After reading about how Internet companies like Google, Microsoft and Yahoo collect information about people online and use it for targeted advertising, one New York assemblyman said there ought to be a law.
So he drafted a bill, now gathering support in Albany, that would make it a crime — punishable by a fine to be determined — for certain Web companies to use personal information about consumers for advertising without their consent.
And because it would be extraordinarily difficult for the companies that collect such data to adhere to stricter rules for people in New York alone, these companies would probably have to adjust their rules everywhere, effectively turning the New York legislation into national law.
“Should these companies be able to sell or use what’s essentially private data without permission? The easy answer is absolutely not,” said the assemblyman who sponsored the bill, Richard L. Brodsky, a Democrat who has represented part of Westchester County since 1982.
Mr. Brodsky is not the only lawmaker with this idea. In Connecticut, the General Law Committee of the state assembly has introduced a bill that focuses on data collection rules for ad networks, the companies that serve ads on sites they do not own.
The New York bill, still a work in progress, is shaping up as much broader. Although it is likely to see some tinkering before it comes to a vote — which Mr. Brodsky hopes will happen this spring — it aims to force Web sites to give consumers obvious ways to opt out of advertising based on their browsing history and Web actions.
If it passed, computer users could request that companies like Google, Yahoo, AOL and Microsoft, which routinely keep track of searches and surfing conducted on their own properties, not follow them around. Users would also have to give explicit permission before these companies could link the anonymous searching and surfing data from around the Web to information like their name, address or phone number.
Because there is no federal legislation on these subjects, Mr. Brodsky’s bill — and, to a lesser extent, the one in Connecticut — could set interesting precedents.
“A law like this essentially takes some of the gold away from marketers,” said Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania. “But it’s the right thing to do. Consumers have no idea how much information is being collected about them, and the advertising industry should have to deal with that.”
Web companies in the advertising business, which have spent the last few years busily courting advertising agencies to persuade them to shift their clients’ ad dollars to the Internet, are now lavishing their attention on Albany. In recent weeks, Microsoft and Yahoo have sent lobbyists to meet with Mr. Brodsky, and AOL, a unit of Time Warner, is planning a meeting. Unlike most Web companies, Microsoft favors legislation about online privacy and advertising practices and has lobbied federal lawmakers to establish regulations, said Michael Hintze, associate general counsel for Microsoft.
Microsoft asked Mr. Brodsky to broaden his bill to include all sorts of companies that serve ads around the Web, not just those that show ads based on users’ behavior. Such a change would create a bill that more clearly includes Microsoft’s chief competitor, Google.
Mr. Brodsky says he has asked the Web companies point-blank if they would support legislation similar to what he has proposed. Microsoft gave him a firm “yes,” but Yahoo, he said, seemed to be opposed to any sort of regulation. Yahoo declined to comment on its meeting with Mr. Brodsky.
Targeted advertising, the kind based on consumer data, is one reason that big brands like Coca-Cola and General Motors have been shifting their ad budgets to the Web. The largest Web companies collect data about Web-surfing consumers hundreds of times a month and use the information to help clients show different ads to different people, based on their demographics and interests.
It is unclear how much consumer data is really needed for effective online advertising. The attitude among Web companies is that more is always better, but Mr. Brodsky said there might be a compromise position that enables many ad practices but enhances consumer protection.
“What we have with this new technology is a conflict between the economic model of the Internet and consumers’ reasonable expectations of privacy,” Mr. Brodsky said.
He has sponsored three recently passed laws that relate to Internet security, but the pending bill is his first involving online advertising. Mr. Brodsky said he became concerned with advertising practices last spring when privacy activists contacted him about Google’s plan to buy DoubleClick, a company that delivers ads to Web sites. That deal, now worth about $3.2 billion, drew antitrust scrutiny but has recently cleared all regulatory hurdles; it was one of many that have helped consolidate consumer data in the hands of a few Internet companies.
Not surprisingly, executives in the advertising industry say that concerns like Mr. Brodsky’s are unwarranted.
“There has really been no harm shown by behavioral targeting or third-party advertising, so this rush to regulate the Internet is really unnecessary,” said Mike Zaneis, vice president for public policy for the Interactive Advertising Bureau, an industry group that represents companies like Google and Yahoo.
Moreover, Mr. Zaneis said, the New York bill threatens to undercut the business model that supports the Web. “If you take the fuel out of this engine, you begin to see the free services and content dry up,” he said.
Another view is that the genie is already out of the bottle. Data collection by online ad companies is already widespread. Advertisers have come to expect Web companies to sell them ads based on copious consumer data, and it might be difficult to beat back that expectation.
Furthermore, some Web executives say the Internet is changing far too fast for lawmakers to keep up. “Taking a snapshot of what should be the standard today probably will not be a lasting and durable solution,” said J. Trevor Hughes, executive director of the Network Advertising Initiative, a group of online advertising networks that voluntarily produced and agreed to a set of privacy standards.
The Federal Trade Commission, which regulates advertising on the national level, has proposed voluntary privacy guidelines and is receiving comments about those rules until April 11. A spokeswoman for the commission declined to comment on the bills pending in New York and Connecticut.
Mr. Brodsky said he welcomed input about his bill and was working to modify it. “In the end, I don’t have a philosophical objection to targeting, if it’s done with permission,” he said. “But it is absolutely clear that people right now do not understand what they’re actually giving up.”
Louise Story, The New York Times. March 20, 2008
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