Oh, behave! Debate over behavioral advertising heats up
Those who’ve seen the Tom Cruise blockbuster “Minority Report” may remember a scene when Cruise’s character, John Anderton, walks through a building and as his eyes get scanned by sensors, advertisements that “know” his name and preferences pop up on giant screens, one after another, for everything from diamonds to American Express travel.
“The road you’re on, John Anderton, is the one less traveled,” a soft-spoken female narrator says in a Lexus ad.
“John Anderton, you can use a Guinness right about now,” an upbeat male voice proclaims as Cruise walks by.
This scenario may still be the advertiser dream of tomorrow, but it’s really not that futuristic. Have you noticed that last time you logged into say, Facebook or Gmail, the ads you saw seemed to “know” things about your hobbies, likes or shopping habits?
Behavioral advertising — or, as the industry players like to call it, “interest-based” —is growing at such a rapid pace that some see it doing to display (nontargeted) advertising what craigslist.org and others have done to print newspaper classifieds. A 2009 Congressional Research Service Report cited an eMarketer study that estimated behavioral advertising spending to grow from $775 million in 2008 to more than $4 billion in 2012. And some estimate that this “smart” advertising form will dominate local digital revenues by 2014.
In a nutshell, these ads are based on browsing and other online actions — every time you cruise online, play online games, join social networks, blog about things, shop and even sign up for promotions, marketers collect piles of data that can be used for “personalized” ads. The same CRS report, for example, cited a study that found one major advertising firm that had more than 4,500 sites collecting more than 135 million individual behaviors 50 times per month, and had “segmented the online audience into behavioral buckets.”
What price are consumers willing to pay for their privacy?
From a company’s standpoint, all this tracking leads to providing targeted ads that are more in line with a consumer’s interests. As Google explained: “With personalized ads, we can improve your ad experience by showing you ads related to websites you visit, recent searches and clicks, or information from your Gmail inbox.”
The advertising industry emphasizes that the data collection doesn’t include personal information such as name, contact information and credit card numbers and that this type of advertising benefits consumers by matching them up with their interests.
Yet consumer advocates, members of Congress and the Federal Trade Commission alike have been raising privacy concerns. Sometimes the players — the big ones like Google, Apple and Facebook among them — back off some of their ideas, either due to major public backlash, lawsuits or FTC violations (Facebook’s Beacon advertising system is one example; it was ditched after two years just as it was the target of a class-action lawsuit that included many other major websites using the service). But as they continue to experiment with various ways of exploiting the vast field of online data, these companies are not giving up — with Facebook, again, being an example, since behavioral advertising is alive and well on the social networking site even after the Beacon fiasco.
The FTC earlier this year issued a privacy framework, “Protecting Consumer Privacy in an Era of Rapid Change: Recommendations for Businesses and Policymakers,” after months of discussions and revisions. The framework is calling on companies to implement best practices that would protect consumer privacy, but doesn’t apply to companies that collect data from fewer than 5,000 people per year and do not share that information with other parties.
One of the key principles promoted by the FTC is “simplified choice for businesses and consumers.” It calls for giving consumers the ability to make decisions about their data at a relevant time and context, including through a “do not track” mechanism.
‘Do Not Track’ consumer option
The online “do not track” (DNT) concept is similar to “do not call” for consumers’ telephone numbers. Opting for it doesn’t disable cookies on a website but rather sends the site a message that the user doesn’t want to be tracked. The Digital Advertising Alliance (a consortium of the largest U.S. media and marketing associations) launched a self-regulatory program in 2010 that allows consumers to opt out of being tracked on participating websites. The World Wide Web Consortium (W3C), whose long list of member organizations includes many major players (from Apple and Microsoft to Netflix and Yahoo), is also working on web standards for various things including the meaning and technology behind “do not track.”
Several digital industry leaders announced their own DNT tools this year, including Twitter and Yahoo. Google gives an opt-out option for personalized ads (which doesn’t stop ads completely, just disables the specific cookie for interest-based ads). And Microsoft plans to set its soon-to-be-released Explorer 10 with no-tracking as default.
What the Digital Advertising Alliance is advocating for is its mechanism marketed under the brand AdChoices, represented by a blue triangle “logo.” When consumers see the logo on a website, they can click on it to read more about behavioral advertising and have the option to activate the “do not track” mechanism for that site. Many websites don’t use the logo but instead have a link at the bottom of the page, in the same place where terms of use or privacy policies are linked.
Opponents of DNT say tighter regulations on online advertising, which could be coming down the pike from the federal government, would spell the end of the internet as we know it; cripple technology innovation, start-ups and small businesses in general; and even lead to the end of free online services or increased prices for online goods.
One problem with DNT is that the system, as it currently exists, is full of holes. First, websites’ compliance is voluntary, even if the company agrees to participate. Second, many interpret the definition of “do not track” as “do not target ads” vs. “do not collect data.”
The heated discussion around the balance between privacy and free commerce is not likely to die soon. Take the Microsoft IE10 move, for example. It prompted the Digital Advertising Alliance to take the position that this is not “an appropriate standard for providing consumer choice” because it’s a choice made by the browser manufacturer. The Association of National Advertisers board — which includes VIPs such as CEOs of GM, Walmart, Dell, McDonalds, Verizon and IBM, to name a few — even went as far as writing a scathing letter in October to Microsoft CEO Steve Ballmer and a couple of other top brass, accusing the company of making the wrong choice for consumers.
“ANA’s Board of Directors is very concerned that Microsoft’s action threatens to take the information out of the information economy,” the letter said, asking Microsoft to revise its decision.
In the end, all the debates may come down to one question: What price are consumers willing to pay for their privacy? Someone has to foot the bill for things like free information or all the free goodies from Facebook, Twitter, Gmail and other services that have become ingrained in their daily lives. At the moment that “someone” is the advertisers for whom the users’ data is as good as gold.
“Get away, John Anderton. Forget your troubles,” the American Express display ad was telling Cruise as he rushed through in the movie. The irony of that scene is that John Anderton was on the run from the authorities — and getting away was a bit problematic with all the “Hello, John Anderton” ads flying at him in a crowded building.
Behavioral advertising is perhaps more benign (at least nobody’s scanning retinas … yet). But as long as people are willing to make that trade — lack of privacy for convenience — the days when advertisements talk to consumers a la “Minority Report” as they walk around will continue to creep a little closer to reality.