June 2011 Archives

Supreme Court Decisions Support Digital Ad Industry

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iStock_000006718276XSmall.jpgIt’s not often you can say that the judicial system electrified the media and marketing world, but yesterday the United States Supreme Court closed their latest session with a bang! Wrapping up their 2010-11 session, the Court issued two landmark decisions that bolster First Amendment/free speech protections for marketing practices. In a decision issued last Thursday, the Court struck down Vermont’s Prescription Confidentiality Act as an anti-marketing law masquerading as a privacy law. This decision casts a doubtful eye on state restrictions of marketing practices, supporting extremely close scrutiny of laws that disfavor certain speakers (such as marketers) or types of speech (such as marketing) through restrictions on data collection or transfer. Sorrell clarifies that legislative proposals seeking to regulate commercial data practices, including marketing and advertising activities, face high constitutional hurdles.

Just yesterday, the Court struck down a California state law that prohibited the sale or rental of violent video games to minors and established tough new labeling requirements. Again finding strong First Amendment protections for this type of commercial speech, the Court noted that there was no need to expand the successful self-regulation guidelines that are already used in the video game industry—which are 80% effective in making sure that minors cannot purchase seriously violent games on their own. Furthermore, the Court called the Act over-inclusive in its goal to aid parental authority, concluding that many parents do not actually care whether their children purchase violent video games.

Taken together, these decisions demonstrate a continuing move by the Court to protect the First Amendment’s freedoms of speech and expression over government restrictions of marketing and advertising. The Court also demonstrated strong support for industry self regulation versus government regulation, reaffirming past decisions which held in the online context that parental filters and other “user empowerment” tools are more effective than regulation at protecting minors, making government limits on content unconstitutional. While it might be dangerous to overreach in trying to interpret the exact legal precedents these decisions hold for digital advertising, the trends are clear and undeniable.

More detailed legal analyses of each case follows:

Sorrell v. IMS Health Inc.

Vermont’s Prescription Confidentiality Law stated that absent a prescriber’s consent, prescriber-identifying information could not be sold by pharmacies to entities for marketing purposes or be used for marketing by pharmaceutical manufacturers. Data-miners—that collect the prescription information—and an association of brand-name drug manufacturers challenged the law as a violation of the First Amendment and sought declaratory and injunctive relief. The District Court denied relied. The Second Circuit reversed the decision, holding that the Law unconstitutionally burdens the speech of pharmaceutical marketers and data-miners without adequate justification.

On June 23, 2011, in a 6-3 decision written by Justice Anthony Kennedy, the Court affirmed the Second Circuit’s decision. The Court applied a strict scrutiny test to the Law because it was a content and speaker-based restriction on the sale, disclosure, and use of prescriber-identifying information which clearly disfavored marketing (content based speech) and particular speakers. The Court explained that the creation and dissemination of information is speech, and not conduct, for First Amendment purposes. Thus, under a strict scrutiny test Vermont needed to show (1) a substantial government interest and (2) that the Law was narrowly tailored to that interest. Vermont’s interests were to protect medical privacy and confidentiality and to help reach the states policy objectives of improving public health and reducing health care costs. The Court explained that the Law was not narrowly tailored to keep the relevant information confidential because the information could be sold to anyone who is not using the information for marketing. Thus, the Law fails to create privacy and confidentiality regarding the information. Next, the Court explained that the Law did not properly advance the states interests in lowering healthcare costs. The Court noted that the Law attempted to do so by restraining specific speech by specific speakers and never claimed that the speech was false or misleading. The State was purely restricting speech that they felt was persuasive, and the Court made clear that content-based restrictions cannot be made because the State feels that the doctors may make bad decisions based on truthful information. The Court explained that the State had attempted to advance their goal in lowering healthcare costs based purely on opinion. The Court, thus found that Vermont had not narrowly tailored the Law to the State’s interest, and thus held that the Law was invalid under the First Amendment.

Brown v. Entertainment Merchants Association

In 2005 the California state legislature passed Assembly Bill 1179, which prohibited the sale or rental of “violent video games” to minors and required that the packaging of such games be labeled “18.” Violation of the Act would be punishable by a civil fine of up to $1000. The Entertainment Merchants Association, which represents the video game and software industries, filed a pre-enforcement challenge to the Act. The Federal District Court held that the California law violated the First Amendment and permanently enjoined its enforcement. The Ninth Circuit affirmed.

