Advertising & Marketing

I highly recommend this analysis of the Federal Trade Commission’s (FTC) new “Do Not Track” proposal by Ben Kunz over at Bloomberg Businessweek.  In his essay, Kunz, the director of strategic planning at Mediassociates, a media planning and Internet strategy firm, hits many of the major themes we have developed here at the TLF when critiquing the FTC’s plan and privacy regulation more generally. Namely, we live in a world of trade-offs and regulation can have unintended consequences.  Kunz argues that, “while the [FTC] may have consumers’ best interests at heart… the idea has two huge problems”:

1. It won’t stop online ads. While Do Not Call lists kept telemarketers at bay, you’ll still see tons of banners and videos everywhere online. They’ll simply be less relevant.

2. Do Not Track will send billions of dollars to the big online publishers, hurting the little sites you might find most interesting.

The second point is painful. It could really harm you, too, dear consumer, if you read things online other than The New York Times, Bloomberg, or iVillage.com. Why? The “Long Tail” of niche content is going to get crushed. Let’s follow the money. More than $25 billion was spent on U.S. online ads in 2010, according to eMarketer. About $1 billion of this went to behaviorally targeted ads tied closely to user data; nearly $8 billion overall is in some way related to online tracking.

That $8 billion has posed horrible problems for publishers of major websites, such as Bloomberg (this column’s host, for which we don’t work, so we’ll be equally critical of it) or The New York Times. Before tracking came along, such publishers were the only means of reaching a known type of audience. Business people read Businessweek.com while moms read O magazine online and iVillage.com. Like the publications of the past century, a given website has always been a proxy for an audience target. Alas for the big publishers, good data on audiences has meant that smart marketers could leave big, expensive sites behind. So in perhaps the biggest revolution of Internet marketing, the more data you can collect about today’s customers, the cheaper online advertising gets.

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While I harbor plenty of doubts about the wisdom or practicability of Do Not Track legislation, I have to cop to sharing one element of Nick Carr’s unease with the type of argument we often see Adam and Berin make with respect to behavioral tracking here.  As a practical matter, someone who is reasonably informed about the scope of online monitoring and moderately technically savvy already has an array of tools available to “opt out” of tracking. I keep my browsers updated, reject third party cookies and empty the jar between sessions, block Flash by default, and only allow Javascript from explicitly whitelisted sites. This isn’t a perfect solution, to be sure, but it’s a decent barrier against most of the common tracking mechanisms that interferes minimally with the browsing experience. (Even I am not quite zealous enough to keep Tor on for routine browsing.) Many of us point to these tools as evidence that consumers have the ability to protect their privacy, and argue that education and promotion of PETs is a better way of dealing with online privacy threats. Sometimes this is coupled with the claim that failure to adopt these tools more widely just goes to show that, whatever they might tell pollsters about an abstract desire for privacy, in practice most people don’t actually care enough about it to undergo even mild inconvenience.

That sort of argument seems to me to be very strongly in tension with the claim that some kind of streamlined or legally enforceable “Do Not Track” option will spell doom for free online content as users begin to opt-out en masse. (Presumably, of course, The New York Times can just have a landing page that says “subscribe or enable tracking to view the full article.”) If you think an effective opt-out mechanism, included by default in the major browsers, would prompt such massive defection that behavioral advertising would be significantly undermined as a revenue model, logically you have to believe that there are very large numbers of people who would opt out if it were reasonably simple to do so, but aren’t quite geeky enough to go hunting down browser plug-ins and navigating cookie settings. And this, as I say, makes me a bit uneasy. Because the hidden premise here, it seems, must be that behavioral advertising is so important to supplying this public good of free content that we had better be really glad that the average, casual Web user doesn’t understand how pervasive tracking is or how to enable more private browsing, because if they could do this easily, so many people would make that choice that it would kill the revenue model.  So while, of course, Adam never says anything like “invisible tradeoffs are better than visible ones,” I don’t understand how the argument is supposed to go through without the tacit assumption that if individuals have a sufficiently frictionless mechanism for making the tradeoff themselves, too many people will get it “wrong,” making the relative “invisibility” of tracking (and the complexity of blocking it in all its forms) a kind of lucky feature.

There are, of course, plenty of other reasons for favoring self-help technological solutions to regulatory ones. But as between these two types of arguments, I think you probably do have to pick one or the other.

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“The do-not-track system could put an end to the technological ‘arms race’ between tracking companies and people who seek not to be monitored.” – David Vladeck, FTC

David Vladeck is right. The Do Not Track system would put an end to the technological “arms race” – but that’s not a good thing. Instead, its the nuclear option that will halt ongoing industry innovation and consumer welfare.

This has been unofficial privacy week in Washington, DC. Wednesday saw the release of the FTC’s privacy report. Yesterday was the House Commerce Committee hearing; phrased in the form of a question, the tile of the hearing was a bit presumptuous: “Do-Not-Track Legislation: Is Now the Right Time?” And today, NetChoice responds with why the answer to that question should be No.

Do Not Track is a Blunt Response, Not an Informed Choice

The FTC’s report calls for a “uniform and comprehensive” way for consumers to decide whether they want their activities tracked. The Commission points to a Do Not Track system consisting of browser settings that would be respected by web tracking services. A user could select one setting in Firefox, for example, to opt out of all tracking online. The FTC wrongly calls this “universal choice.”

Really, it’s a universal response. It’s a single response to an overly-simplified set of choices we encounter on the web. This single response means that tracking for the purpose of tailored advertising is either “on” or “off.” There is no middle setting. But it is the “middle” where we want consumers to be. The middle setting would represent an educated setting where consumers understand the tradeoffs of interest-based advertising – in return for tracking your preferences and using them to target ads to you, you get free content/services. But an on/off switch is too blunt and not, err, targeted enough. There is no incentive for consumers to learn about the positives, they’ll only fear the worst-case scenarios and will opt-out. In return they’ll also opt-out of the benefits.  [more on the “middle” below]. Continue reading →

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