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Opening Pandora's Box? The forward-looking Implications of "interest-based advertising"

What are the big forward-looking implications for the broader Internet-related economy of Google's announcement it is launching a new variant of behavioral advertising, called "interest-based advertising."

  • Analytically, this may be one of the most significant developments in the digital economy, Internet advertising and online privacy in a long time.
  • Why? 

First, it is probably a major catalyst escalating and accelerating public discussion about behavioral advertising and online privacy.

Context is always important, and this announcement does not occur in a vacuum. It has broad implications because of the pervasive reach of the issue and the market leadership of the announcer. For example:

  • Google acknowledged today: "Advertising is the lifeblood of the digital economy."
  • The U.S. DOJ concluded last November, that Google has a 70% dominant share of both the search advertising and search advertising syndication markets, and that Google attempted to illegally extend that dominance through an ad partnership with its leading competitor Yahoo.
  • The FTC staff recently released its revised behavioral advertising principles, which were first released coincident with the FTC's 4-1 approval of the Google-DoubleClick merger fifteen months ago.   

Another reason that it is a major catalyst is that it is a material change affecting ~70-85% of U.S. online consumers that could potentially be tracked via Google's search and DoubleClick's ad-serving platform. Moreover, the recent FTC report stated:

  • "Companies must adhere to the promises they make regarding how they collect, use, store, and disclose data and cannot make 'unilateral changes' to such promises without consumers' consent."
  • It appears that this new interest-based advertising effort is a material change and may eventually require some type of affirmative consent by most of the U.S. online population.  

    The second important implication of this new type of behavioral advertising is that it may be precipitating a slippery slope dynamic. 

    • When the industry leader and dominant company sets new privacy policy that affects ~70-85% of U.S. online users:
      • Does it force the rest of the industry to follow?
      • Does it trigger one-up-man-ship as other players "compete' for being most privacy-friendly?
      • Does it force the FTC to intervene to enforce its expectations in its recent behavioral advertising principles? or
      • is it the straw that breaks the camel's back that incites Congress to legislate in this arena?
    • Does this major catalyst create more momentum for:
      • More "transparency?" 
        • (Can consumers see all the info that is being collected on them, that may not be included in the proposed ~600 consumer profile categories?)
      • More consumer choice?
        • (If Google offers the partial equivalent of a Google "Do Not Track List" does it make an FTC "Do Not Track List" more or less likely?)
      • More consumer control? 
        • (Is there a way to not be tracked without installing a Google-no-track-cookie on one's device?)
      • More antitrust attention?
        • (What safeguards will there be that the customer data collected via this behavioral advertising effort is not commingled with the infomation from Google's dominant search advertising platform?)     

    The third big implication is that this new effort may be the Internet equivalent of opening the proverbial Pandoras box

    • In February, before FTC Chairman Leibowitz was designated Chairman, he warned in a statement
      • "Industry needs to do a better job of meaningful, rigorous self-regulation or it will certainly invite legislation by Congress and a more regulatory approach by our Commission." ... "a national 'Do Not Track List' ... deserves serious consideration." ... "A day of reckoning may be coming."
    • The FTC and others will have to examine to what extent "interest-based advertising" is behavioral advertising that the FTC is concerned about, and also whether Google's definitions or understandings of "transparency," "choice," "control," and "sensitive information"  are the same as the FTC's and Congress'.

    In short, since "advertising is the lifeblood of the digital economy," the ripple effects from today's big development on behavioral advertising will be felt far and wide -- for a long time.