On June 27, 2011, the United States Supreme Court’s 7-2 decision, affirmed the Ninth Circuit’s ruling, and held that the California Act was unconstitutional under the First Amendment. The Court explained that video games qualify for First Amendment protection. After explaining that “violent video games” did not fall into the obscenity exception to the First Amendment, it applied a strict scrutiny test to the Act because it was a content-based regulation. The Supreme Court has consistently held that content based restrictions are invalid unless they pass strict scrutiny. Under the test, the Act would be held invalid unless California could show that the law was (1) justified by a compelling state interest and (2) that the law was narrowly tailored to serve that interest. The Court concluded that the law was not narrowly drawn to the State’s interest in addressing a serious social problem (violence) and helping concerned parents control their children. The Court explained that the Act was underinclusive—meaning it singled out video games as opposed to other forms of violent media targeted to children including books, cartoons, and movies, and that the State gave no explanation why only video games were targeted. Furthermore, the Court called the Act over-inclusive in its goal to aid parental authority, concluding that many parents do not actually care whether their children purchase violent video games. The Court also noted that there was no need to expand the successful self regulation guidelines that are already used in the video game industry—which are 80% effective in making sure that minors cannot purchase seriously violent games on their own. Thus, the Court found the Act invalid because it was not narrowly tailored to meet California’s state interest.

Mike Zaneis is SVP & General Counsel of the IAB.

Bianca Loew, IAB Mexico

In the IAB’s inaugural “IAB Global” interview I chat with Bianca Loew, the leader of IAB Mexico. Bianca, a native of Germany who’s found a home in the Distrito Federal, was IAB Mexico’s first employee. She helped to grow it from a scrappy startup with eight members in 2005 to the robust, 140-member collective that it is today. Bianca shares insights she’s gained from developing standards and strategies in an emerging market, as well as her hopes and goals for our global dialogue.

Mary Block: So how did you end up in Mexico?

Bianca Loew: Oh well, that’s a long story. I came for the first time when I was 19 years old. I was working as an au pair for a couple of months in Mexico City. Then I came back for an exchange program from my university in Germany, and started working in the dot com world in 1999. I started working for some startups. After I finished university in Germany I was offered a six-month program in Mexico, and I never left.

MB: How long has it been since the six-month project?

BL: Almost nine years. It’s been good! Mexico has treated me very well.

MB: When you went to Mexico initially, was it to work with IAB?

BL: No, I didn’t know the IAB existed at that point. I started working with the IAB in 2005, when the IAB in Mexico was founded. It was an initiative of Yahoo and Prodigy MSN, the local MSN here. So they hired me to set up the IAB in Mexico, and I actually never planned to stayed that long, but now it’s been more than six years with this adventure! It’s been great.

MB: So you’ve always been the head of the IAB Mexico office.

BL: Yep! I’ve been here since day one. I was IAB Mexico’s first employee. At that point, Greg Stuart was managing the IAB in the US, and he told me that IAB Mexico was the first IAB to have an official license from the IAB in the US, to carry the name and the logo. So there were some IABs before us, but IAB Mexico, I’m told, was the first one with a signed licensing agreement. So we’re very proud of that!

MB: Where were you before you were asked to be the head of the IAB?

BL: Right before then I was working for Solutions Abroad, which is an Internet company that caters to the foreign market here in Mexico. And before that I was involved in some startups: I was a marketing manager at Submarino, which is like the Amazon of Latin America, and I started—you know Babycenter.com? I started Bbmundo.com, which is the same thing as Babycenter, but for Mexico. I started that with Martha Debayle, who’s very famous here in Mexico, and I was there for a year and a half. But I think the most important step in my career was the IAB itself. It’s been six years. I’m thirty-five years old, so still pretty young, but before that I was trying things out here and there. There was no place that I stayed longer than a year and a half. But I’ve been here for six and a half years, so that speaks for itself. It’s been a great leap in my career, and the IAB Mexico, for me, is like a child that I brought to life and helped to grow up here in Mexico. So there’s a very strong emotional attachment to it for me.

MB: What would you say that the primary initiatives of the IAB in Mexico are?

BL: Currently, we focus on three pillars. One is education: everything to do with educating marketers, agencies, and people within the industry itself. The second pillar is research: like the IAB in the US and other IABs, we generate several studies throughout the year. The third is best practices and guidelines, where all the standards fall in.

