Self regulation is one of those dreamy concepts like working from some idyllic retreat and being just as productive as all those drones sitting in their cubicles.
And when it comes to big money-making issues like the $37 billion in internet advertising based on tracking consumer preferences there was never much chance of the industry coming up with a solution that would satisfy anyone but their clients. And who can blame them? The industry took a gut punch in 2008 and has never really been the same. No one can say for sure how credibly measure the impact of much advertising amid the pressure to move online while still delivering the numbers that TV has generated for decades.
Meanwhile, consumers dont care so much about privacy per se, they just feel creeped out by some of the advances and, in latter-day libertarian fashion would prefer to make the decision themselves as to what gets tracked and what doesnt. The current offerings of do-not-track legislation are of a draconian, take it or leave it nature. Many consumers are not sure what they want from day to day and the advertising industry is in total melt-down over the prospect of losing their best chance to demonstrate how marketing investments lead directly to purchases.
So the industry's and regulators' attempts to craft a self-regulatory regimen were doomed from the start. Which everyone knew, but regulators dont have much clout anymore and for the industry, no action was a positive development. But it aint over. As the following article explains, technology is providing its own answer, as it is wont to do. Apps, browsers and home grown solutions will almost certainly proliferate. Where there is market demand in this economy, there is usually someone trying to meet it. That's innovation. JL
John Bussey reports in the Wall Street Journal:
We're about to see what happens when industry self-regulation fails. It will not be pretty. And it will be the free market, not government, that applies the pain.
The industry is the online advertising and marketing business, notably the marketers that develop targeted advertisements based on your Internet activity
The Federal Trade Commission and consumer groups have long wanted a do-not-track protocol that can guard privacy. The idea is to give Internet users a one-click option to prevent marketing firms and websites from placing "cookies" on their computers, following users around the Internet, and then selling that browsing history to advertisers to pitch product.
It's big business. Internet advertising revenue hit $37 billion in 2012, according to the Interactive Advertising Bureau. And if you're an average Internet surfer, you likely have dozens of these bugs on your computer tracking you now.
After two years of negotiation and missed deadlines, the effort to find a solution through industry self-regulation suffered a nervous breakdown this summer.
"My sense is the thing is dead," says Stuart Ingis, a lawyer who represents some of the marketing firms involved in the talks. "It's been very frustrating for everyone."
"We tried really hard and it wasn't successful," says Jonathan Mayer, of Stanford's Center for Internet and Society. "The responsible move now is for the group to disband." Mr. Mayer resigned from the talks last week.
But this battle is really just beginning. Frustrated with the failure, Sen. Jay Rockefeller (D., W.Va.) introduced legislation in May that would enforce do-not-track. The FTC, which helped set the talks in motion, is still expecting resolution. And public-opinion surveys show the majority of consumers want a better privacy fix.
To see the disconnect over the issue, consider that marketers, such as the Direct Marketing Association, believe that privacy has already been addressed. They point to the "Ad Choices" icon that appears on Internet ads that, if clicked, takes Internet users to a site where they can opt out of receiving behavioral advertising. The program was created by the industry under pressure from the FTC.
"We already have a result that works," says Mr. Ingis. He says 20 million people have visited the site, and 1.5 million have opted out. He adds that consumers should understand that behavior-based advertising helps fund websites and keeps the Internet free and innovative. And at Youradchoices.com, "you can press one button and stop it."
But it's not that simple. In the mind of consumer groups, Youradchoices.com is part of the problem, not the solution, and it's easy to see why. The site appears to be designed chiefly to sell consumers on what it calls the "awesome" value of getting ads geared to personal interests. Its heavy-handed marketing and obfuscation all but bury the option of opting out.
Most importantly, the site doesn't give consumers privacy. Opting out stops behavior-based ads from coming to your computer. But you are still tracked from website to website by the marketing firms, which continue to collect and use that data.
"Under this self-regulatory regime, all of the collection of information, all of the invasion of privacy, still occurs," says a spokesman for the Senate Commerce Committee, which Sen. Rockefeller chairs.
Where's all this headed?
"Technology is going to overtake this process if the process doesn't come up with a solution that allows consumers to opt out of collection of information by third parties," says Jon Leibowitz, who stepped down as head of the FTC this year and is now at law firm Davis Polk.
That's the free-market part. Browsers such as Apple's Safari already have cookie-blocking capability. It's likely to get refined as consumers and regulators look for better solutions. Mozilla's Firefox is working on a more comprehensive default blocking option. Google's Chrome has been slower to join the party.
"It's an easy future to see and I think it's huge progress," says Mr. Mayer, who has worked with Mozilla on its program. "My money is on the browsers."
Mr. Ingis says this would be bad for the marketing and advertising industry, and unproductive for all parties. Marketers would likely find other technology through which they can continue gathering the data, he says.
That could put the industry in the sticky position of not just invading privacy but doing so against the expressed desire of consumers. Thin ice.
"Companies that elect to undermine consumer choice do so at the risk of greater scrutiny on the part of the FTC and the Congress," says Edith Ramirez, who now heads the FTC.
And so, forewarned.
Now watch technology do what self-regulation should have done.
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