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Online Behavioral Marketing

Behavioral marketing is based on the idea that collecting data on what people do online can help advertisers learn about their interests and then effectively present ads to those who will be the most receptive. The advertising industry has touted the concept of behavioral marketing as a way to make ads increasingly relevant to consumers.

An example of behavioral marketing is advertising popular related items next to a news story that readers might find interesting. Another example is how large e-commerce sites, such as Amazon, will list products that other customers have also purchased when browsing. The objective of behavioral marketing is to identify and advertise to your target audience, to ensure that marketing efforts are directed towards individuals who are most likely to purchase the product.

FTC Report on OBM Principles

On February 12, 2009, the FTC issued its Staff Report on Self-Regulatory Principles for Online Behavioral Advertising. The report defined online behavioral advertising as “the tracking of a consumer’s online activities over time – including the searches the consumer has conducted, the Web pages visited, and the content viewed – in order to deliver advertising targeted to the individual consumer’s interests.”

The report went on to outline principles that ensure:

  • Transparency and consumer control
  • Reasonable security and limited data retention for consumer data
  • Affirmative express consent for material changes to existing privacy promises
  • Affirmative express consent to (or prohibition against) using sensitive data for behavioral advertising

These principles apply equally in the context of mobile devices.

Responses to FTC Report

In response to the FTC’s guidelines, consumer privacy advocate groups began to claim that the document was not stringent enough and that the commission does not sufficiently investigate privacy threats and wrongful practices targeting children, adolescents and multicultural consumers. According to Pam Dixon, executive director of the World Privacy Forum,

“I think that the issue of self-regulation has been on the FTC’s plate for ten years and it’s disturbing that only one commissioner chose to question the self-regulatory model. I think my disappointment in the FTC approach is there weren’t specific renegotiations on the self-regulation model.”

According to Chris Hoofnagle, director of information privacy programs at the Berkeley Center for Law and Policy Center, Berkley, CA. “The FTC failed to address the clearest examples of sensitive information and that there is certain user data that should never be used for targeting.”

Cory Wright, senior counsel and adjunct professor at Georgetown Law commented, “The commission’s report does not heed the concerns we have been having. The policy is not meaningful. The document fails to define children in terms of what age group can be referred to as children. The FTC says affirmative consent will work but does not go into detail about what that means. The guidelines don’t go far enough to protect kids.”

Mobile OBM

Many advertisers are looking eagerly at the potential of the online mobile market. Perhaps companies could then connect with clients on the go to let them know about their nearby products and services. In response, the FTC and Congress have voiced their concerns regarding the potential for abuse and misuse of consumer information in this context. Furthermore, there is a quickly-diminishing distinction between personally identifiable information (PII) and non-PII, including a user’s IP address and other computer/mobile device identifiers.

It has been discussed that the FTC’s guidelines regarding mobile marketing does not do enough to control applications. It is challenging to create effective disclosures, especially given the size limitations in the mobile context, as well as continuous developments in mobile-based products and services.

Summary

This article takes a look at online behavioural marketing practices and how these are used in e-commerce. The article explores the FTC’s report on Self-Regulatory Principles for Online Behavioral Advertising, which was released in early 2009. It also looks at responses to the principles, from privacy rights groups in the United States. Finally, the article explores possible privacy issues inherent to mobile online behavioural marketing.

CIPP Exam Preparation

In preparation for the Certified Foundation Examination (Foundations), a privacy professional should be comfortable with topics related to this post, including:

  • Online Behavioral Marketing (OBM) (III.B.j.ii.)
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