On March 15, 2010, a coalition of marketing associations will require members to display a unique “I” icon with ads that are targeted at users based on data collected about their web activity which includes search queries, web pages visited and content viewed. It is an attempt by the industry to alleviate user privacy concerns by showing its commitment to the public on being transparent as to how they use the information collected about individuals in targeting ads.

Placing information about behavioral targeting into the privacy policies has proven not to be a good choice as the Federal Trade Commission (FTC) has highlighted that privacy policies of companies are often not clear or easily accessible for users to under as to whether their online data is being used appropriately. This is quite troubling because majority of consumers are unaware what information is being collected with regards to their online activity along with no clear explanation as to how it is being used. These actions could be viewed as a invasion of privacy especially for consumers who feel they did not authorize to have their information collected for the purposes of having specific ads directed at them.

The FTC’s interest in area stems from the growing sophistication of data collection and profiling applications that as a direct result has generated massive amounts of rich data for the purpose of online advertising.  As stated by George Steely in Ad Week “ The Federal Trade Commission has voiced specific concerns about storing and combining Internet-use information, such as a consumer’s restaurant preferences, neighborhood housing values and online research on medicine or medical conditions.”  The potential for fraud or other harm to consumers has been noted as another reason as to why the FTC has pushed the issue forward.

The FTC seeks to remedy this by placing expectations see in their2009 Self-Regulatory Behavioral Guidelines on companies and marketers to provide not only clear notice about behavioral advertising but also a way for consumers to choose whether to have their information collected.

The added fact that eMarketer, a digital marketing research company has forecasted that advertisers in the U.S. will spend more than $1.1 billion on behaviorally targeted ads this year only further draws attention to the issue by regulators and heighten concerns.

The development of the “I” icon and its implementation was brought forward when the FTC warned that unless the industry wanted it to step in, it had to devise stricter self-regulatory principles.  Companies including Microsoft, Google, General Electric, and more helped developed their own  self-regulatory guidelines document which is where the idea for the icon was conceived from in an attempt to meet the demands of the FTC and consumer advocacy groups against online behavioral advertising targeting claiming the process is violation of individuals’ rights to privacy. The principles range from giving Internet users a choice to not have their information as to what they do online collected to making sure organizations that collect such data  have protocols in place to keep the information secure.

The new icon will display phrases such as “Why did I get this ad?” when users move their mouse over it. If they choose to click on the icon, it will take them to a page that explains more about the process used to serve the ad to them, including the use of behavioral data collected.

In my opinion, the icon will serve to be a beneficial tool for educating consumers. It is an important step to provide transparency in terms of what information is being collected about individual consumers and how it is being used.  As stated by Lora Bentley of IT Business Edge “consumers are often oblivious to the fact that some businesses share a great deal of their personal information with other businesses who deliver targeted behavioral.” Exploiting this fact for profit is a violation of consumer privacy. How can consumers control what they reveal about themselves online when they don’t even know what’s being collected? The guidelines that have been set forth by the coalition of companies and marketers have shown promise as they attempt to provide consumers choice to opt out of having their online behavior collected

However, the underlying question here is not simply if the informative icon will be good for the consumers but ultimately who should enforce it’s use along with the other regulatory guidelines set to protect consumer privacy. The current guidelines show promise in educating consumers and giving them some kind of control as to what information companies can collect especially with regards to personal identifiable information (PII).

But some have argued that regulation and enforcement should fall into the hands of the FTC as seen below:

In BtoB Magazine,  Lee Peeler, president of the National Advertising Review Council mentions that “the criticism of self-regulation is that it’s good for those who do it voluntarily, but if an advertiser doesn’t do it, there are no consequences” (Hosford, 2009)

According to Robert M Brecht, Ph.D. Director of Research & Education at the DMN3 Institute has stated that “It is safe to say that, without the pressure of the FTC and congressional hearings on the subject, we would not be seeing these efforts at self regulation”

Others view the current voluntary self-regulation by companies and marketers to be a much more effective approach in alleviating consumer concerns about privacy. Many companies and marketers argue that that legislation or regulation by the FTC would move too slowly to reflect technological changes and would choke Internet revenue. Below are some of the statements made in support voluntary self-regulation:

According to Commerical Alert, Nancy Hill, president-CEO of the American Association of Advertising Agencies, said she was “heartened by the FTC’s continued understanding that the people best equipped to regulate this new technology are the practitioners who use it daily and are evolving it at seemingly warp speed.”

