NebuAd is dead. The company‘s plan to track users through their ISPs for the purpose of targeting advertising met with public and congressional concern that ultimately led to its demise.
I believe that ISPs should stick to serving bits and not get into the business of serving or helping to serve ads, so I’m glad to see NebuAd’s model fail. I’ve been made aware by a similar company – Phorm – of the privacy sensitivity they design into their system, but the answer for me is still “No, thanks.”
In terms of policy, this story is mixed. Fans of government involvement probably believe that concerns expressed by public authorities caused NebuAd’s partners to pull out. ISPs also responded to public concerns expressed directly and in the media, of course, and I believe that consumers’ passive reliance on government authorities for protection is in error.
Statue at FTC Headquarters: “Man Controlling Trade” (We’re rooting for the horse!)
Adam Thierer and I have just released a new PFF paper entitled “Targeted Online Advertising: What’s the Harm & Where Are We Heading?” (PDF) about the FTC’s new “Self-Regulatory Principles for Online Behavioral Advertising.” Adam lampooned some of the attitudes at play in this debate in a great rant yesterday.
But we give the FTC credit for resisting calls to abandon self-regulation, and for its thoughtful consideration of the danger in stifling advertising-the economic engine that has supported a flowering of creative expression and innovation online content and services. That said, we continue to have our doubts about the FTC’s approach, however-well intentioned:
- Where is this approach heading? Will a good faith effort to suggest best practices eventually morph into outright government regulation of the online advertising marketplace?
- What, concretely, is the harm we’re trying to address? We have asked this question several times before and have yet to see a compelling answer.
- What will creeping “co-regulation” mean for the future of “free” Internet services? Is the mother’s milk of the Internet-advertising-about to be choked off by onerous privacy mandates?
We stand at an important crossroads in the debate over the online marketplace and the future of a “free and open” Internet. Many of those who celebrate that goal focus on concepts like “net neutrality” at the distribution layer, but what really keeps the Internet so “free and open” is the economic engine of online advertising at the applications and content layers. If misguided government regulation chokes off the Internet’s growth or evolution, we would be killing the goose that laid the golden eggs.
The dangers of regulation to the health of the Internet are real, but the ease with which government could disrupt the economic motor of the Internet (advertising) is not widely understood-and therein lies the true danger in this debate. The advocates of regulation pay lip service to the importance of advertising in funding online content and services but don’t seem to understand that this quid pro quo is a fragile one: Tipping the balance, even slightly, could have major consequences for continued online creativity and innovation.
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The Progress & Freedom Foundation has just launched the new Center for Internet Freedom. CIF offers an alternative to the proliferation of advocacy groups calling for government intervention online by offering timely analyses and critiques of proposals that diminish the vital role of free markets, free speech and property rights. We aim to drive the Internet policy debate in new directions by emphasizing a layered approach of technological innovation, user education, user self-help, industry self-regulation, and the enforcement of existing laws consistent with the First Amendment. Such an approach is a less restrictive—and generally more effective—alternative to increased regulation.
Here are some of the issues I’ll be working on as CIF’s Director in conjunction with my esteemed colleagues Adam Thierer, Adam Marcus, and adjunct fellows:
- Defending online advertising as the lifeblood of online content & services, especially in the “Long Tail”;
- Emphasizing market solutions to problems of privacy protection, especially regarding the use of cookies and packet inspection data;
- Protecting online speech and expression both in the U.S. and abroad;
- Defending Section 230 immunity for Internet intermediaries;
- Opposing online taxation and legal barriers to e-commerce and digital payments, especially at the state and local levels; and
- Ensuring that Internet governance remains transparent and accountable without hampering the evolution of the Internet.
By Berin Szoka & Adam Thierer
Progress Snapshot 4.19 (PDF)
Since the fall of 2008, a debate has raged in Washington over “targeted online advertising,” an ominous-sounding shorthand for the customization of Internet ads to match the interests of users. Not only are these ads more relevant and therefore less annoying to Internet users than untargeted ads, they are more cost-effective to advertisers and more profitable to websites that sell ad space. While such “smarter” online advertising scares some—prompting comparisons to a corporate “Big Brother” spying on Internet users—it is also expected to fuel the rapid growth of Internet advertising revenues from $21.7 billion in 2007 to $50.3 billion in 2011-an annual growth rate of more than 24%. Since this growing revenue stream ultimately funds the free content and services that Internet users increasingly take for granted, policymakers should think very carefully about what’s really best for consumers before rushing to regulate an industry that has thrived for over a decade under a layered approach that combines technological “self-help” by privacy-wary consumers, consumer education, industry self-regulation, existing state privacy tort laws, and Federal Trade Commission (FTC) enforcement of corporate privacy policies.
In an upcoming PFF
Special Report, we will address the many technical, economic, and legal aspects of this complicated policy issue-especially the possibility that regulation may unintentionally thwart market responses to the growing phenomenon of users blocking online ads.
We will also issue a three-part challenge to those who call for regulation of online advertising practices:
- Identify the harm or market failure that requires government intervention.
- Prove that there is no less restrictive alternative to regulation.
- Explain how the benefits of regulation outweigh its costs.
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Over on Techdirt, Mike Masnick discusses an interesting new survey that highlights the sharp disconnect between how much we claim privacy matters to us and how far we’re willing to go to safeguard it. America Online polled 1,000 users in the United Kingdom, and the results further reinforce what other recent studies have suggested:
The study found 84% of users say they carefully guard their info online — but when tested, 89% of people actually did give away info in the same exact survey.
The AOL survey brings to mind security guru Bruce Schneier’s insightful quip on privacy from back in 2001:
If McDonald’s in the United States would give away a free hamburger for a DNA sample they would be handing out free lunches around the clock. So people care about their privacy, but they don’t care to pay for it.
When presented with the option of sacrificing a bit of privacy for something of value, like a chocolate bar or a free gift certificate, many users are surprisingly willing to dole out data to third parties for commercial use. And the value of personal details to marketers is massive. As social networking sites and ad-serving networks amass ever greater knowledge of our hobbies, political views, and even our favorite music, these sites are getting better at mining data to tailor ads with pinpoint precision, commanding high click rates while sustaining server farms and original content publishers.
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.