Randall Rothenberg: June 2008 Archives

If you are a Web publisher earning less than $1 million annually in advertising revenue and with five or fewer employees, you can help save the ad-supported Internet. I urge you to join the Interactive Advertising Bureau and become part of the small business army we are mobilizing to stop politicians from unfairly and inappropriately regulating digital advertising.

The threat is very real. As I have outlined in previous postings, forces arrayed in Washington and multiple state capitals are specifically targeting the business infrastructure that enables small Web sites to support themselves through advertising sales. Although these advocacy groups have provided no evidence of public harm, their efforts have resulted in a flurry of regulatory proposals which, if enacted, would severely hinder the ability of small publishers to support themselves with advertising sales, and impair the ability of small businesses to use interactive advertising to market themselves.

I believe these proposals have received little attention from marketers, media and publishers because they have been hidden on legislative calendars in Albany, Hartford, and Springfield, or been negotiated behind closed doors in Washington, away from our ecosystem's business leaders. Moreover, because the proposals state that they seek to control "behavioral marketing" or "third party networks" or "online preference marketing," publishers that do not engage in such practices or with such practitioners believe they are safe.

But in fact, these proposals are so broad, they will put virtually all interactive advertising practices -- and even many mainstream marketing practices -- under a strict regulatory regime. Business leaders need to start paying attention now, or the underpinnings of the "free" -- which is to say ad-supported -- Internet will come undone.


Consider a bill that has been before the New York State Assembly, which aims to curtail “online preference marketing.” It defines “online preference marketing” as “a process used by entities whereby data is typically collected over time and across web pages to determine or predict consumer characteristics or preference for use in ad delivery, including the use of non-personally identifiable information.” But employing non-identifiable data to predict consumer preferences for use in ad delivery is, in fact, the very definition of advertising research. Were the New York bill to pass, a mainstay of business development for 120 years would, for the first time, fall under a strict regulatory regime – forcing small Web publishers and their advertisers to incur legal and lobbying expenses they cannot afford, and just for New York State.

Or look carefully at Connecticut General Assembly Bill 5765. It offers the same, sweeping definition of “online preference marketing,” and goes on to say that any publisher offering it through a “third-party advertising network” must additionally give consumers the opportunity to “opt out” from receiving it. This means consumers, for the first time, would be able to force advertisers to stop providing them ads – but only if those ads are relevant to their interests! Presumably, mass-distributed “spam” advertising would still be protected.

The Connecticut bill also would allow consumers to pull non-identifying data they generate out of the aggregated databases that are commonly used in market research to improve products, services, and marketing. To put this in perspective, this is the equivalent of allowing you, me, or anyone to demand that a grocer not use our anonymous checkout-counter scanner data to determine when to restock a product.

These state bills have been tabled -- for now. But consider the Federal Trade Commission’s recommendations for self-regulatory principles for “online behavioral advertising.” The FTC has been a good partner with the interactive media and marketing industries, and has encouraged us, for the most part beneficially, to develop an effective self-regulatory mechanism to guard consumers’ legitimate interests in identity protection and data security. Yet even the FTC has succumbed to the fear-mongering of anti-business advocacy groups, and HAS offered breathtakingly broad definitions that could severely hamper the activities of small publishers and marketers.

The FTC defines “behavioral advertising” as “the tracking of a consumer’s activities online,” and would give consumers the right “to choose whether or not to have their information collected for such a purpose,” apparently even if it is anonymous and non-identifying. Yet one such “tracking activity” is the measurement of Web site audience traffic – the central measure by which advertising prices are established. Another such “tracking activity” is the measurement of advertising delivery – the core determinant of whether the publisher gets paid by the marketer for running its ads! Thus, in its recommendations for the self-regulation of what it calls “behavioral advertising,” the commission has made suggestions that would break longstanding processes essential for the management of media companies in the U.S.

The most unfortunate aspect of these proposals is that they are utterly unnecessary. The IAB and its members vigorously support the principle of consumer control over their media consumption. Indeed, consumer control is one of the fundamental reasons interactive media have grown so quickly in popularity. And consumers have all the tools they need to control all forms of data collection in online media and advertising, built into their browsers and into security packages, many of them available free online.