"Do Not Track" Impasse Threatens Future of Online Behavioral Advertising

Excerpt:

Online Behavioral Advertising ("OBA") involves the use of information collected about consumers for the purpose of targeting them with ads based on their interests. This information is collected from the consumers' web surfing, their queries to search engines, and even from the content of their e-mails. The past few years have witnessed a robust debate over the types of conduct (if any) that ought properly to be permitted in implementing OBA. Among the stakeholders are various components of the OBA industry, governments, consumer advocates, and consumers themselves. Proponents of OBA claim that it funds the World Wide Web, and permits advertisers to focus their ads on individuals interested in them, while reducing advertising costs and avoiding the broadcast approach that results in unwanted ads for most recipients. Although behavioral advertising did not begin with the WWW, the online milieu has provided a fertile environment for it, and an entire industry has grown up around OBA.

A great deal of OBA is third party OBA, where information is gathered about users by an entity other than the website visited, usually when a third party hired by the website deposits cookies on the user's hard drive. A cookie is a small data file that, inter alia, identifies the user to the company depositing it, which is often a company managing an ad network across many subscribing web sites. The cookie identifies a computer, and does not identify any individual by name. Using the cookie identification, the network is able to track the surfing activities of the user(s) of that computer across the web. Another type of OBA is first party OBA. Here the information collected at a website is used only to market the products of the company owning the website. For example, someone who buys a book online from Amazon may get a display ad or e-mail a month later from Amazon informing her of a different book on the same topic. Yet another type of OBA is contextual advertising, where the user, while visiting a web page (e.g., for shoes) receives, on behalf of a third party (e.g., another shoe company), an ad for a product of the type shown on the visited page.

The Issues

In this debate, several relatively clear-cut issues have now emerged, of which the following are among the most important:

1. What Types of OBA are of Concern? The FTC seems concerned only with data collectors that share data about consumer preferences. Thus, the FTC position is that first party OBA is not a concern; the FTC sees no problem, for example, with Amazon's use of Amazon sales data to market Amazon products. But the European Union position is that, because first party OBA involves the collection, processing, and use of personal information, it is a matter covered by the EU Data Protection Directive, and is therefore subject to governmental regulation. And what about contextual advertising, which need not involve the retention of personal information? Should that be of concern? [footnote omitted]

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