Is third-party data tracking acceptable?
The gloves are off
Tracking is not a security or privacy problem when used properly with self-regulatory best practices, but it does become one when companies don't notify customers and give them the choice to opt-out. Recently, there's been much negativity about online tracking, from new federal bills being discussed on Capitol Hill to reactions to the European Union's directives to control it. What concerns me is the view that tracking, whether first- or third-party, is purely bad.
Tracking of any kind helps deliver timely and relevant advertising and messaging to a company's customers. Without it, users would receive boring, non-tailored information from senders. To make things worse, many "freemium" apps on iPhones, Androids and other devices would go away. They are free because when you download them, advertisers can show relevant ads based on your habits through opt-in tracking. If they can't show relevant ads, then the apps won't be free, and prices on services and technology will go up.
As a marketer, you need to ensure that the person you're tracking knows you're doing so. They should understand that by visiting your site and filling out a form, you will put a tracking mechanism on their computer. You need to be hyper-transparent to site visitors on how to remove or opt-out of tracking.
We see third-party tracking receiving a bad reputation because companies are not telling the end user about the tracking mechanism that will be placed on their computer. Also adding fuel to the fire is that some companies are sharing that data with "unauthorized" third parties and not alerting them that their information will be shared or sold. It is beneficial if the consumer knows he is being tracked ahead of time so he can opt-out or remove the tracking device from his computer.
Overall, tracking isn't bad as long as the parties dropping both the first- and third-party cookies are hyper-transparent about it and consumers can opt out. Without notice, choice and consent, the marketing industry isn't respecting the end user's right to privacy. The industry can protect consumers' privacy without legislation or further governmental oversight and expense, but it needs to provide preference centers for customers who are not comfortable being tracked.
Many in the business claim third-party targeting is not only valuable, but actually beneficial to the consumer. I disagree. There is no persuasive argument that consumers benefit at all from third-party tracking. The ads are not perceptibly more relevant to the consumer. The only groups benefiting significantly from third-party tracking are the companies that sell it.
There are three arguments commonly used to make a case for third-party targeting today. One is that targeting makes advertising more relevant, and it benefits the consumer. The second is that there is no harm in third-party tracking technologies; the tracking is anonymous. Three, some argue that nothing nasty is going on in this space, and some people are just overreacting.
Targeting doesn't make advertising more relevant — it makes only a small percentage of the ads people see more relevant. To really increase the relevance of advertising through targeting, the number of advertisers would need to vastly increase. There are more than 5 trillion online display ad impressions per month, and more than 90% of US display ad spend is driven by fewer than 6,000 advertisers. The math is pretty simple — there is very little opportunity to target display advertising against niche segments today. The reason people aren't seeing relevant ads is not because targeting is not good enough; it's because there are too few ad creatives to apply against the vast number of ad impressions.
Many companies building these systems are small startups, which often lack the security required to protect against significant breaches. Even major corporations have had problems keeping data private — some of which have already leaked millions of people's data into the public domain.
Despite the evidence to the contrary, those who work in the online advertising industry continue to operate as if there is no ethical issue here. But I disagree — there is a major and growing ethical issue with third-party tracking.
Direct Marketing News Decision
Companies with no direct relationship to a consumer should not have the right to track his or her behavior across multiple websites, make money off that consumer's data, and potentially put that user's privacy at risk without explicitly asking permission first.
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