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Behavioral Advertising Faces New Challenges

5 Apr, 2011 By: Linda A. Goldstein


As direct response marketers migrate increasingly to the Internet, it is important to be aware of the new challenges facing behavioral or targeted advertising. Behavioral advertising uses information collected across multiple unaffiliated websites to predict a user’s preferences and display ads most likely to be of interest to consumers based on their online behavior.

Behavioral advertising is currently a subject of much debate with privacy advocates pushing hard for legislation that would prohibit online tracking unless the consumer expressly opts in. The Federal Trade Commission (FTC) has publicly advocated for a Do Not Track List, which, like the Do Not Call List, would allow consumers to opt-out of such advertising and prohibit advertisers from tracking their online behavior.

In an effort to stave off regulation, many of the advertising industry’s leading trade associations have developed a self-regulatory program designed to provide enhanced notice to consumers when websites are engaged in online tracking behavior and provide consumers with the choice of opting out of the collection of such information. As part of this self-regulatory program, the industry has developed an industry icon to be placed in or near interest-based ads on the webpage where ads are served or data is collected to signal to consumers that the site they are browsing may be collecting data. The icon links to a notice of the data collection practices and provides consumers with the opportunity to opt out.

While the direct response industry has not actively participated in this industry initiative, marketers should be aware of significant developments in the self-regulatory initiative that could result in marketers being subject to enforcement action if they are engaged in behavioral advertising and fail to comply.

Last month, the Council of the Better Business Bureau (“CBBB”), the same body that houses the National Advertising Division (NAD) and the Electronic Retailing Self-Regulation (ERSP) programs, announced plans to increase monitoring and enforcement of online activities to ensure compliance with the industry’s self regulatory program. Specifically, the CBBB announced that it had appointed a new program director and had signed a contract with a technology company, Evidon, to supply the technology that will allow the CBBB to more effectively monitor online interest-based ads. The CBBB, in announcing this increased monitoring effort, stated: “We will be monitoring everyone engaged in interest=based advertising … ad networks, ad agencies, web publishers, advertisers and service providers.” The CBBB has also indicated that it will refer instances of non-compliance to the government for enforcement.

Although there is currently no federal law prohibiting online behavioral advertising or requiring use of these icons, it is important to remember that the FTC has brought numerous cases in the privacy and data security sector without any federal legislation. The FTC would likely take the position that tracking a consumer’s online behavior without adequate notice and consent is a deceptive practice under the FTC Act. Thus, with increased enforcement by the CBBB and the threat of referrals to the FTC, marketers engaged in this form of advertising could well be facing potential enforcement action if they fail to comply.

Linda Goldstein is chair of the Advertising, Marketing and Media division of Manatt, Phelps & Phillips, LLP, based in the firm’s New York office. She can be reached at lgoldstein@manatt.com.


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