TRUSTe CEO Babel Discusses The Business Of The Trusted Intermediary As Privacy Concerns Swirl

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TRUSTeChris Babel is CEO of TRUSTe, a privacy services company.

AdExchanger.com: TRUSTe started as a non-profit and moved to profit status in 2008. Why the change? Do you still consider the company a start-up?

CB: We realized that without transitioning to a for-profit company with a venture capital infusion we weren't going to be able to meet the demands of the rapidly expanding privacy market to effectively build trust and privacy between businesses and consumers online. By making this transition in 2008 we were able to invest in technology, personnel and product development that allowed us to rapidly grow our customer base for our website privacy certification products and expand to launch privacy services in mobile and advertising markets.

While I like to think of TRUSTe as the newest 13-year-old startup in existence, it's better to think of us as a 2-year-old startup that had great people, products, customers and brand from day one.  Since adding 20 people to the team in 2010 and planning 25+ in 2011, our growth and trajectory are certainly those of a startup while our experience and reputation spans 13 years.

What problem is TRUSTe solving?

There is an inherent lack of trust online.  While many security companies solve the "is my data secure" question, no one really solves the "what is happening with my information" question, which is critical as there is a great potential for privacy abuse and data misuse.  Data practices are complicated and opaque and consumers don't have any insight into what happens with their personal information when they click on an ad or hit the "submit", "send" or "purchase" buttons.  This lack of confidence and trust hurts engagement, innovation and growth online.  By acting as a trusted intermediary who vets and certifies companies’ online privacy practices, TRUSTe helps clients build consumer trust by protecting their privacy, which directly translates into increased marketing ROI and improved sales. "Truth in Privacy" is good for business and it's good for consumers.

Who do you see in your competitive set today?

TRUSTe is the only company offering a comprehensive suite of privacy solutions across websites, mobile and advertising markets.  With the increased interest in privacy, we have seen the emergence of complimentary consumer-facing privacy companies like Reputation.com as well as specific vertical market competitors like Evidon, who has a behavioral advertising self-regulatory product that competes with our own product, TRUSTed Ads.

Why pursue DAA approval to serve the "i" logo for OBA compliance?  And, is there a significant infrastructure build out necessary?

We recently announced that we received Approved Provider status by the DAA for our OBA compliance product, TRUSTed Ads. We have developed TRUSTed Ads because our customers have aggressively asked us to provide such an offering.  As the advertising industry looks to self-regulate its online behavioral advertising practices, it makes sense to turn to the leader in online privacy to help educate consumers in a trusted way with a brand name partner that has 13 years of experience.  From an infrastructure perspective, we have been serving our TRUSTe seal for thousands of customers on a daily basis across multiple seal types and sizes, not to mention our seal is translated into 33 languages, so we have a long track record of operational execution for our customers to leverage for TRUSTed Ads.

How will you price the "i", if you will? Do you see it as a significant, revenue growth driver?

We currently offer a full end-to-end compliance solution that starts with an ad tag insertion, then delivers the industry "forward i" icon, the interstitial notice upon icon click, and finally additional information and the consumer preference manager.  As we only have contracts directly with our clients as opposed to being an industry watchdog, we provide each client a full set of reporting on a real-time and monthly summary basis and it is up to them to share this data with regulators or industry associations.  We price on a CPM basis with a basic service which is upgradeable to include additional consumer interface customization and advanced reporting and we are offering free trials to customers in this initial phase of market implementation.

Can you break out the target market for TRUSTe's products today?

TRUSTe provides its privacy services to a few large and growing end markets and most of our customers purchase multiple privacy services across these markets.  Our historical product of website privacy certification is sold to companies operating a website which could be across any vertical.  As examples, Adobe, Apple, Best Buy, Facebook, Intuit, NFL, Pfizer. Salesforce, The New York Times and Zagat are all customers of TRUSTe’s website privacy services.  Our second major set of customers are those that are utilizing mobile applications to reach their target audience and examples would be Allstate, GoDaddy, The Weather Channel and Yelp.  These customers are often looking to provide a unified customer experience across their website and mobile applications.  Finally, customers are interested in our TRUSTed Ads product that has been mentioned above and customer examples are Comcast, Intuit, Media6Degrees and Publishers Clearing House.

Most relevant is that our customers look to provide privacy consistency across their consumer base whether interacting via website, mobile or advertising and TRUSTe has the unique ability to serve this need.

Any thoughts on the ad verification business model such as those grown by AdSafe Media, DoubleVerify, AdXpose, Adometry, et al.?  Will TRUSTe get into the ad verification solutions business?

Ad verification companies provide very valuable services to their clients, but as a startup, we know the value of focus and have intentionally stuck to privacy.  While there are always many opportunities to expand to adjacent markets and we get asked about markets like ad verification frequently, we see our customers best served if we continue to focus on privacy across all its vertical markets.  We have partnered with ad verification companies in our TRUSTed Ads offering and think that there are many synergies in approaching clients jointly, but we don't see ourselves directly offering ad verification services.

How do you see government regulation shaking out in the U.S.? How does this compare internationally?

A number of online privacy bills were unveiled in the last Congress, though none made it to the President's desk. I think we can expect the introduction of more of these bills in the 112th Congress since privacy is a fairly bipartisan issue – consumers care about privacy and both Republicans and Democrats have taken up the cause. Privacy issues also have significant implications for the economy, innovation, and international trade so it’s a closely followed topic on The Hill. Many of the potential privacy bills we’ve seen to date would create safe harbors, which shows great support for industry self-regulatory efforts. TRUSTe is currently the largest safe harbor certification provider for the Children’s Online Privacy Protection Act so we’ve seen firsthand how valuable privacy safe harbors can be to companies doing business online.

Will any of these privacy bills become law in 2011? It's possible, but I'm doubtful given other legislative priorities. That said, there is growing privacy momentum in the U.S. and unlike our European neighbors, the U.S. does not have an overarching national privacy law that informs online business practices. We instead have a number of sectoral laws that address specific subsets of privacy, such as the Children's Online Privacy Protection Act, and number of state laws around data breaches and information security. Given the complexities of getting privacy legislation "right", a new federal privacy law is more likely a 2012 event, which also gives everyone a chance to measure the success of industry self-regulation.

Do you anticipate another round of funding? Are you profitable? And, how about headcount today and a year from now?

We like to say that the first thing we did as a for-profit company was lose money as we increased our investments in products and technology to better serve our customers.  With a great base of customers, high renewal rates and a scalable business, we see reaching breakeven in late 2012 and don't see the need for additional funding.  We started the year with about 65 employees and expect to end 2011 with between 90 and 100 employees as we grow the team to meet market demand for our privacy products.

Regarding milestones, what are a few you'd like the company to achieve in the coming year?

Our key goal is to enhance the relationship between our client and their consumer or business customer by delivering “Truth in Privacy”.  We do this by helping clients be transparent about their data collection, retention and sharing practices; by giving consumers/businesses choice about how their information will be used; and by holding our clients accountable for the end privacy results.  If we are successful, it doesn't matter whether the medium is a website, a mobile application or an advertisement as our client is delighted that we have been able to help them provide a more trustworthy user experience.

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