Advocate Alleges ‘Racial Labeling’ in Targeted Online Ads

WASHINGTON, December 9, 2009 – The ubiquity of online advertising is a product of its importance to the internet economy, said a group of consumer advocates Wednesday during a debate on the future of online advertising.

But the impact of new targeted advertising methods on consumer privacy and its potential to manipulate online experiences was the subject of heated argument at the event, sponsored by the Information Technology and Innovation Foundation.

Privacy does not mean the same thing to all consumers in all situations, said Progress and Freedom Foundation Senior Fellow Berin Szoka. Advertisements are attempts to capture user attention – the “great currency of the Internet” – and when successful support a wide range of valuable content, he said. But in online life, “consumers have many values,” Szoka added.

“Privacy is one of them,” he said, but it is not an absolute. Consumers must sometimes trade privacy for content, he said. “There is no free lunch.”

As more information and entertainment migrates to the internet, Szoka said it is “critical…that we find a way to support this media.” Targeted advertising can fit the bill, he suggested – especially if technology gives users more control over their own preferences.

Most consumers don’t understand that advertising is a necessity for today’s internet, he said. New technologies like targeting need to be given a try, he said, so content providers can recoup the value of their advertising – down 25 percent since 2000, he noted.

Center for Digital Democracy founder Jeff Chester said Szoka’s ideas about advertising’s future represented a “false dichotomy.” The real debate should be over the rules that regulate advertiser content, he said. Chester warned of a “Targeting 2.0” system in which neuroscience combined with massive databases not only serve ads, but target content to users.

“It’s about influencing our behavior without our consent,” he said. Chester pointed to the subprime lending crisis as proof of the system’s invidiousness, alleging “racial labeling” in which ads for subprime loans were presented to users whose online profiles had been targeted by a “pervasive, far-reaching system” that identified them as minorities.

“What we need are safeguards,” he said. “We don’t want to have a system that is invisible and unaccountable.”

But Howard Beales, a professor of strategic management and public policy at George Washington University said targeting has nothing to do with whether or not advertising is good or bad for consumers. Even when less-than-savory tactics are employed, targeting doesn’t necessarily increase the effectiveness of ads, he pointed out.

Any discussion of advertising regulations should be forward-looking, not based on past behavior, said Center for Democracy and Technology Vice President Ari Schwartz, who pointed out that many practices decried by consumers received little industry support, even from those who might benefit from their use.

“What I’ve seen…is that you don’t hear publishers as the ones who come to its’ defense,” Schwartz said. Publishers, in fact, don’t see gains in revenue from increased advertising, Schwartz said – but ad networks do. “Intraspaced ads” will not be the savior of online publishing, he said.

Use of personal information to target ads is a subject worth debating, Schwartz said. He suggested that should self-regulatory models and existing law fail to prevent abuses, new legislative efforts would surface. But Chester interjected, insisting “you cannot separate out the data collection process [to protect privacy] unless you understand the business model [of advertisers].

Ad networks aren’t trying to sell ads, Chester said. “The business model is to have a connection with you everywhere you go online.” Advertising is even shaping editorial content of news sites, Chester alleged.

Advertisers and publishers, he said, are “honing in on our interests and vulnerabilities” in order to serve targeted content to consumers in real time, he said. “What you see and what your neighbor sees may be totally different…there are real dangers here” he warned. “We need to examine it and create the most appropriate safeguards.”

But Szoka suggested Chester’s dire warnings come from a view that all advertising is manipulative and that consumers are inherently stupid, and reprimanded Chester for portraying him and Beales as “industry shills.”

Instead of rushing to regulation of something that may not be harmful, Szoka suggested an “principled alternative” of campaigns to “empower and educate” consumers on issues and the tools available to them – “something the FTC does extremely well.”