Online Behavioral Advertising - Are You Implementing a Self-Regulatory Program?

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There has been a lot of buzz as of late around online behavioral advertising. Mounting concerns around consumer privacy and threat of legislation has forced advertising industry bodies to implement self-regulatory programs to ensure they are compliant.

I'm in Canada, and the Interactive Advertising Bureau (IAB) in Canada has recently announced a framework for a "Self-Regulatory Program for Online Behavioral Advertising" (OBA).

While this has been in play in the U.S. since this past fall (October 2010), it is exciting to hear that Canada is adopting the same principles with support of various industry associations.

What Is OBA?

Online behavioral advertising is defined by the Federal Trade Commission (FTC) as "the practice of tracking consumers' activities online to target advertising."

The ability to serve ads to a user based on their observed online behaviors and interests is an approach that has proven successful for advertisers trying to reach the most appropriate audience for their products or services. In fact, ads targeted in this manner are usually three to five times more effective in terms of conversion and brand awareness.

Why Has Guidance Been Issued?

There has been threat of legislation to severely restrict the use of OBA, such that it could greatly reduce its impact for advertisers. To avoid the need for formal legislation, industry associations have decided to take it upon themselves to "regulate" the industry. There has been a call to standardize an approach to "self-regulation" so that concerns over consumer privacy would be mitigated.

What Does It Mean?

All advertisers are required to operate within the framework laid out by the IAB (in both the U.S. and Canada). The key elements are as follows:

• Transparency. Providing notice to consumers when they are being served OBA.
• Education. Facilitating one-click access to all relevant information about OBA.
• Choice. Enabling consumers to opt out of this type of behaviorally-targeted ads.
• Accountability. A program that ensures consumers' preferences are maintained and respected.

The IAB-endorsed OBA Self-Regulatory program requires all advertisers to include a small "Ad Choices" icon on their consumer-facing banner advertising. When the icon is clicked, the user's browser opens a new window or tab and displays a page where the user can learn more about behavioral advertising, which companies are tracking their activities, access the advertiser's privacy policy, and opt out of OBA tracking.

Do I Need to Implement the Program?

While there is no legislation explicitly regulating the use of OBA, there is a strong push by leading industry organizations to adopt these principles. Many publishers and advertising agencies have already implemented the program and are encouraging individual advertisers to move ahead. It is recommended that companies participate to ensure their advertising is compliant with consumer privacy guidelines.

Will It Negatively Impact My Advertising Program?

Many advertisers are concerned if they implement this program, that they will lose the ability to target their desired audience. In reality, the percentage of users who opt out of this targeting is so small it's almost negligible. According to a study by Millward Brown's Dynamic Logic, "Consumer Interactions with In-Ad Notice," opt-out rates only average about 0.0001 percent (which translates into about one person for every 1 million impressions)! And even if users do opt out, it isn't necessarily bad for your brand. Many studies, including the just-reference study by Millward Brown, found that increasing transparency actually improves consumers' perceptions of a brand and their likelihood to purchase.