I think our most important project is education. Our IAB Conecta event is our annual congress, which we’ve been doing for six years now. It’s growing every year: nowadays it’s an event that 1,000 people attend. We think it’s definitely the most important event in the region. I better not say that out loud, though—Apple might think that theirs is the most important or something. It’s definitely a very important event, though, and for Mexico the most significant one. I think one of the things that makes the IAB Conecta event different is that half of the audience are marketers, primarily Mexican companies. We invite 500 marketers, so that practically guarantees that we fulfill our mission, which is to educate and to bring more advertising dollars to the table.

MB: Who are some marketers that attend?

BL: Well of course we try to go as high as possible, so it’s the main brands here in Mexico: Unilever, Proctor & Gamble, Coca-Cola, Dell. And of course some local companies, but mainly it’s big brands. Brand directors, marketing directors, and CMOs attend, so it’s very exciting—half of the audience is marketing people. Our speakers are always international—we have speakers from the IAB board in the U.S. and some speakers from Europe. So that’s a way that we differentiate ourselves from other Mexican events. Often with regional events, it’s the same people speaking from local companies. So we like to bring in talent from abroad. Randall Rothenberg is going to be here this summer, which we’re really looking forward to. It’s the most important event of the year for us, and I’m very happy that we’ve received such a great response to it from the U.S. and from other countries.

Another education program that we have is our diplomado in marketing interactivo, which is a four-month certificate program that we design and that we teach. We have an alliance with the Tec de Monterrey, which is one of the most prestigious universities in Mexico. The course is in its ninth generation, so we’ve now graduated about 330 people.

MB: That’s fantastic. What sorts of things are in the course curriculum?

BL: There’s a legal part, there’s creativity, market intelligence, online media planning, online strategy integration, search marketing, mobile marketing…so it’s a crash course in the most important aspects of online advertising. Every module has a different professor, usually an industry expert from one of our member companies.

MB: And there are a lot of people within the IAB Mexico that want to teach?

BL: Yeah! They love doing it. We have a very high level of interest in teaching the course. And we’ve negotiated a revenue share with the university, so it’s actually a revenue stream for us.

MB: That’s a really great idea.

BL: Another one of our education initiatives is “Digital Days,” which we started last year. They’re one-day, crash course seminars that we host in our own space—we have a 30-seat auditorium. We have at least two each month, and they’ve been very popular lately.

MB: Who generally attends? Is there a difference between the diplomado course and the Digital Days in terms of their students?

BL: Well, the students in the diplomado course are really serious about it.

MB: Right. And are they undergraduate students, or people already established in the industry?

BL: It’s mostly people with established careers in the industry. It’s only open, I believe, to people that have a communications or marketing or business degree already. But everyone is welcome to attend the Digital Days. It’s mainly people from member companies, clients, advertisers, agency people. It’s a very mixed crowd.

MB: In the six years that you’ve been at the IAB, have you noticed any major shifts in within the Mexican marketplace?

BL: Oh, it’s a big difference. In the beginning, when we started the IAB and we started talking to advertisers and marketers, they weren’t even listening to us. They were like, “OK, sure” and showing us the door. They saw (digital advertising) as a sort of crazy fashion thing going on. Nowadays, it doesn’t matter which company you talk to—they all know digital is crucial for their business. Everyone has digital on their agenda. Nowadays the CMO of Coca-Cola calls us up. He didn’t do that five years ago.

There’s a lot more interest; there are more players now in the market now, as there are in the U.S. and everywhere. It’s more advanced now, there’s more media. There definitely are more users. For example, this year there are 5 million more Internet users in Mexico than there were a year ago. So now we’re talking about a market of 40 million people. When we started it was about 20.

Mobile is really starting to take off, and mobile was something that people weren’t even mentioning 2, 3 years ago. Now “mobile” is the big buzz word. Even though the numbers are still very small, everybody knows that, especially in the emerging markets, mobile will be crucial. Today, not everybody here in Mexico has a computer or access to a computer, but everybody has a mobile phone. There has been a big, big movement over the past 6 years, and I feel fortunate to have been a part of it.

MB: Have you seen any real challenges to the growth of the interactive advertising industry in Mexico?

BL: I don’t know if this is specific to Mexico, but probably specific to the emerging markets: you don’t have 80% of the population online. It’s about 35% right now. The broadband connections are not that advanced, not as powerful as in Europe or the U.S., although it’s not modem dial-up anymore. The companies are only now starting to offer big data plans. So that’s definitely been an obstacle. And of course there’s resistance to change, like in other markets. People are comfortable with what they’ve been doing for 20 years and they don’t want to change it.

