‘Do Not Track’ Won’t Kill Online Advertising

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“Data Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today's column is written by Peter Klein, SVP of media services at MediaWhiz, an integrated digital media agency and part of the Hyper Marketing Inc. network.

It’s easy to take a prominent stance against proposed “Do Not Track” legislation. Like many online marketers I don’t yearn for regulation of the industry, believing it will stunt growth and hamper innovation. However, I also believe that anti-tracking legislation will not destroy online advertising.

Despite continuing pressure by public advocacy groups and members of Congress I don’t expect the United States to adopt anti-tracking legislation or regulations for several years — if ever.

The history of success of competition and regulations against certain forms of marketing and communications is mixed. The U.S. Postal Service has been around for almost 240 years and yet it is adapting (albeit slowly) to Web-based competition. And best of luck to those who try to “unsubscribe” from receiving targeted catalogs and direct mail, despite Federal unsubscribe regulations.

The passage of regulation meant to curb online behavioral marketing will require market adjustments. We’re already seeing that on a small scale after Microsoft introduced default DNT settings in the newest version of its Internet Explorer browser. Despite claims by some that anti-tracking legislation will mean the end of online advertising I wouldn’t start shuttering ad agency doors just yet.

After the dust around this debate settles, I predict government regulators will come to several sensible conclusions:

  1. Behavioral targeting is good for the consumer. After all of the non-personally identifiable information concerns of online ad tracking are properly addressed regulators will realize that behavioral targeting provides a beneficial consumer experience.
  2. It’s a Federal vs. State battle. Given that the States have final say on nexus laws for Internet taxes being collected, I’d be surprised if this didn’t become a similar type of battle as to who owns the decision on behavioral targeting. Online tax revenues for each State are at stake.
  3. Lack of ability to enforce. Unlike unsubscribes from an email list, or entering a phone number on the national Do Not Call registry, it is unclear how a person can make claims of being “targeted” by online advertising if she blocks cookies in her browser. There are numerous data points collected on a consumer, and new ad-tracking technologies will emerge that may make any DNT legislation obsolete almost as soon as it is enacted. Worth considering is what will happen when the FBI or another law enforcement agency needs data to track terrorism, child pornography or DRM piracy issues.
  4. Consumers have freedom of choice online. Consumers, advertisers, site owners and publishers all have the same pushback strength as the tobacco industry since billions of dollars are at stake. Somehow millions of people still smoke despite the fact that the government spends millions of dollars on graphic ads depicting black lung X-rays, people utilizing voice-box devices and Surgeon General warnings on packages. The same will prove true in behavioral marketing; it will continue regardless of government or industry regulation.

Even if the above conclusions are taken into consideration, anti-tracking legislation would impact the online marketing industry in several important, and potentially unforeseeable, ways.

First, the cost of consumer acquisition will increase. Behavioral targeting helps home in on the appropriate audience. DNT legislation will hinder marketers’ efforts to collect consumer data, resulting in a larger marketing spend by brands due to the diminished ability to optimize.

There would also be a shift in brands’ online marketing spend to social media and vertical-specific sites. Advertisers would move into vertical-specific sites and social media platforms where users' demographic data is already registered. Consider Facebook’s nascent ad exchange that will help the social network generate revenue from retargeting users’ data.

Finally, DNT legislation would bring significant growth of the Database Management Platform (DMP) and big data market. Companies like Bluekai, Mediaplex, Bizo, Exelate and many others will be relied on heavily for the data that can legally be targeted, stored and appropriately marketed. Advertising agencies with strong technology and media-buying skills will build their own DMPs to take advantage of a sudden influx of business opportunities arising from advertisers no longer having easy access to customer data.

Anti-tracking legislation may happen but that doesn’t mean the future of online advertising is in peril. Continued innovations, a commitment to self-regulation and new technologies will ensure that a $31 billion industry retains its influence on brands’ marketing efforts and consumers’ purchasing habits.

Follow MediaWhiz (@mediawhizllc) and AdExchanger.com (@adexchanger) on Twitter.

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