George Steely in Ad Week states that “ultimately, as we have seen, consumers want convenience along with value. They are willing to trade some privacy to store their financial information on retail sites, just as they are now comfortable with allowing cookies to make it easier to log onto certain sites.” He view that people will trade privacy for convenience in the long run which is why it is not necessary for the government to step in.

Overall, I’m in favor of voluntary self-regulations for the immediate future because the FTC has no clear expertise in this area. Especially, in balancing the privacy concerns of consumers on the internet and advertisers business need to have access to a wide range of data about users to create better ads. There needs to be a dialogue between both the FTC and marketers to generate ideas that will benefit both sides. It is impossible for the FTC to enforce some mandatory regulation as the ramifications is can have is uncertain. What is going on now, should be treated as a learning experience to see what works and what doesn’t. It is inevitable that marketers will push to meet the FTC needs inorder to maintain this self –regulation system. This is evidenced by the creation of the “i” icon that will be incorporated in many behavioral ads in the future. However, should marketers and companies fail to follow through with the guidelines they set forth. Only then, should the FTC consider intervene in making those accountable.

Sources:

http://www.corporate-eye.com/blog/wp-content/uploads/2010/01/behavioral_advertising_privacy_icon.jpg

http://mediadecoder.blogs.nytimes.com/2010/01/11/ftc-has-internet-gone-beyond-privacy-policies/

http://www.revenews.com/andrewbaer/ftc-sounds-off-on-online-behavioral-advertising-privacy-issues/

http://www.adweek.com/aw/content_display/community/columns/other-columns/e3ifa3e60e2b52e22815c0a927cd26011d6

http://www.ftc.gov/os/2009/02/P085400behavadreport.pdf

http://www.btobonline.com/apps/pbcs.dll/article?AID=/20100308/FREE/303039999/1445/FREE

http://www.iab.net/media/file/ven-principles-07-01-09.pdf

http://en.wikipedia.org/wiki/Behavioral_targeting

http://www.itbusinessedge.com/cm/community/features/interviews/blog/are-you-ready-for-regulation-of-targeted-advertising/?cs=38111

http://en.wikipedia.org/wiki/Personally_identifiable_information

http://www.dmn3.com/_blog/DMN3_Blog/post/Online_Advertising_New_Consumer_Alert_Icon_for_Behavioral_Advertising/

Last October, the Federal Trade Commission introduced a new of set of rules that would require bloggers, tweeters, etc… to disclose any free products they received or financial interests in products they review.  As Wired Magazine put it, the FTC is trying to, “prevent the net from being flooded with paid-for reviews which appear to be the work of everyday netizens, but are actually paid for with free products.”  The FTC issued these regulations in the hope of making the Internet a more open and trustworthy place for consumers seeking honest product reviews.  Some see this as an encroachment on free speech on the Internet, oppose the regulation, and say the FTC is over stepping its bounds.  However, the FTC has long regulated advertising and endorsements, and introducing such oversight will help create a more trustworthy and open market for consumers.

So, what we are really talking about here is when a company gives a product to some reputable blogger in return for a product review.  Furthermore, it doesn’t apply to professional journalists or traditional media organizations.  According to the FTC, it generally,  “does not consider reviews published in traditional media to be sponsored advertising messages”. It’s only aimed at citizen bloggers who aren’t affiliated with an established media organization.

For example, my friend Sam writes a blog for Role Playing Games.  During the year or so he’s been writing it, he’s developed a pretty decent sized group of readers.  Every now and then, a publisher will send him a new game in hopes that he’ll write about it and his readers will go out and buy the game.  Under the new rules, he would be required to mention in the review that he received the copy for free.

There’s nothing inherently wrong that with that kind of product promotion.  In fact, it’s a pretty common practice called pay-per-post.  Product developers and manufactures can’t wait to give out their latest products to market influencers.  People listen to what they say and it’s a great way to get the word out about a new product or service.  However the FTC, is saying that this type of marketing counts as a product endorsement and must be disclosed to consumers to prevent deceptive practices.

So, what if instead of reviewing role-playing games, Sam writes about houses, home improvement, etc…  Now what if a landscaping company gave Sam $5,000 or a fancy new patio, and he wrote a glowing review for that company, but didn’t tell his readers he had been paid to write the review.  If you were shopping around for a contractor to do your backyard, wouldn’t you want to know that recommendation had been paid for?

