FTC Privacy Principles Might Not Address Consumers’ Behavioral Advertising Issues: Survey

This posting was written by John W. Arden.

Widespread adoption of the FTC’s proposed privacy principles regarding online behavioral advertising might not significantly impact consumers’ feelings about marketers’ use of their online activity to tailor advertisements, according to a recent survey of more than 2,500 adults.

In March 2008, adult consumers were asked how comfortable they were with websites’ use of information about their online activity “to tailor advertisements or contents” to their hobbies and interests. Only 41% of the respondents answered that they were either “very comfortable” (7%) or “somewhat comfortable” (34%). Fifty-nine percent of the respondents answered that they were either “not very comfortable” (34%) or “not comfortable at all” (25%).

In the report on the survey, Dr. Alan F. Westin observed that online advertisers have maintained that Internet users would appreciate receiving customized ads and content, thus reducing the annoying user-irrelevant offers.

“However, our results suggest that this potential outcome did not seem to influence a majority of online users to overcome their underlying concerns about tracking and profiling,” Dr. Westin wrote.

Effect of Privacy Safeguards

In order to determine whether website operators can help users feel more comfortable by implementing privacy safeguards, the survey sponsors drew on the FTC staff’s proposed privacy principles, which were issued on December 20, 2007 (see “Trade Regulation Talk,” December 21, 2007).

The relevant principles follow:

1. Transparency and consumer control. Websites that collect data for behavioral advertising should provide a statement informing users of such collection of data and allow consumers to choose whether to have their information collected.

2. Reasonable security, and limited data retention, for consumer data. Companies collecting data should provide reasonable security for such data and retain the data for only as long as is necessary to serve a legitimate business or law enforcement need.

3. Affirmative express consent for material changes to existing privacy promises. A company must keep any promises it makes on handling and protection of consumer data. Before a company can change its policy and use data in a manner materially different manner, it should obtain affirmative express consent from affected consumers.

4. Affirmative express consent to using sensitive data for behavioral advertising. Companies should only collect sensitive data for behavioral advertising if they obtain affirmative express consent from the consumer to receive such advertising.

Further information regarding the principles appears here at the FTC website.

The same respondents to the first question were asked: “If a web site adopted and followed all of these policies, how comfortable would you then be with companies using information about your online activities to serve customized ad or content to you?”

With these new conditions, 55% of the respondents answered that they were “very comfortable” (9%) or “somewhat comfortable” (46%). Forty-five percent answered that they were “not very comfortable” (26%) or “not comfortable at all” (19%).

Thus, there was a 14 percentage point shift among comfortable consumers (from 41% to 55%) when the FTC recommended privacy and security policies were applied.

Consumers Still Not “Very Comfortable”

“However, it should be noted that the adoption and installation of the four privacy safeguards did not significantly increase the percentage of adult Net users who said they would be ‘very comfortable’ with profiling and customization. This set of users increased only 2%, from 7% to 9% . . .”

Dr. Westin suggested that the increase of comfortable consumers to only 55% may reflect a skepticism that web sites would really follow the privacy and security safeguards and a concern that there would be no user remedies or protective regulation to control such web sites that did not follow the safeguards.

Nevertheless, the survey strongly indicated that the current profiling of users and customization of advertising, without the adoption of privacy and security policies, would not satisfy a strong majority of the online user community, the report concluded.

The study is “How Online Users Feel About Behavioral Marketing and How Adoption of Privacy and Security Policies Could Affect Their Feelings,” results of a Harris Interactive/Westin Survey, March 10-17, 2008, sponsored by Privacy Consulting Group, Alan F. Westin and Robert R. Belair.

Further information about the study appears here at the Harris Interactive website.