Online Advertising WILL be Regulated

Red graphite pencils leaning on stack of thick booksOnline advertising has a major perception problem. Online marketers collect reams of information about everyone, without permission, and profit by using this data to sell advertising. It doesn’t matter what data marketers actually collect and use or if individuals can control the data collection. What matters is perception has turned public opinion, and Congress, against practices in the industry.

Bolstered by reporting like What They Know from the Wall Street Journal, regulatory scrutiny is coming. Whether it is in the form of the FTC regulating based on existing laws (see the case of Chikita as an egregious example) or establishment of new legislation like the Do Not Track proposals in Congress, additional scrutiny and restrictions on online advertising practices are around the corner.

This is coming as the industry finally embraces an attempt at self-regulation, behind the Digital Advertising Alliance and supported by the DMA and IAB. Today’s industry initiatives will not be lost, they will likely become a means for compliance with real regulation. Unlike self-regulation, government regulation will come with real dollar costs, and potentially even criminal charges, for non-compliance.

Self-Regulatory Principles are not Enough
There are too many unscrupulous networks and publishers that will ignore the principles. With a low cost of entry, there is little to stop upstarts from ignoring self-regulation guidelines and avoiding detection through a layer of resellers that turn a blind eye, lacking resources to investigate every inventory source.

Likewise, networks come and go like flies. Today only a small fraction of networks have signed up for the Digital Advertising Alliance’s program, despite industry groups of marketers, publishers and networks mandating compliance in the next few months.

Marketers and Publishers Need to be Liable
Similar to CAN-SPAM, marketers and publishers will have liability. This goes beyond the shaming threatened by the DMA to member companies. Regulation will extend the reach to all companies and financial liability will change the investment and partner decisions marketers and publishers make.

Again, look to CAN-SPAM as an example, and the case of Gevelia, sued for the practices of their affiliates.

Regulation with liability will increase compliance over self-regulation. However, regulation will not significantly change the practices of most online marketers. Just as CAN-SPAM imposed new legal requirements but didn’t address the underlying volume of spam, the industry will have a new checklist, and legal and operations groups will review and revise processes. But data collection and profiling will continue, accompanied by a new disclosure and opt-out.

What is your opinion? Will regulation make a big difference in industry practices? If not, what will?

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