Governing the Internet, BT Edition, Volume 1

Josh GordonThe debate about businesses using behavioral targeting (BT) technology in their online marketing rages in Internet marketing circles, the vertical press and the various governing bodies from state legislatures to the Federal Trade Commission. BT comes in all shapes and forms, today I’m speaking to the impact on affiliate networks.
I previously discussed the New York state legislature’s plan to eliminate tracking technologies for consumers in their state. The FTC has taken up the mantle at a Federal level with a plan that reads similarly to New York’s.

The FTC proposal, which you can read here, is entitled, Behavioral Advertising: Moving the Discussion Forward to Possible Self-Regulatory Principles. The title is as catchy as it is definitive.

Some of the proposal is devoted to practices that companies are most likely already doing, like providing ample security for data. There is the cosmetic element that requires a disclaimer on a webpage where information is being captured, informing the consumer of disclosure and intent of use.

For affiliate networks, difficulty may crop up in the requirement to “…obtain affirmative express consent from affected consumers before using the data in a manner materially different from promises made when…” when the data was initially collected.

Here’s an example: if I read six articles about running, BT Company 1 tracks those clicks and places me in a running segment. BT Company 1 concludes it’s appropriate to provide my profile to BT Company 2 who has an additional segment, let’s say ‘active lifestyle,’ because it’s assumed I’m active since I run. It’s a logical, and accurate, conclusion for the software to arrive at. But, under these proposed guidelines, it creates a lot of extra work. Instead of just serving a targeted ad for a sports drink or running shoes when I visit a website in an affiliate network, I’ll now get ads for BMWs, too, since they are considered appropriate ads for people with an active lifestyle. For me to receive any ads from the active lifestyle segment, substantial time and resources are needed to ensure I’m okay with receiving offers from BMW. Getting permission costs money and time, and a company may decline to absorb the rising costs of advertising on affiliate networks. The affiliate model, as it exists in its current form, could become untenable.

What’s interesting to contemplate is that this proposal is presented with the pretext that consumers deserve more control over their web experience as a whole. If that’s the case, the effectiveness of the online affiliate advertising network is compromised. While that is a possible negative outcome for some, a positive trend may develop. Deploying this technology for individual companies, and containing it to their domain, will provide similar targeting opportunities with less speculation and more relevance for the consumer.

How do you think the FTC’s proposal, if enacted, will change the face of online behavioral targeting?

One Comment

  1. Posted May 30, 2008 at 9:44 am | Permalink

    Josh,

    I found your article interesting on several levels. However, with my non-tech/limited IT background, I wanted to pose a few thoughts from a basic consumer/marketer’s standpoint.

    It sounds to me that the government is trying to over-regulate the internet? You gave the example of the BT Company and articles on running. Well, when I watch any TV program, assumptions about my preferences, demographic, interests, etc. have been made. That’s why I see commercials for Home Depot and Chevy trucks when I watch home improvement or landscaping shows.

    Yet, I don’t hear consumer groups complaining that my privacy has been breached, that companies are unfairly targeting me based on my actions or assumed behaviors. Why the discrepancy?

    Just like TV, I have to pay to access the internet (in one form or another). The content on the internet doesn’t magically appear online; companies and individuals have to invest time and money into creating relevant content. Just like a TV show.

    So I guess the dotted-line, vague connection I’m making is that the internet, like TV, exists for profit. That profit motive is disguised as entertainment, education, and more, but it’s still there. TV wouldn’t exist without advertisers willing to fit the bill. Likewise, would You Tube be able to accommodate all of its user content if it wasn’t generating advertising revenue? How else could it afford the software, servers, etc that are necessary to handle its overwhelming amount of content?

    Why should the internet be hindered by excessive legislation making it increasingly difficult for legitimate companies to advertise their wares and win customers?

    I think the danger of the FTC’s involvement is that they’ll scare away the advertisers by making the Internet too costly a tool. If that happens, what becomes of our beloved Internet? Doesn’t all that fantastic content, from funny You Tube videos to up-to-the nanosecond news and information, disappear?


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