Rep. Rick Boucher of Virginia is positioning for an online consumer privacy bill that could cost the industry $25 billion. Under the veil of "consumer protection," the bill would give the federal government the ability to theoretically target suspicious advertisers and data-collection services.
However, agencies, publishers, ad networks, and clients are worried about granting the government such substantial influence in yet another private industry. With some major auto manufacturers and the health care system now somewhat under government control, the free-enterprise system is at risk.
While under the auspices of granting the Federal Trade Commission (FTC) expanded powers to police shady online ventures, the bill is causing unrest for advertisers and ad agencies that use the Internet for commerce. Under the proposed bill, the FTC would have the authority to penalize violators millions of dollars. The penalties would be far-reaching in that companies seen as "aiding and abetting" the violating company could be penalized as well. Thus, an advertising network that crosses the line could potentially implicate its partner sites, ad agencies, and even the advertiser.
"That really scares you," said Mike Zaneis, the Interactive Advertising Bureau's (IAB) VP of public policy. "That would definitely create a chilling effect throughout the industry."
The government, however, sees this as "viral fear." Boucher told Mediaweek the bill would be "less onerous," stating it will allow consumers to opt out of advertisements targeted at them based on demographic, psychographic, and Web-surfing information. Agencies, and their clients, worry that the bill will require consumers to opt in to receive ads. As to their part in the matter, the FTC states their role is to get the "bad guys."
"The new rule-making authority is really about hard-core fraud," said Jon Leibowitz, FTC Chairman. "It doesn't make sense to initiate rule making where business practices and consumer attitudes are still evolving like behavioral targeting...We prefer self-regulation. We would not be looking at rule making [in this area]."
The "authority" to which Leibowitz refers is the Administrative Procedure Act (APA), which became law in 1946. The FTC lost their ability to use this power in the 1970s and believes they need to be granted under the APA to best protect consumers from unscrupulous online advertisers in the rapidly changing online environment. One of the FTC's missions is to investigate reports from consumers and businesses, pre-merger notification filings, congressional inquiries, or media reports that pertain to false advertising and other forms of fraud.
While consumers may benefit from government involvement, advertising agencies and online ad networks fear the intrusion will result in companies being overcautious and adopting a more conservative approach when using online space for advertising.
According to Grace Liau, VP at Digitas: "Clients are extremely sensitive about this. I think it would slow business, period."
The best possible solution is for the IAB and other online-standards providers is to self-regulate. In an earlier post, I wrote about the solution proposed by Russell Glass, CEO of Bizo, that allows B2B consumers the option to opt in to advertising that pertained to their current wants or needs. Bizo is enhancing their B2B ad network via total transparency as consumers are given the option to see exactly why they're seeing a certain ad. They can then choose to continue to receive the ad or opt out altogether.
Glass believes this will actually increase online commerce because consumers will choose to receive relevant ads. This increases ad effectiveness by targeting buyers in the purchase cycle who are ready to make a decision. It's an everybody-wins business model if explained to consumers correctly.
Most Facebook members are aware the site provides an opt-out option allowing them to deny irrelevant or offensive advertising.