The Case for Good Regulation

We have been conditioned to think that government regulaion is wrong. However, there is such a thing as good government regulation, even for industries being regulated. Look no further than HIPPA in the healthcare industry, and as recently as 2003 for CAN SPAM, a great example in the marketing industry. I believe that the consumer privacy regulations being proposed by Congress largely fall into the “good regulation” category. Here’s why.

It won’t ruin the industry
As early as 1997, marketing industry groups such as the DMA and the FCC created a stalemate in Congress by lobbying against a bill to control unsolicited commercial e-mails. By 2002, however, the problem had reached a boiling point, and the political will was there to move legislation forward. E-mail marketers were worried that this would spell the end of their businesses. We all need look no further than our spam filters to know that this didn’t harm the economics of the e-mail business. That legislation was signed into law by President Bush in 2003 and had very little effect on the industry. But it did help to protect consumers. I believe that we are headed in the exact same direction with the proposed privacy legislations that are being discussed in Congress today. This legislation won’t mean the end of online targeting. Instead, like CAN-SPAM, it will help to create more legitimacy and a healthy marketplace for online targeting practices that promote transparency and consumer control.
The industry could use some enforcement mechanisms
This may be surprising coming from someone in the ad-targeting business: my company Bizo uses cookies to target business professionals online. However, there is a trust problem in online advertising, and frankly there are shady publishers and ad networks out there using personally identifiable information (PII) and other data about your online behavior without transparency or consumer control. PII and nefarious targeting should be abandoned in order to create an open and transparent industry environment, and thoughtful federal regulation could clean this up quite a bit and create a better environment for legitimate players. Self-regulatory efforts are great, but they have no “bite.” Candidly and selfishly, I admit that if these regulations kill off a few of the worst offenders, more dollars will flow to legitimate targeting platforms, and I count my company among them.
Publishers need ad revenue 
Just as the ad industry agonizes over the prospect of new laws cutting off revenue streams, publishers are uneasy about the possibility of losing a big source of income. This comes ironically at a time when so many publishers are fighting to transition their business models to the online world, where all the eyeballs are moving. If publishers are going to lose much of the value they gain by providing free content in exchange for serving ads, they will go to a “gated” model just like with paid content. With even Draconian opt-in regulations, users will simply be required to click a terms of service (“I opt in to targeting”) before accessing the site’s content. If the user doesn’t want to opt in, then many publishers will send them to a payment form to access the content for a fee. The vast majority of users will simply accept the terms and opt in to targeted advertising in exchange for free content.
Consumers want transparent targeting, even if they don’t know it yet
We’re all addicted to free online content, often to the chagrin of publishers, and without advertising, it can’t exist. If targeting is hamstrung, the advertiser has to resort to annoying tactics like pop-ups and takeovers to raise attention levels. Have you noticed how ads get louder when you watch TV? On the other hand, targeted ads create a much better user experience: They are less annoying and more likely to be more relevant and more useful, which is of course the intention of a targeted ad! If there is a clear user understanding that consumers are receiving free content in exchange for safely targeted ads, most consumers will agree to that tradeoff. Consumers are not stupid, contrary to what the industry seems to think.
Good regulation
So I’m excited for good regulation that codifies self-regulatory principles and adds “bite” to enforcement.  It will raise consumer awareness, increase trust, and create transparency. Success in this industry needs to be predicated on full transparency. If you have that, the notion of opting in or opting out isn’t even necessary, it’s all simply user tradeoffs. If it takes an act of Congress to bring this transparency to the market, so be it.
Russell Glass is CEO of Bizo, an audience-targeting firm.
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