A "Strong Nudge" from FTC May Lead to "Draconian Measures"

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When behavioral ad-related privacy worries arise, online ad industry execs often point to the fact that they only store and apply non-personally identifiable data in ad targeting. However, as far as government regulators are concerned, that may not matter. The Federal Trade Commission signaled as much earlier this year in its revised principles for behavioral ad targeting, and reiterated its stance yesterday.

"For the principle purposes, it doesn't really matter whether it's non-personally identifiable or personally identifiable," said the FTC's Richard Quaresima, referring to the agency's recently-revised behavioral ad principles. Speaking during the Online Marketing Summit Conference in Washington, DC, Thursday, Quaresima, who works with the Bureau of Consumer Protections Division of Advertising, said if data can be tied to a specific consumer or a specific computer or device, it should be considered personally identifiable when it comes to behavioral advertising.

Quaresima also indicated that current industry guidelines for disclosure of data tracking and usage may not be sufficient in the eyes of the FTC. In particular, the main self-regulatory body for the behavioral advertising sector, The Network Advertising Initiative, requires only that its members -- mainly ad networks and behavioral technology firms -- notify users about its data collection and use in their privacy policies.

"It's a relatively consistent mechanism and a place where you can work with publishers," said Chuck Curran, executive director and general counsel at the NAI.

Yet, the FTC's guidelines suggest that firms provide prominent disclosure; indeed, Quaresima encouraged companies engaging in behavioral advertising to include notification someplace in addition to their privacy policies. For example, Google's behaviorally-targeted ads include a link to information about how each ad was targeted. Users can also click through to opt-out of such targeting, or adjust their preferences regarding which interests the company associates with them.

"I think you can view this as an extremely strong nudge," said Quaresima of the FTC's prodding for more prominent ad disclosure. He added the industry needs to devise creative ways to prominently disclose behavioral ad practices and protect consumer privacy. "Otherwise," he continued, "There could be a lot more draconian measures imposed."

Curran, appointed to his NAI leadership role in April, indicated the NAI is taking the FTC's "strong nudge" into consideration. "When the FTC and the government say that, we, of course listen intently because we're not tone deaf," said Curran during the panel discussion focused on online ad industry regulation, moderated by this reporter.

Curran acknowledged that, amid increasing congressional and regulatory interest in online ad targeting and privacy, "The stick is being waved at industry."

"It's a bat," quipped Google Senior Policy Counsel Pablo Chavez in reply to Curran.

Though the NAI is the behavioral sector's only self-regulatory body, several firms enabling behavioral targeting are not members. Perhaps most significant, one of the largest online ad networks, ValueClick, is not a member, despite the fact that it offers behavioral targeting. The group's membership has grown significantly in the past year to around 30 companies.

Speaking in general terms, Curran stressed the need for all industry players to get involved in self-regulation."The people who like to live close to the edge or over the edge have the capability to basically extinguish this business model," he said.

Quaresima disagreed somewhat with the notion that the industry has been held back from more effective self-regulation because a handful of bad actors have not agreed to abide by standards accepted by others. "There are always going to be outliers," he said. "There has been generally a systemic "keeping it in the shadows," he continued."I think it's a bigger systemic issue."