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Behavioral Advertising Helps Fund Valuable Online Services

Posted by Mort Greenberg on April 11, 2008


April 09, 2008

By Dan Jaffe

Advertising is critical to the economic foundation of the Internet and the vast array of products, services and information that is available in the online world.  The government should not adopt any rigid, overly broad rules on the collection and use of consumer information that would undermine that vital role played by advertising.  The privacy interests of consumers can be best protected by strong industry self-regulation and positive industry leadership.  This leadership is already buttressed by the FTC’s enforcement powers to make sure that companies are fully complying with their privacy promises.

Those were the important messages conveyed to the Federal Trade Commission (FTC) today by ANA and nine other trade associations (the American Advertising Federation; the American Association of Advertising Agencies; the Consumer Bankers Association; the Direct Marketing Association; the Electronic Retailing Association; the Interactive Advertising Bureau; the National Retail Federation; the Retail Industry Leaders Association; and the U.S. Chamber of Commerce).  These groups filed detailed comments on a set of proposed self-regulatory principles for online behavioral advertising that were released for comments by FTC staff last December.  The industry comments are available here.

Online behavioral advertising involves the tracking of a consumer’s online activities in order to deliver targeted advertising to meet that individual consumer’s interests.  The FTC held a two-day town hall meeting last November focusing on the possible privacy issues raised by online behavioral advertising.  On December 20th, the Commission issued a staff draft of self-regulatory principles to govern the practice of online behavioral advertising.  That draft is available at

Our comments described the critical role that advertising plays as a funding source and economic foundation for the various services that consumers enjoy in the online world – from free e-mail to chat rooms to the rich content of thousands of newspapers and magazines.  The Internet economy is strong and online advertising is a major contributor to fueling its growth.  Our comments noted that in 2007, revenues from online ad spending exceeded $21 billion and online advertising is expected to grow 24% annually through 2011.

Behavioral advertising is just one component of all online marketing but it provides tremendous benefits for both consumers and businesses.  Behavioral advertising makes it possible for consumers to see the right ad at the right time about the right product, rather than simply a series of ads that may be irrelevant to them.  It also provides marketers with a more efficient and effective means of reaching consumers who are most likely interested in their offerings.  This efficiency supports competition and innovation and substantially strengthens the U.S. economy. 

We have serious reservations about some of the proposed principles suggested by the FTC, particularly the notion that consumers should be given the ability to opt-out of anonymous tracking and the collection of non-identifiable information across multiple websites.  Everyone agrees that consumers should have the ability to control the transfer of personally identifiable information to third parties.  Under long-standing privacy self-regulation principles, consumers are provided notice and choices when PII will be transferred to third parties for marketing purposes.  Such choices exist in the guidelines of every major privacy self-regulatory program and are included in the privacy policies of most major commercial websites. 

But what is the potential consumer harm if non-PII information is transferred to a third party?  Providing the same choice or control over non-PII as industry currently does for PII could have serious implications for the architecture of the web and undermine many business models.

We look forward to continued dialogue with the FTC and other groups about online behavioral advertising.  This is a very complex area involving numerous players.   There is clearly a need for more consumer education about how online behavioral advertising works and the tremendous benefits it can provide for them.  We also pledge to continue to evaluate our various self-regulatory privacy programs to make sure they are protecting the legitimate privacy interests of consumers in the online marketplace


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