible ability to understand consumers has brought us better business results; but it seems that the day may have finally arrived when we need to face and address those nagging concerns about how we collect and act on all the consumer information we gather.

This topic is important because BT is important. It drives significantly stronger business results, and the higher CPMs; it drives help publishers better monetize and improve content offerings. Currently, well over a billion dollars a year are spent on behaviorally targeted graphical media. And its growth rate is even faster than that of our industry as a whole.

The BT goose lays, and will continue to lay, golden eggs -- so long as privacy concerns fade and the bird stays healthy. But what happens if tolerance of these methods goes drastically south? No one knows for certain. But it is possible to formulate three possible scenarios about how BT and our industry as a whole will evolve in the next year as a result of different action on the privacy hunt.

Understanding what could happen in the future may help us figure out what to do now. So with that in mind, I offer these three plausible scenarios about how opinions and actions -- of consumers, clients, government, data companies, and media -- could reshape our industry.

Scenario 1: BT = R.I.P
This much has already happened: The Wall Street Journal published a story chronicling its research on ad targeting and privacy. It reported, among many other revelations, that 234 cookies -- including 20 virtually unremovable Flash cookies -- got dropped on its PC during a single visit to Dictionary.com.

Yes. That's 234 cookies!

Even if you think BT is totally hunky dory, that's a crapload of cookies. Enough to make some people even more nervous about internet privacy.

Graphical depiction of the tracking from Dictionary.com from the Wall Street Journal Blog.

At first, most of the general public didn't really take much notice, but clients and government officials took the article very seriously.

Clients were already pretty nervous. Research conducted in 2010 by the Ponemon Institute showed that more than 90 percent of marketers say they eschew BT or hold back spending out of fear of consumer backlash.

The WSJ piece made them even more jittery, as did the many trade articles that were published in the ensuing months.

Now begins our speculation of what could happen: Soon after, Facebook makes some poorly messaged privacy changes. Again. Privacy advocates counter by putting out some spicy press releases. The cable news kicks in, and then the local news as well. The photographers on Getty One that have keyworded pictures "Big Brother" start making serious bucks. And consumers begin to take notice.

In Washington, Congressional committees and the FTC subpoena the CEOs of data companies and ad networks. We learn that many congressmen share the concerns voiced by Sen. Claire McCaskill in hearings held in July 2010:

U.S. Sen. Claire McCaskill (D-MO)

"I understand that advertising supports the internet, but I am a little spooked out. This is creepy."

Laws and regs take some time to meander their way through Committee and the FTC. But brands don't wait. They start cutting BT from their plans.

The FTC implements a "do not track" registry, much like the wildly popular "do not call" registry that buried the telemarketing biz. Consumers flock to opt out of being targeted online.

Agency revenue drops a bit because nothing can make up for the performance drops. Then publisher revenue drops. And ad network revenue drops. Certainly the revenue loss deals a blow to many of the data companies, many of whom need BT to make their numbers.

Meanwhile, there are some winners that emerge, such as publishers with high quality contextual content, and network platforms like Vibrant, ContextWeb, and Kontera that offer platforms primarily focused on context. But most publishers take it on the chin. And agencies and brands contend with revenue shortfalls.

The internet wouldn't go away. But some companies would. And some jobs. And it would likely may be more jobs than you would think. Consider:

  • VCs have flooded the market with money for DSPs and data companies all built on the supposition that the collection and use of data can continue.
  • The holding companies are creating their own data driven buying platforms -- the value of which is predicated on data.
  • DM companies are entering the environment in force on the idea that data can empower digital efforts in the same way it does direct mail.

Without data, our well-oiled machine withers.

Scenario 2: In the eye of the storm
As any Floridian knows, hurricanes have odd architecture in that, at their very center, there is often a calm zone.

The eye of Katrina

When the eye passes over your house, you get a few moments respite; but you also know that you then have to get through the second half of the swirling hurricane before it's all over.

In this scenario, our industry gets a year of respite. Consumer interest in internet privacy rises, but does not reach fever pitch. The FTC decides to go forward with some form of regulation, but Washington being what it is, it takes the FTC some time to get it all done. Action's coming, but these things take time.

Many industry stakeholders decide to conduct business as usual, irrationally hoping that the transitory peace of eye signals the end of government and consumer interest in the topic.

