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Internet marketers, Web publishers, privacy groups eye House BT hearings

The battle over behavioral targeting legislation continued Thursday when members of the House Energy and Commerce Subcommittee on Communications, Technology, and the Internet met with the Commerce, Trade, and Consumer Protection Subcommittee for a hearing on the Hill.

At the joint hearing, led by Commerce Subcommittee Chairman Bobby Rush, a Democrat from Illinois, both sides pleaded their cases.

Yahoo argued that a consumer’s privacy should be respected and that online advertisers should be transparent about practices in order to build trust. The company recently announced its new data retention policy, in which Yahoo will retain the vast majority of its Web log data in identifiable form for only 90 days.

“Our business depends almost entirely on the trust of our users,” said Anne Toth, VP of policy and head of privacy at Yahoo, in a statement. “Our approach to privacy couples front-end transparency, meaningful choice, and user education with back-end protections for data that limit how much information and how long personal identifiers are maintained.”

The Direct Marketing Association, for its part, is working with the American Association of Advertising Agencies, the Association of National Advertisers, the Interactive Advertising Bureau and the Better Business Bureau on self-regulation guidelines.

“We hope to be out with [those guidelines] soon. We’re moving along, responding to the Federal Trade Commission,” said Jerry Cerasale, SVP of government affairs for the DMA and a hearing attendee. “This is an area where we think self-regulation can work. With technology changing rapidly all the time, we think self-regulation gives us the ability to change fairly quickly and make adjustments.”

Cerasale added that the hearing “was very much a fact-finding mission. I’d expect more hearings before either the House or the Senate take up any bill on the floor.”

Lou Mastria, chief privacy officer and VP of public affairs at NextAction, a multichannel database provider, came away from the hearings with cautious optimism.

“We’re encouraged by the tenor of the hearings and specifically the focus of the House being deliberate about gathering information prior to making any decisions,” he said. “I think, too, there was a pretty clear recognition that self-regulation works and has a role to play in this ecosystem. It’s a still-evolving media.

“By the same token, respecting personal privacy is a baseline requirment, Mastria added. “We can’t make light of that, and anonymity has to be paramount in how we do this. As publishers, marketers and networks that use that information, you have to provide consumers with conspicuous notice and the ability to choose whether or not to participate.”

Interestingly, Google is reportedly in favor of federal legislation, probably due to the challenges that legislation on a local level would create. Christine Chen, a Google spokeswoman, expects legislation later this year.

“Congress is certainly interested in introducing some sort of privacy legislation later this year,” Chen said. “It is really unclear to us what kind it will be. Whether it will be a broad based effort [covering consumer privacy] or whether it will be specifically related to behavioral targeting, we honestly don’t know what they are going to do.”

Chen said behavioral targeting is still an area of growth and opportunity. In the absence of legislation, Google introduced its own behavioral product in beta in March. Called Ad Preferences Manager, it enables the user to pick which interest-based ads they want to receive or opt out of them altogether.

“We’re eager to see how people receive it,” she said. “We think we have a lot of strong privacy protection to offer for users. We want to do in a way that makes sure we respect users choice and privacy. So if they choose not to receive interested based ads, they can opt out all together.”

Next page: Privacy groups speak out, vendors ready BT programs

Privacy groups still believe that the only way to protect consumers is to create legislation. “Self regulation is only as good as the regulatory rules that provide clear direction for industry oversight,” said Jeffrey Chester, executive director of the Center for Digital Democracy (CDD). “It is time for Congress to enact sensible rules that protect consumers around data collection.”

When this issue first surfaced in November 2007, privacy groups petitioned the FTC to take action.  Now, Congress is involved. Last April, House members first met to discuss the possibility of introducing federal privacy legislation. One of the ideas that has been discussed is an opt-in strategy in which consumers could elect to allow their behavior to be tracked.

“This is very rare, and it would be very different from any other privacy legal strategy that we have in this country,” said Tanya Forsheit, an attorney at Proskauer Rose. “The default in the US has always been ‘yes, you can use data, unless you are told not to.’ It remains to be seen what kind of proposed legislation will come out of this and whether it will go though.”

Despite the continued controversy around behavioral targeting, vendors don’t appear to be shying away from it. At the recent Internet Retailer Conference and Exhibition in Boston, a couple of exhibitors were showcasing new solutions with a behavioral targeting tie-in.

Amadesa, a Web site testing and personalization software-as-a-service (SaaS) provider, launched an automated behavioral targeting capability for the Amadesa Customer Experience Suite. The platform uses an algorithm that analyzes hundreds of anonymous user data points in real time to learn which campaign promotion, category image or other content element is most compelling and automatically matches the best content to each visitor to drive engagement. Home fitness online retailer Smooth Fitness saw a nearly 20% increase in average order value using behavioral targeting, according to Amadesa.

The behavioral targeting Amadesa is engaged in is based around one specific Web site, as opposed to what happens with most advertising networks, which produce cookies that follow a user from site to site.

Personalizing a Web site [via behavioral targeting] helps an individual with an intent to find what they are looking for and helps the site owner deliver more content that is relevant to the individual, said Pete Olson, VP of product management at Amadesa.

Also at the Internet Retailer show, ClearSight Interactive, a behavioral targeting service provider, launched ClearTrigger, which enables retailers to identify and make direct e-mail contact with unregistered users and previously unknown online consumers who have demonstrated an interest in a product or service.

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