Stoking Online Advertising Draws Fire

Michael Hedges April 15, 2011 Follow on Twitter

Online advertising is, without argument, the current growth engine for the advertising business. Behavioral advertising is its fuel. Targeting consumers more directly, more precisely, has had the advertising people in a lather for more than a hundred years.

Internet technology made it possible, finally, to put specific ads in front of specific people on specific devices and specific times. For the advertising people, this is metaphysical bliss. And, too, its more than just a little interesting for the media sector, who recognize that delivering content on the web is popular with consumers. Behavioral advertising is the great digital dividend.

The UK’s advertising self-regulation council Advertising Standards Authority (ASA) seized the online advertising burden and from March has extended its duties to include all forms of online marketing communication. Advertising people universally prefer self-regulation to hard-bitten, specific laws. Sometimes it works and sometimes it doesn’t.

At almost the same moment the ASA decided to watch out for online advertising the European Commission (EC) decided (November 2010) to refer the UK to the European Court of Justice (ECJ) for infringing the EC’s Data Protection Directive. At issue was – and remains – a disagreement between the EC and the UK over the strength of UK law protecting consumers. Back in 2007 UK telecom BT (formerly known as British Telecom) tested software in real-time from US company Phorm that extracted a lot of information from Web users with the intention of placing targeted ads in front of them based on the behavioral information gleaned.  Other internet service providers (ISPs) were also hot for this entré into the heady world of big time advertising money.

BT didn’t bother telling the UK Web users about the test before hand that cookies were set to enable a little spying. But the secret was quickly discovered. There was a whistleblower; juicy stuff. BT denied, then confessed. Consumers were not impressed and began complaining. UK authorities waved them away.

Eventually the complaints reached the European Commission in early 2009. EC Info Society Commissioner Viviane Reding took a dim view of the UK’s privacy rules effectiveness in protecting Web users from spyware. The UK government at the time waved off Commissioner Reding’s formal requests for details saying UK law was sufficient and the EC should mind its own business.

“The Commission may have to proceed to formal action if the UK authorities do not provide a satisfactory response to the Commission's concerns on the implementation of European law in the context of the Phorm case,” said Commission spokesperson Martin Selmayr to The Register (February 2009).

Over time, some things have changed. In 2010 the UK government changed hands, Commissioner Reding took the DG Justice portfolio and Commissioner Neelie Kroes took the Digital Agenda portfolio. What didn’t change was the British government’s intransigence on consumer privacy and the BT/Phorm case. Neither Commissioner Reding nor Commissioner Kroes have changed their opinions either.

When UK police waved off a complaint internet privacy activist Alex Hanff took it to public prosecutor Crown Prosecution Service (CPS). Eighteen months later the CPS decided (April 8) it, too, wouldn’t bother because BT had received “conflicting legal advice that led to it halting the covert trials,” said the CPS statement.  “As there was no evidence to suggest either company acted in bad faith, it could be reasonably argued that any offending was the result of an honest mistake or genuine misunderstanding of the law.”

“The core alleged criminality in this case was the possibly unlawful interception of data, not computer modification or copyright,” the CPS statement continued. “We have concluded a prosecution would not be in the public interest.” The CPS first abandoned then was forced to “re-examine” (January 15, 2011) evidence in a different “unlawful interception of data” case embarrassing to the current UK government. That case involves phone-hacking by the tabloid News Of The World, owned by Rupert Murdoch, with suspicion that authorities looked the other way.

The advertising people are certainly reading the tea-leaves. Commissioner Reding will present the updated Data Protection Directive this summer and it, along with the e-Commerce Directive, will likely to toughen rules on behavioral advertising. Support groups with deep and abiding interest in seeing the golden goose of internet advertising’s continued health and lightly-regulated future have come this week (April 14) with “best practice recommendations for online behavioral advertising” (European Advertising Standards Alliance EASA – See statement here) and “online behavioral advertising guidelines” (IAB Europe – See statement here). One proposal suggests an icon - similar to the new product placement icon in television programs - appear when behavioral ad servers add cookies.

Online advertising has eclipsed newspaper advertising in many countries. Indeed, the Web and television have the full and undivided attention of the advertising people. With all media rapidly moving to the Web and Web-enabled mobile devices the advertising people are shoveling money. Whether or not it’s “carrying coal to Newcastle” remains to be seen.

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