FTC Chairman Jon Leibowitz

But in their hearts, many know that avoidance isn't going to work this time. After all, FTC Chairman Jon Leibowitz has already added a number of strong privacy advocates to the Commission, including David C. Vladeck, Eileen Harrington, and Joni Lupovitz to his senior staff. And he's also on record advocating for real privacy reform, saying,

"We may explore in the context of behavioral advertising... a do-not-track mechanism that's more comprehensive and easier to use than the procedures currently available. Under such a mechanism, users could opt out of behavioral advertising more easily rather than having to make choices on website-by-website basis."

This scenario assumes that the "do not track" list won't get up and running in 2011. Given the immense popularity of "do not call," it's logical to expect that when such a mechanism gets up and running, it will be inundated with consumer registrations.

But even if the registry doesn't get off the ground in 2011, it is pretty safe to assume that many brands will pull out of BT out of fear of consumer backlash. After all, brands are in the business of satisfying consumers, not ticking them off. This would lead to perhaps a less sudden onslaught of problems for agencies, networks, data companies, et al. But the ultimate results would be the same as in scenario one; the only real difference is the timing.

Scenario 3: Getting our acts together
The third scenario involves our industry following the lead of a coalition of industry trade groups, who have banded together to create a genuine, good faith self regulation platform.

Formed by the 4As, IAB, DMA, CBBB, and ANA, the coalition has created the Advertising Option Icon program that provides notice and choice to consumers. Under the program, ads targeted using advanced techniques like BT would bear a small "I" inside a triangle in their upper right corners. Clicking on the "I" provides information on who is collecting and using data, and provides options on whether the user wishes to opt out.

Significant research conducted by the portals and others indicates that when consumers are given real, easy to understand information about BT targeting, they are generally satisfied with the explanations and don't opt out. In other words, telling the truth in plain English is a good thing for the future of BT.

And here's a picture of the beginning of the post-click experience delivered by Better Advertising, a company founded to give consumers the notice and choice demanded by the coalition and the FTC. You can find this experience on millions of impressions from leading brands like AT&T already.

Better Advertising's information and choice interface

Better Advertising (disclosure: a CSF client) has been chosen by the coalition to power its interest-based advertising self-regulatory program. Other companies, including TRUSTe, also offer notice and choice mechanisms.

Scenario 3 assumes that our brands and agencies follow the coalition's lead. As a result, regulation is unnecessary. BT continues to grow, benefiting publishers, networks, DSPs, and data companies. Venture money continues to flow in, creating more opportunities for the kinds of monetary exits we all like to talk about, not to mention helping us all keep our jobs.

Under this scenario, brands and agencies would also see their businesses grow along with the stronger metrics made possible through advanced targeting. Extending clear information and choice also drives overall consumer loyalty because brands are treating them with respect.

Let me quote FTC's Leibowitz on why this scenario is a win-win:

"And we have great hopes for self-regulation. Last year, a Coalition including the Direct Marketing Association, the Interactive Advertising Bureau, and the Better Business Bureau proposed behavioral advertising guidelines; these included the recommendation that companies explain their information collection practices for advertising outside the privacy policy using common language and a common icon. So long as self-regulation is making forward progress, the FTC is not interested in regulating in this area... In this case, doing what is right -- respecting your customers' most basic rights to privacy and well-informed choice -- is also doing what is good -- good for business, good for consumers, and good for the growth of an ever-expanding, innovating cyberworld."

Conclusion: No crystal ball here

No one can predict with certainty what will happen in 2011 with regard to BT and privacy. Ultimately, a lot of what happens depends upon the extent to which our industry takes this issue seriously.

But it is certain that the world of BT and privacy is going to change in the future. The days of sidestepping this issue are over.

The question is, will we take the right step, or keep our heads buried in sand? Either way, our heads won't be buried for long, because the privacy hurricane will blow it all away and leave us struggling with the level-five aftermath.

Much easier just to do the right thing now. By embracing the coalition's Triangle-I program, the industry can continue to grow while restoring trust among consumers. Privacy disclosure and choice platforms make compliance quite easy, and once you get started it amounts to no additional work on your end.

Jim Nichols is senior partner at Catalyst:SF.

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