Microsoft, Google and AOL are getting ready to meet with New York assemblyman Richard Brodsky, a Democrat from Westchester County, to discuss a privacy bill that he is developing, which could have strong implications for the online advertising industry.
“The bill is very broad and it would make a lot of legitimate practices illegal. [It] would basically make ad networks illegal,” said Mike Zaneis, VP of public policy at the Internet Advertising Bureau (IAB). “Publishers usually offer up thousands of ad impressions into an ad exchange, which are bid on by dozens of entities in real time.”
The bill would also mandate that all relationships between publishers and advertisers be contractual. Some Internet advertisers feel that, if a contract is required, it may slow down the process and exchanges that take place in an automated ad exchange.
Brodsky’s office is meeting with these Internet giants to discuss and help finalize the proposal, which was based in part on the best practice guidelines set by the Network Advertising Initiative, a group of online marketing and analytics companies. Yahoo met with the Assemblyman last fall.
“We are looking to clean up the language and are looking to these companies in the industry to tell us what they think,” said Kent Sopris, legislative director at Brodsky’s office.
The bill first came to life last June in response to Google’s offer to acquire DoubleClick, which, after a series of reviews, has been approved.
“Assemblyman Brodsky was not satisfied with the focus of privacy that the [Federal Trade Commission] was looking at and wanted to make sure that a big company like Google cannot track a consumer’s behavior and then target them with advertising based on these ads,” Sopris explained.
Google, Yahoo and Microsoft did not return phone calls for comment. AOL declined to comment on the proposed bill until it meets with Brodsky.
The IAB is pushing for consumer and legislator education about how online advertising technologies work and the benefits that it can have for consumers.
“While it claims to be looking out for consumers, this bill is not consumer friendly,” Zaneis said. “Advertising is the engine that drives the Internet today. It pays for free services and content for consumers.”
John Ardis, VP of corporate strategy at ValueClick, agreed, “The problem with this kind of legislation is that while it usually starts with good intentions, without a fuller understanding of how some of these things work, it can cause unexpected harm to both consumers and the direct marketing industry.”
ValueClick itself was just fined $2.9 million in a settlement with the FTC regarding a complaint for allegedly violating CAN-SPAM.
According to Ardis, raising questions about online privacy may lead legislators to consider direct mail and telemarketing, where much more personal information is tracked. “The focus should be on protecting data,” he said.
But not everyone in the industry thinks that this proposal is bad. Quinn Jalli, chief privacy officer at Datran Media, which was fined $1.1 million in March 2006 to settle a lawsuit brought about by former New York Governor Eliot Spitzer concerning a privacy breach, said that the industry should have seen this coming.
“We as marketers need to remember that at the end of the day, our business is about serving consumers,” he said. “From an industry perspective we should be thinking about giving the best consumer experience possible and making it easy for them to opt out.”
Still, Jalli said he thinks that legislators should use language that would prevent the prohibition of behavioral targeting.
While Sopris did not say how the bill would be enforced, he did say that it could go further than New York. The bill could be especially problematic for those businesses that do online business across state lines and globally.
“This could be the impetus for a larger federal piece of legislation, but that’s something we’ll have to wait and see about,” he said.
Connecticut is also proposing a similar bill in the current assembly session. In an e-mail to DMNews, Jerry Farrell Jr., commissioner of consumer protection in Connecticut, said “Connecticut has not passed a law barring the tracking of consumer behavior online. There are legislative proposals that have been made that would deal with some aspects of such tracking. But, at this point, they are strictly proposals and would need to work their way through the legislature by early May, in order to become law.”
The proposed New York bill is currently in the Consumer Affairs Committee, and will be sent to the floor when the proposal has been finalized.
The issue of consumer privacy online is not a new one. Last November, the FTC met with nine privacy organizations, including the Center for Democracy and Technology, Consumer Action, Consumer Federation of America, Public Information Research, Privacy Journal and World Privacy Forum, about implementing a do-not-track list that would protect consumers from having their online activities tracked, stored and used by marketers and advertising networks without their knowledge.
The list would require advertisers that use tracking technologies on consumers’ computers to register with the FTC all domain names of the servers involved in the tracking. There is currently a cookie available from the FTC that consumers can download to see individual sites’ tracking habits. No legislative action on this proposal has been taken yet.
