NY bill threatens online ads

Microsoft, Google and AOL are getting ready to meet with New York assembly­man Richard Brodsky, a Demo­crat from Westchester County, to discuss a privacy bill that he is developing, which could have strong implications for the online advertising industry.

“The bill is very broad and it would make a lot of legitimate practices illegal. [It] would basi­cally make ad networks illegal,” said Mike Zaneis, VP of public policy at the Internet Advertis­ing Bureau (IAB). “Publish­ers usually offer up thousands of ad impressions into an ad exchange, which are bid on by dozens of entities in real time.”

The bill would also mandate that all relationships between publishers and advertisers be contractual. Some Internet ad­vertisers feel that, if a contract is required, it may slow down the process and exchanges that take place in an automated ad exchange.

Brodsky’s office is meeting with these Internet giants to discuss and help finalize the pro­posal, which was based in part on the best practice guidelines set by the Network Advertising Initiative, a group of online mar­keting and analytics companies. Yahoo met with the Assembly­man last fall.

“We are looking to clean up the language and are looking to these companies in the industry to tell us what they think,” said Kent Sopris, legislative director at Brodsky’s office.

The bill first came to life last June in response to Google’s offer to acquire DoubleClick, which, after a series of reviews, has been approved.

“Assemblyman Brodsky was not satisfied with the focus of privacy that the [Federal Trade Commission] was looking at and wanted to make sure that a big company like Google cannot track a consumer’s behavior and then target them with advertis­ing based on these ads,” Sopris explained.

Google, Yahoo and Micro­soft did not return phone calls for comment. AOL declined to comment on the proposed bill until it meets with Brodsky.

The IAB is pushing for consumer and legislator education about how online ad­vertising technologies work and the ben­efits that it can have for consumers.

“While it claims to be looking out for consumers, this bill is not consumer friendly,” Zaneis said. “Advertising is the engine that drives the Internet today. It pays for free services and content for consumers.”

John Ardis, VP of corporate strategy at ValueClick, agreed, “The problem with this kind of legislation is that while it usually starts with good intentions, with­out a fuller understanding of how some of these things work, it can cause unex­pected harm to both consumers and the direct marketing industry.”

ValueClick itself was just fined $2.9 mil­lion in a settlement with the FTC regard­ing a complaint for allegedly violating CAN-SPAM.

According to Ardis, raising questions about online privacy may lead legislators to consider direct mail and telemarket­ing, where much more personal informa­tion is tracked. “The focus should be on protecting data,” he said.

But not everyone in the industry thinks that this proposal is bad. Quinn Jalli, chief privacy officer at Datran Media, which was fined $1.1 million in March 2006 to settle a lawsuit brought about by former New York Governor Eliot Spitzer concerning a privacy breach, said that the industry should have seen this coming.

“We as marketers need to remember that at the end of the day, our business is about serving consumers,” he said. “From an industry perspective we should be thinking about giving the best con­sumer experience possible and making it easy for them to opt out.”

Still, Jalli said he thinks that legislators should use language that would prevent the prohibition of behavioral targeting.

While Sopris did not say how the bill would be enforced, he did say that it could go further than New York. The bill could be especially problematic for those businesses that do online business across state lines and globally.

“This could be the impetus for a larger federal piece of legislation, but that’s something we’ll have to wait and see about,” he said.

Connecticut is also proposing a simi­lar bill in the current assembly session. In an e-mail to DMNews, Jerry Farrell Jr., commissioner of consumer protec­tion in Connecticut, said “Connecticut has not passed a law barring the track­ing of consumer behavior online. There are legislative proposals that have been made that would deal with some aspects of such tracking. But, at this point, they are strictly proposals and would need to work their way through the legislature by early May, in order to become law.”

The proposed New York bill is cur­rently in the Consumer Affairs Commit­tee, and will be sent to the floor when the proposal has been finalized.

The issue of consumer privacy online is not a new one. Last November, the FTC met with nine privacy organiza­tions, including the Center for Democ­racy and Technology, Consumer Action, Consumer Federation of America, Pub­lic Information Research, Privacy Jour­nal and World Privacy Forum, about implementing a do-not-track list that would protect consumers from having their online activities tracked, stored and used by marketers and advertising net­works without their knowledge.

The list would require advertisers that use tracking technologies on consumers’ computers to register with the FTC all domain names of the servers involved in the tracking. There is currently a cookie available from the FTC that consumers can download to see individual sites’ tracking habits. No legislative action on this proposal has been taken yet.

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