One of the biggest problems for Mexico, probably the biggest barrier to online advertising, has been the power of the TV broadcast companies. Televisa and TV Azteca practically rule the market. I mean, they have their digital sites as well, but they’re very very small in comparison to TV, and they attract more than 50, almost 60% of the advertising dollars. They’re very powerful. They have a lot of power with the advertisers and with the agencies. For other media, it’s very difficult to compete. But I have to say, our IAB president right now, Juan Saldivar, is from Televisa Interactive, so he’s running their digital site. So there’s a good side to this, in that he’s leading the Interactive Advertising Bureau with lots of success.

MB: So some integration and progress is being made.

BL: Oh yeah. Absolutely. Everybody has their digital strategy, including Televisa.

MB: Do you find that privacy is a big issue in Mexico?

BL: Not as much as in the U.S, at least not right now. It’s not a main subject on our agenda. We are more focused on research and education and getting standards out there. Which I think you’ll find when you talk to other folks in Latin America. We don’t have anybody in congress; we don’t do lobbying. We know that at some point we have to tap into the whole privacy issue, but it’s not the priority of the board right now. We don’t have these threats that you guys have in the U.S. right now, but it’s important to mention that we are closely following all the happenings in the U.S. and in Europe, so we know when we have to react and take action.

MB: How many members does IAB Mexico have?

BL: Right now we have 142; that’s the latest number I’ve heard. And we started in 2005 with eight members. In February 2010 we reached the hundred-member mark, and now there are 140. Every year is the new best year for us in terms of members and revenue. So there has been some good growth.

MB: What are you hearing consistently from your members in terms of their needs? Are there issues that you’re able to address, or that you’re working on being able to address?

BL: We’ve picked up on the Rising Stars program that you guys in the U.S. are doing. We’re really pushing it to the market because there’s definitely a need that has been identified. The program has had a lot of echo here in Mexico. We have lots of request from our members for new studies. Additionally, I would love to do a cross-media study soon, maybe one like the TV + Online study that they’ve been doing successfully in the U.K.

IAB-Mexico-Team-Pic.jpgThe IAB Mexico team

MB: Does IAB Mexico host an award event, or any other events outside the professional development events you’ve mentioned?

BL: Yeah! We have the Conecta Awards—Premios IAB Conecta. They’re similar to the IAB Mixx Awards in the U.S.—we’re working with the same criteria that you guys use in the U.S. We’ve been running the awards now for three years, and in this third year we had 197 campaigns registered. That’s over 100% more than last year, when we had about 90 campaigns. So the awards are growing each year, and we’re also trying to improve the methodology of how the judges qualify the campaigns. We just had the awards in April.

MB: Who won the Best in Show award?

BL: Well, the Best in Show was not given. We’re very, very demanding. We’re not choosing a Best in Show just to say we have a Best in Show, but because they really deserve it. But the Agency of the Year was Grupo W, which is a Mexican agency. So they won the Agency of the Year Award for the second time. Our Marketer of the Year was Unilever for the second time. Grupo W and Ogilvy were the two agencies that really stuck out.

MB: What are you most hoping to learn from this new global exchange?

BL: Specifically, I’m looking forward to reading studies that have been successful that other locations have done. And measurements and standards—I think we have a long way to go in terms of standards, and of course I know what the U.S. and U.K. are doing, but it would be great to know what others are doing. I think IAB Mexico can be a great example of education initiatives for others.

I think it’s going to be great for all the IABs to learn and to get a better sense of what the others are doing. Of course there are some IABs that talk more to specific others, especially if they’re located near each other, but I think it’s great that the U.S. is taking the initiative to get everybody together, to send out the questionnaire. I think there are a lot of IABs that have just started that can take advantage of the experience of others. And of course I’m curious to see what other IABs are doing, and to be inspired by them.

*Key links from IAB Mexico:

  • Media Consumption Study 2010 an annual study to explore the internet habits and behavior of Mexicans online (Spanish)

  • Ad Effectiveness Study 2010 a study undertaken with Dynamic Logic to measure the effectiveness of an online campaign by Procter and Gamble (Spanish)

  • Advertisers Survey an annual survey of advertisers in Mexico about their plans for the forthcoming year (Spanish)

Bianca Loew, General Manager of IAB Mexico, can be reached on Twitter @Bianca_IABmx and @IABMexico.

Originally from Miami, Mary Block is a writer currently living in New York City, and a member of the IAB Global group on LinkedIn. She can be reached on twitter @mary_block.