Why Online Advertising Should Be Regulated

In a recent AdExchanger.com article,
I
wrote about the need for
regulating online advertising and how doing so will help promote growth
of the industry overall. Below is the full excerpt:


The online advertising industry is going through rapid and exciting
changes. In the past two years, we’ve moved from a publisher-centric
model to a network-centric model and now to a data-centric model. Top
advertisers can now buy specific audiences in addition to specific
publishers.

All of these innovations provide consumers with a better experience
with more relevant ads, customized content, and less spam while giving
advertisers more confidence in the performance of online ads.

While this technological transformation is enabling a richer and more
personalized web, it also raises new privacy concerns for consumers as
their data is being analyzed and shared. The increasing lack of clarity
about data practices for technology providers and consumers alike will
likely impede further growth in online advertising.

While conventional wisdom might hold that regulation is harmful to an
industry, we believe closer regulation of online advertising will
promote continued innovation by allowing companies to better understand
the rules while giving consumers and brands more confidence to engage
with online media.

Regulation provides guidelines, promotes growth

Already, our industry is working hard to establish its own rules. The
Network Advertising Initiative (NAI) has been very forward looking and
has done a great job establishing standard guidelines (such as how to opt-out).
The Internet Advertising Bureau (IAB) has also done a tremendous job by
establishing a set of principles
that govern what is reasonable for online privacy. And together, the
NAI and IAB have released the CLEAR
Ad specification
advocating notices in online ads to tell consumers
what information was used to deliver the ad to them, and how that
information was collected.

These are important steps to protect privacy. Unfortunately, these
institutions are still not well recognized by consumers, and because
they are opt-in for advertisers, there remains a profusion of bad
practices including use of flash-based cookies, IP targeting, deceptive
offers that auto-bill credit cards, and many others.

Absent legislation, some advertisers may try to out-compete others by
using practices that work against the long term interests of the
ecosystem. Over time, these practices erode the foundation for exciting
industry changes, increased use of online services by consumers, and
brands’ adoption of advertising technology.

That’s why formal regulation is needed – not only to clarify what the
right guidelines are, but also to make sure everyone follows them so
that the advertising industry will continue to move forward.

The current state of regulation

Today the federal rules are vague on what is permissible and what is
not. If you ask ten experts you are likely to get ten different answers.
And we are entering a world where most innovative advertising practices
are poorly understood by consumers or unknown altogether. It will take
some time and debate before the dust settles and the guidelines are set.

What is clear, however, is that we are in an era where consumers are
only slowly awakening to what data is readily available in the 50
milliseconds it takes to serve them an ad. And if consumers cannot fully
grasp the implications of behavioral advertising, they will shy away
from participation – and brands will be reluctant to drive spending to
mistrusted technology.

Specific industry guidelines from Washington would be the clearest
signal to consumers and brands that it is safe to participate, enabling
innovation to move forward by providing much needed clarity.

Right now there is a healthy debate over the draft
legislation
put together by Congressman Boucher. Both industry
advocates and privacy advocates raise legitimate concerns, and it’s
clear that there is work left to do to strike the right balance between
the benefits of better advertising and consumer expectations of privacy.

While some pieces of the draft legislation need to be changed, the
spirit of the bill is a good one: clarify the rules and make online
advertising safer for consumers, content, and brands. Clear federal
guidelines are what we need to realize the full potential of our
industry.

1 thought on “Why Online Advertising Should Be Regulated

  1. David Wondersten

    Auren: this is a very well thought-out blog. Thank you for writing it. It certainly challenges the view that govt regulation is generally bad for businesses. I’m not sure that it changed my mind but it certainly made me think.

    Reply

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