Online behavioural advertising needs to be regulated, say experts

A storm is brewing in the online behavioural advertising world, where consumer clicks are tracked to help online advertisers target messages more effectively.

The argument boils down to whether the rapidly evolving industry that makes its money advertising to people surfing the web – and by figuring out exactly which ads those people want to see – should continue to be self-regulated with respect to consumer privacy rules.

Some in the US say state or federal legislators should step in to limit the amount of information that online advertising platforms such as MSN, Google and Yahoo can collect and use.

A number of factors are at play. One is that the online advertising world has developed dramatically since industry self-regulation was introduced, as has the technology that helps companies track consumer clicks. A consumer can be anyone online, not just shoppers.

Newer companies such as Phorm have developed tools that can track every single click a person makes online by collecting data from a user's internet service provider, which Phorm is able to do through contracts with British telecommunications companies – to much consumer uproar.

At the same time consumers have become more aware of privacy issues related to internet surfing – in every area from identity theft to disclosing shopping secrets on Facebook.

The question boils down to this: how much information – and what type of information – should companies be able to collect and utilise about people while they are online?

Industry experts believe behavioural advertising snips away individual privacy rights and should be regulated. Legislators in the US have introduced a bill that would, in effect, establish an internet advertising bill of rights for consumers.

The bill is likely to change from its original form once the lawmakers hear back from Microsoft, Google and Yahoo. The legislation has several main tenets geared towards online advertisers:

n To limit the use of "personally identifiable information about sensitive medical or financial data, sexual behaviour or orientation, or social security number" for online preference marketing

n To make "all reasonable efforts" to ensure information is collected from reliable sources and that the data is protected from "loss, misuse, alternation, destruction or improper access"

n To ensure that any entity collecting or using personally identifiable information posts a "clear and conspicuous notice" on its website telling consumers about the data collection

n To give consumers a clear option to opt out of personal data collection activities

Opponents of the legislation say the bill is lifted almost word-for-word from the existing self-regulation standards drawn up by the Network Advertising Initiative (NAI), which they say are not adequate.

The NAI's mission is to provide both information and a mechanism for consumers to monitor and control their online experience and to provide a platform for the development of standards and policies for online marketers, according to the group's website.

"The bill tracks extremely closely to the NAI initiative," said Alyssa Cooper, chief computer scientist at the Centre for Democracy and Technology in the US. "It looks to take self-regulation and put it into legislation. Is that appropriate? It depends on the status of the self-regulatory scheme."

Cooper said the NAI's regulations grew out of an incident in 1999 when DoubleClick – which has just been bought by Google – wanted to merge with Abacus, a company that tracked offline what DoubleClick tracks online – consumers' responses to ads.

"That was eight years go," said Cooper. "In those years a lot has changed – the business model, the technology, the players. We feel that those eight years of change have caused NAI's standards to not hold up. Legislation needs to be in place to protect consumers instead of relying on self-regulation."

The NAI's self-regulatory principles suggest that advertisers should not use personally identifiable information – such as medical or financial data or social security numbers – for online preference marketing. The NAI has come up with a proposal to upgrade the regulations.

The new rules would cover a number of areas including scope and enforcement, sensitive consumer characteristics, choice enabling technologies, consumer education and standards for use of personally identifiable information.

Mike Zaneis, vice-president for public policy at the Interactive Advertising Bureau (IAB), said legislation would be harmful to both online companies and consumers. The IAB is a US-based industry group that represents Google, Yahoo and a number of online media companies.

"We're not averse to legislation if we can identify real concerns and come up with real solutions," said Zaneis. "But there are people with ulterior motives who want to regulate advertising because they don't like advertising." He said the bill was a solution searching for a problem and self-regulation was the better option.

"There is no demonstrable consumer harm," he said. "Our customers are not telling us that relevant advertising is bad. It's the opposite – they're telling us it's better than getting random ads. There is a direct consumer benefit. What we're not hearing is consumer harm."

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