State Governments Not Letting Up on Online Ad Players

texasseal.jpgState governments are becoming thorns in the side of the digital ad industry, and Texas is the latest state to wrangle an online ad player. Indeed, Texas is the reason World Ave is Out $800K. The lead gen services firm World Avenue will cough up the cash to the state as part of a deal to settle the case against it. According to the Texas Attorney General’s Office, the state took legal action because the firm didn’t disclose that users would need to weed through a chain of sponsor offers (and register for them) before getting through to a promised iPod or other so-called “free” gift.

World Ave. works with clients including Blockbuster, Netflix, credit card companies, and others, offering products in exchange for customer data.

“World Avenue USA has agreed to develop and implement standards and best practices to ensure that proper disclosures are included in the future,” according to the AG’s press release. The company also has to abide by rules about using the word “free” that are becoming commonplace in such settlements. For instance, “when a purchase is actually required, that disclosure must be in close proximity to the word ‘free’ so that customers are adequately informed about costs associated with acquiring the ‘free’ item.”

Like Florida’s AG Office, which settled with World Ave in January (they agreed to pay $1 million), Texas seems active in investigating online ad companies. Back in November 2007, the Federal Trade Commission held a forum on behavioral targeting that featured a panel with Brad Schuelke, chief, Internet Enforcement Unit Office of the Texas Attorney General. He indicated state governments would be involved in inspecting that sector.

“I think in general right now the states are looking at a couple of things,” he said. Yeah, it’s vague, but the guy was on a panel at an FTC conference (I believe a representative of NY’s AG Office was also present). That’s indication in itself.

It’s unclear whether Texas is investigating other firms for alleged fraudulent online ad practices. An AG Office spokesperson told me they don’t reveal that information. “I will have to tell you that this office does not acknowledge investigations of any kind, but we welcome complaints from consumers at any time, particularly if they believe they are being defrauded or misled, as was the case with the World Avenue USA matter,” he wrote in a later e-mail.

We know Florida is going after the big fish – companies that enable payments for alleged fraudulent mobile content offers. In February, AT&T Mobility agreed to pay $2.5 million to the AG’s office in addition to refunding customer payments for ringtones and other cellphone content advertised as free.

It’s my understanding that Attorney General’s Offices often collaborate. When I spoke with Office of Florida Attorney General Bill McCollum in February, he told me state operations do talk from time to time because they’re dealing with the same problems.

“There’s communication,” he continued, “but in reality, they have their own cases and we have our own efforts.”

State approaches vary as much as the practices of the online ad industry firms they seek to regulate. Still, it’s interesting to note Internet ad firms also work together to stave off unwanted government intervention. For instance, just last month, a once-loose collective of companies including Google, Yahoo, AOL and eBay finally incorporated officially after four years of collaborating to influence state policy.

Related reading