Support for a law aimed at protecting consumers' online privacy is gathering steam in Washington. Representative Edward Markey (D-Mass.), head of the House Energy & Commerce Committee, says he and others plan to introduce comprehensive online privacy legislation in the coming congressional session.
Dubbed the Online Privacy Bill of Rights, the law may require companies to get approval from consumers before collecting information about their Web-surfing habits, a process known as behavioral targeting that helps Web sites more strategically place ads. The legislation may also demand that companies disclose more information on how they collect and use people's Web-use data. "There is a reasonable chance that we will see something in the next Congress," says Michael Hintze, an associate general counsel at Microsoft (MSFT).
Watching what you watch
Legislative interest in ad targeting spiked amid recent hearings over a company called NebuAd, which makes devices that attach to the networks of Internet Service Providers and log surfers' movements (BusinessWeek.com, 8/14/08). Lawmakers are particularly interested in the implications of NebuAd's technology, known as deep packet inspection (DPI), one of the most comprehensive ways of keeping tabs on what people do online.
An examination of NebuAd prompted congressional staffers to look at ad targeting more broadly. On Aug. 1, Markey's committee sent letters to 33 companies, including Google (GOOG), Yahoo! (YHOO), and Microsoft, asking each to outline its tracking practices.
Behavioral targeting has come into its own in recent years as companies crafted ever more powerful methods for combing through data. Internet companies have bolstered their ability to target ads through the acquisition of large ad networks able to amass their own information on consumers' site-viewing habits. During the past year, Microsoft acquired aQuantive, Time Warner's (TWX) AOL snapped up Tacoda, Google purchased DoubleClick, and Yahoo bought BlueLithium. The use of ad networks surged from 5% of total ad impressions sold in 2006 to 30% in 2007, according to a study released Aug. 12 by the Interactive Advertising Bureau.
Google's Move Toward Transparency
Markey's office says the legislation is still in the planning stages. For instance, it's unclear what kinds of targeting would fall under requirements that companies let consumers opt-in to letting their data be collected and used. Opt-in clauses could apply to DPI only, or they could include less comprehensive targeting, such as the methods employed by companies such as Google and Yahoo.
The industry is already reacting to new scrutiny from Congress and the Federal Trade Commission in an attempt to avoid federal intervention. During the past year, Yahoo, Microsoft, and AOL began allowing people to opt out of tracking on their sites. They also adopted policies for deleting or making search data anonymous after a certain time period. Updated policies were "long overdue," says Jules Polonetsky, AOL's chief privacy officer. "After behaving rather glacially, there has been a huge jump forward just in the past year."
More changes may be on the way, Polonetsky says. "The heightening focus on the Hill is going to prod companies to do more to give users transparency and control," he says. He expects companies to roll out data-retention limits on other kinds of information they collect. He also says more companies will let people see the data being collected by ad tracking services.
Google is already headed down that path, rolling out a new feature in late July that lets people see how search results are customized, using data such as past searches and IP addresses.
Lessons From the Do-Not-Call List
Privacy advocates argue that for now, the industry's response doesn't go far enough. The Center for Democracy and Technology urges companies to put opt-out links right on ads and says that the industry should establish a Do Not Target list, akin to the telecommunications industry's Do-Not-Call list.
Others want Congress, now that it's paying attention, to require opt-in for behavioral targeting. "It shouldn't have taken them by surprise, they haven't been looking at the new medium," says Jeffrey Chester, executive director of The Center for Digital Democracy. "No one was looking where this was going."
Most industry execs are eager to do whatever they can to avoid regulation. They prefer a combination of self regulation, education campaigns, and technological responses, such as tools that block so-called cookies, which follow a user's movements across the Web. Legislation is hard to tailor to the ever-changing tech industry, they say. "The challenge with legislation is that we're in a fast-moving industry," says Anne Toth, Yahoo's head of privacy and its vice-president of policy. "With things moving so quickly, from our standpoint a self-regulatory approach would be able to respond more rapidly."
Courting consumer trust
Yahoo and others also say they believe most people prefer to see more targeted ads. "We're not talking about more online advertising," says Trevor Hughes, executive director of the Network Advertising Initiative, an industry group. "We're talking about relevant advertising that consumers appreciate."
Privacy advocates contest that notion, pointing to surveys like the one released this spring by TRUSTe, a privacy policy accrediting group. In the survey, 57% of 1,015 respondents said they weren't comfortable with advertisers using their browsing history to serve relevant ads.
Some in the industry think that legislation might be the way to set a common standard and avoid inconsistent, piecemeal legislation on the state level. Microsoft came out in 2005 in favor of federal privacy legislation and thinks others are beginning to agree. "Companies are coming around to the notion that it's not only compatible with their business practices but [that it] can help them by enhancing consumer trust and making compliance more streamlined," Microsoft's Hintze says. Microsoft advocates privacy baselines that cover not just the online collection of data, but offline collection as well.
David Hallerman, analyst at researcher eMarketer, says legislation would go a long way toward assuaging fears of advertisers who fret consumers don't want their privacy compromised. He says that if an online privacy law were passed, "the benefit would be there for advertisers, publishers, and the public."
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