FTC Airs Mobile Marketing's Dirty Laundry

  |  May 9, 2008   |  Comments

A Federal Trade Commission town hall on mobile marketing examines privacy concerns over about location-based mobile advertising, improper disclosure of fees, and more.

Security and privacy were the overriding issues at "Beyond Voice: Mapping the Mobile Marketplace," a two-day town hall meeting held by the Federal Trade Commission in Washington, D.C., this week. "The emerging mobile marketplace raises a host of opportunities as well as a host of consumer protection challenges," said FTC Commissioner Jon Leibowitz. Those challenges include improper disclosure of fees as well as issues involving privacy and spam.

The event, attended by as many as 250 people on the first day alone, included panelists representing the mobile industry, academia, consumer interest and privacy groups, and the government. On day one, topics covered included mobile commerce, messaging, games and social interaction on mobile platforms, location-based services, and mobile advertising and marketing. The second day tackled more sensitive topics such as security and privacy.

Cautionary words directed towards advertising involved fees and spam. "Some folks don't mind a few ads, especially if they get free services, or a lower monthly bill in return, but recent surveys have found that most consumers are annoyed, and this shouldn't surprise anyone, when those ads appear on mobile devices," Leibowitz said. Ads, he added, are particularly annoying when they interfere with the use of those devices.

Companies seen as breaking ground in the mobile space, like Procter & Gamble, still view themselves as being in the test-and-learn phase, said Jean Berberich, digital marketing innovation manager of mobile at P&G. The mobile channel is rarely used as a standalone advertising vehicle, but complements traditional channels.

Proctor & Gamble replicated a color-match utility for cosmetics from the Web in a mobile site. Women were able to access the site during down time, their commute home on the train, while at the store, or while waiting in line. Because consumers opted in to the mobile site, they were more receptive to advertising than those receiving spam-like messages.

"Consumers who get mobile and have unlimited plans, they engage like crazy. A lot more than online sites sometimes. It's all about choice and relevant content. Consumers choose to engage when they find the content is relevant to them," said Berberich.

Where issues of scams come into play are often with disclosure. "More and more often consumers are invited to text and message to a short code to vote for their favorite TV show contest at that particular time, enter a contest, buy a ringtone, receive a joke, or just get more information," said Leibowitz. "Many of these promotions involve premium charges beyond standard text message fees, or subscription programs with recurring charges.

Leibowitz said many of these programs are clearly disclosing the nature of the deals, however the FTC is receiving a growing number of complaints about inadequate disclosures and unauthorized charges. "Simply put, consumers shouldn't be shortchanged by short codes," he said.

Azoogle was one company that paid the price for improper disclosure. It agreed to pay the Florida Attorney General $1 million for its online offers for mobile ringtones. Florida Assistant Attorney General William Haselden spoke on a panel on mobile messaging, though he did not specify the Azoogle case.

An emerging advertising platform that seems most promising to marketers, but is drawing concern among privacy advocates, is location-based services. The technology started as a way for parents to keep track of their children, but is gradually being adopted by marketers. Advertisers are able to provide a more relevant message by honing in on a subscriber's location. For instance, a movie theater can serve an ad with the nearest theater and show times based on the subscriber's proximity. Possibilities for advertising begin with content applications of users looking for information, content, local weather, news, and search queries.

Some advocacy groups are leery about location-based services and how they affect a person's privacy.

"Location information can defy user expectation," said Alissa Cooper, chief computer scientist at the Center for Democracy and Technology, who raised privacy concerns. "People don't expect an ad for a latte to pop up as they walk by a coffee shop," she said, referring to a study released by the Samuelson Clinic at University of California at Berkeley. She called LBS ubiquitious, and suggested information is being collected from a user's handset device all the time, and that a user carries it with them at all times.

Advertising using location-based identifiers is addressed under Mobile Marketing Association guidelines, which state users should have opportunity to opt out at any time.

"We can look at advertising on a browser on the phone that is tied to the location as fairly harmless. [A subscriber] can opt out," said Fran Maier, executive director and president of TRUSTe. In the case where subscribers are joining social communities with location-based services, the permission levels are deeper, she said. There are two opt-ins: one for the service and one for each friend being allowed to view your location.

Applications using global positioning or location-based services include Google Maps, which uses cell towers to triangulate a mobile user's position. The Apple iPhone and iPod come equipped with Wi-Fi, and have the ability to use Wi-Fi towers to assist in global positioning.

During the town hall, some speakers pointed out how regulation of the whole mobile ecosystem, location-based services included, has evolved in a fragmented manner. Some said Telecommunications Act of 1996, which includes provisions to guard customer information, is one step towards protection. Others said industry groups such as the Mobile Marketing Association and the Cellular Telecommunications & Internet Association (CTIA), have established self-regulated best practices.

Legislation to address the privacy concerns resulting from mobile services may not be the answer at this time, some said. "We do not want to see more regulation on top of the patchwork," said Maier. "[There is] a generalized privacy policy we keep seeing with new applications. There are new distinct challenges that may not lend themselves to privacy law."

Leibowitz, warned though, the FTC will be keeping a close eye on the market's development. "In an era of broadband and information services, the FTC will be watching and is watching closely. We strongly believe, as many of you know, in self-regulation, but we are also going to police the wireless space."

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Enid Burns

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