This gets at the heart of the issue and the argument goes something like this.  People trust established sites and the fact that may receive free products doesn’t affect that trust, so they don’t have to disclose freebies.  But, consumers don’t know if they can trust every Dick and Jane blogger out there, so they have to disclose if they’ve received free products or payments from the company whose products they are writing about.

Believe it or not, bloggers have a pretty big influence on consumer purchasing decisions, and marketers know it.  According to research conducted by Jupiter Research and summed up by Marketing Vox, “blogs factor in to critical stages of the purchase process, weighing most heavily at the actual moment of a purchase decision”.  That means that people make decisions to purchase or not purchase a product based on what a bloggers say about it.  This is why supporters of the FTC’s actions say the FTC’s move is a good decision.  Since bloggers influence the purchasing decisions of consumers, regulations should exist to prevent deceptive advertising practices in this channel.

In recent years some big name companies have run afoul in the murky world of pay-per-post marketing.  Last year Google was lambasted for paying Japanese bloggers to talk up their new key words feature.  Bloggers would install the new feature on their site and talk about how great it was and how easy the new feature made it to stay up-to-date on the latest and greatest, and Google cut them a check.  The only hint that this was a paid endorsement (aka advertisement) was this line entered at the bottom of the posts, “I am taking part in the Cyberbuzz campaign”.

Microsoft had similar troubles with the launch of Windows Vista.  When Vista was about ready to launch, Microsoft hired PR company Edelman to generate buzz through tech bloggers.  Edelman gave a group of bloggers brand new Acer Ferrai laptops valued between $1899 and $2299. Again, this is pretty normal practice and there should not be a problem with it.   However, there is a problem when consumers don’t know this a paid endorsement.  A Northern California software consultant put it this way, “I went to a few of the “gifted” bloggers Web sites. Only one, Laughing Squid, made it clear MSFt provided the Ferrari.”

In both cases, once they found out, the online community was pretty outraged.  Customers aren’t stupid, and when they find out companies are trying to trick them with fake reviews, they don’t like it.  Furthermore, consumers should not have to find out when they’re being tricked and force companies like Microsoft and Google to apologize.  By forcing disclosure in such marketing campaigns, the FTC regulations make the entire process much more open and transparent.

When I spoke with my blogger friend Sam about it, he said that the FTC regulations would have a bigger impact on small-time bloggers rather than big name ones.  Most bloggers don’t make any real money off their blogs.  The free promo gifts they receive are a nice token of appreciation for the time and effort they put into their blogs.  He also said that some bloggers might be over reacting, “I got the sense that bloggers were going with a ‘the sky is falling’ attitude because of all the talk of regulating these promo gifts.”  He also reiterated the point that blogging is about build a certain closeness and trust with your readers.  As he said, “I realized that blogging isn’t about sharing some kind of new information that can’t be found anywhere else on the internet [sic].  It really is about sharing yourself and opinions with other people.” And that’s the point of the FTC regulations, to help maintain that level of trust by creating a more open environment.

However there are those who come down staunchly opposed to the regulation.  Not long after the FTC announced its decision, the Duke University Press came out against the new rules.  They make the following point, “We, and many book review bloggers, believe these guidelines will have a chilling effect on the online book reviewing community”.  Their point is that, the threat of fines might be enough to stop bloggers from accepting free books.  I don’t buy it, but it’s a decent argument.

Others who object take a more Big Brotherish stance against the FTC’s rules.  They say that if you let the government regulate what bloggers say (or in this case don’t say), who knows what they’ll regulate next.  Marketing Pilgrim’s Frank Reed put it like this, “I have to think that if the government is given an inch that they will take full advantage of expanded influence and power well beyond a mile”.  To his credit, he isn’t a conspiracy theorist, but just feels that this is an issue that should be left for the free market to work out.  But this is a pretty small requirement that the FTC is asking for.  Bloggers only need to insert one line saying they got this product for free.  Me thinks those who share that opinion doeth object too much.

In summary, I believe that since consumer decisions are being influenced by bloggers whose opinions they trust, consumers have the right to know if a blogger is being influenced by a corporate interest.  Disclosure of the fact that a blogger received a free product or was paid by a company allows consumers to make better decisions.  Furthermore, it makes it easier to trust the opinion of the blogger.  If my favorite blogger opens a product review by telling me he received a free copy of the latest and greatest gadget, the issue is out on the table.  It’s up to me to decide whether or not I think the review is biased or genuine.