January 12, 2011
For a while now, behavioral marketing has been under the intense scrutiny of several internet watchdog groups, as well as the Federal Trade Commission, in regards to heightened concern over privacy laws. And recently, this criticism has intensified, leading to many new proposed ideas as to stop advertising platforms from accessing computer browser history in order to more accurately place ads. Broadly speaking, the majority of these ideas lead to a common conclusion—that much like the “Do not call” registry for telemarketers, people need the option of a “Do not track” list for the internet. In the following paragraphs, there will be a summary of recent advances in the debate over behavioral marketing as well as the scramble to avoid Federal legislation by many internet based companies. And finally, there will be a discussion over the potential implications in the PPC industry if behavioral marketing’s influence is reduced.
Since the beginning of internet marketing, there has always been a concern as to the privacy of the internet user. But recently, there has been much more scrutiny, especially from the FTC. In December, David Vladeck, director of the FTC’s Bureau of Consumer Protection, told the House Committee on Energy and Commerce Subcommittee that behavioral marketing has its benefits, but needs government regulation so as to make it easier for consumers to opt out due to “privacy concerns.” Also, Vladeck says, the internet marketing industry needs to be easier for the consumer to control, as well as more transparent in its techniques and practices. And although Vladeck states that some in the industry have taken great strides towards better consumer control, knowledge, and overall practice transparency, in general the industry has fallen short and is in need of Congressional legislation. Summarizing his appeal to the subcommittee, the following issues were brought up as points of potential legislation:
- It should not undermine the benefits online behavioral advertising provides consumers, including funding content and services;
- Unlike the FTC’s Do Not Call Registry for telemarketers, it should not require a registry of unique identifiers; rather, the Commission recommends a browser-based mechanism;
- It should consider an option that lets consumers choose to opt out completely or to choose certain types of advertising they wish to receive or data they are willing to have collected about them;
- The mechanism should be simple, and easy to find and use;
- The FTC should be given Administrative Procedures Act rulemaking and the ability to fine violators to “provide a strong incentive for companies to comply with any legal requirements, helping to deter future violations.”
Basically, Vladeck is proposing an easy way for consumers to get out of being tracked for behavioral marketing, and calling for Congress to make this law. And also, Vladeck is redefining what is “private information,” so whether or not the consumer decides to block behavioral marketing, it will still result in less information that advertisers would have at their disposal (the types of data that would be illegal has yet to be determined in full). But on the other side of the controversy, internet marketers have made a case against Vladeck.
Leading industry proponents for self-regulation give an alternative to the possible Congressional law, titled the “Self Regulatory Program for Online Behavioral Advertising.” Basically, this is a conglomerate of many of the top online advertising agencies (check out the list of participants) who have decided to regulate themselves in terms of internet user privacy and behavioral marketing. More specifically, it is a massive campaign to educate people as to the basic aims of internet behavioral marketing, and how the advertisers see it as not a breach of user privacy, but an enhancement of the user experience, allowing for more relevant content to be displayed for the user (Check out this article by Michael Zaneis, Sr. Vice President of IAB, one of the members of the program). In addition to education, the site allows user to “opt out” of any type of behavioral marketing/tracking that its member advertising agencies use, allowing several different types of user customization, even down to individual sites for users to block access. In addition, any ad that is displayed by a member company of the Self Regulatory Program for Online Behavioral Advertising has to display a small icon in the ad, which when clicked upon takes the user to the “opt out” page. Membership is five thousand to ten thousand dollars, which allows the program a quite hefty policing budget. And for those companies outside the program, the Better Business Bureau (itself a member of the program) is tasked with policing the advertising practices of these sites.
According to the Interactive Advertising Bureau, over eighty percent of all digital marketing campaigns are influenced to some degree by behavioral marketing. In addition to this, over sixty-seven percent of people in a Decmber Gallup Poll said that “….advertisers shouldn’t be allowed to match ads to specific interests based on websites you have visited.” So, the new regulations that are being proposed by the FTC (mainly the browser-based “opt out” option) could directly affect the relevancy of ads being shown to internet users, should they choose to get rid of behavioral marketing. So, instead of being able to target ads to potential consumers based on their demographics and other characteristics (as based on browser history), ad agencies would not have access to this information.
Now, contextual targeting would still work—that’s based on the content in a website, not on the user’s history. But remarketing efforts (See the blog post “Google is Not Creepy”) as well as behavioral based ads could take quite a plunge. So, generally speaking, if the FTC effectively does away with behavioral marketing through it’s more stringent privacy laws and broad “opt out” option for users, CTR and conversion rates for ads may drop, due to less relevancy in the ads that potential customer’s are shown. This in turn may lead to higher costs, as lower CTR leads to lower Quality Score, resulting in higher Max CPCs to retain ad position. To combat this issue, it would be advisable to keep an eye out on this ongoing debate, perhaps prepare campaigns in your advertising platforms devoid of behavioral marketing and keep them paused as a fall back option, or spend more time with contextual targeting on the content network as an alternative to behavioral marketing.