FTC: Don’t Turn Out the Lights on Internet Advertising

Ever been in a meeting room where the lights are way too bright?  But when you shut the lights off, it’s too dark and really all you need is a simple dimmer switch to adjust the lights just the way you want.

 

FTC Chairman Jon Leibowitz has entered the room where millions of Americans are happily using free online services that are paid for by targeted advertising.  And the Chairman thinks the FTC needs to shut the lights off.

 

The FTC (Federal Trade Commission) already has broad enforcement powers against unfair and deceptive trade practices, whether online or offline.   But current FTC leadership has its heart set on creating new regulations for collection and use of data for online advertising.  Thing is, the FTC can’t start making new rules unless Congress gives them the go-ahead.  To get Congress going, the FTC recently published a staff report that justified new rules by proclaiming,  “industry efforts to address privacy through self-regulation have been too slow, and up to now have failed to provide adequate and meaningful protection.

 

Two of the FTC’s five Commissioners said the staff report may have jumped to conclusions.   We also believe new laws and rulemaking are not justified.  Moreover, we fear where the FTC wants to go with regulation of online privacy: an “off switch” for online users called Do Not Track

 

At first blush, consumers may like the idea of Do Not Track. If you don’t want your online interests tracked, you just turn off the lights.  Of course, you’d still see online ads – probably lots more than you see now—and those ads won’t be as relevant to your interests.  For example, Buy.com might remember that you searched for toasters and then show you ads for blenders, too.  Similarly, NewYorkTimes.com can track which stories you read and present similar stories next time you view the site.  But this won’t work if you turn off all tracking, which is what happens with an all-or-nothing approach like Do Not Track.

 

Moreover, Do Not Track would harm the online sites and services you rely on today.  Why?   Because tracking makes targeted ads that are far more effective.  And that’s why advertisers are now paying for the free services you use today and the innovations you’ll use tomorrow.   If ads aren’t targeted, advertisers will pay less and sites will have to make up the lost revenue somewhere.

 

In the end, an on-off switch like Do Not Track would diminish the online user experience and decrease the revenue that’s funding online innovation and free services like search, email, news, and social networking.

 

And while the FTC report claims that the status quo is unacceptable, the evidence shows otherwise since consumers embrace free online services at unprecedented rates without any apparent harm.  Let’s demand stronger evidence than what’s in the FTC report before we let regulators ruin the evolving ecosystem of advertising-supported online services.

 

Here’s a thought:  let’s have the online industry work harder on informing and empowering user choice about privacy, while providing the FTC enforcement opportunities.  We came up with a plan for that in our comments to the FTC staff report.

 

Instead of an on-off switch like Do Not Track, let’s allow users to choose which websites can track their data, like a dimmer switch for online privacy.  If you don’t fully trust a given website, opt-out of allowing that site to collect sensitive data.  On the other hand,  if you like the features of a website or their free services, let ‘em collect enough data so that advertisers keep paying for your search, email, and social networking.  It’s all about giving users the right to choose how they use the Internet.

 

However, if we give users the power to choose, businesses have to honor those choices. In our comments, we envision a self-regulatory framework that adapts privacy choice to new technologies and services, encourages participation, enhances compliance—and requires no new legislation.

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However, the FTC still plays a critical role.  The FTC can help drive companies into joining the framework, and the FTC can go after companies that fail to honor their promises about privacy.

 

Living in the dark is not the way we deal with a room that’s too bright.  Nor is Do Not Track the way to deal with online privacy. 

 

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