Wednesday, September 2, 2009 - The Progress & Freedom Foundation Blog

Privacy War II (Part 1): Attack of the Anti-Advertising Axis

Note the disclaimer below, emphasized here

Seventy years ago yesterday, Hitler's troops invaded Poland. Thus began World War II--after twenty years of rising tension in Europe. For the next eight months, the world sat waiting for the other shoe to drop--the sitzkrieg (literally "sitting war") or "Phoney War," as the English dubbed it. Finally, Hitler invaded France and the Low Countries in May 1940 and the real war in Europe had begun.

In an eerie coincidence, yesterday also marked the beginning of Privacy War II: A coalition of ten "privacy and consumer advocacy" groups launched an attack of their own against targeted advertising, calling for sweeping preemptive privacy regulation to stop the much-dreaded "behavioral advertising" (customizing online ads to consumers likely interests based on "tracking" the websites they visit). This war rests on a much-repeated, but little-examined rhetorical fiction (much as Hitler's invasion of Poland was justified by a staged "Polish" attack on a German radio station near the border): Consumers are in dire peril if government does not act to protect them from... what, exactly?

What Churchill said of the debt owed by the British people to the heroic airmen of the RAF during the Battle of Britain could be said about online advertising over the last decade: "Never was so much owed by so many to so few." Never before has advertising done so much good for consumers in funding innovation and creativity on so broad a scale for so many. Yet never before has advertising been so reviled in Washington as now.

No, I'm not actually comparing the coalition to Hitler (surely the dirtiest rhetorical trick in the book), despite my tongue-in-cheek title. But I would be remiss as an armchair historian for not pointing out the significant parallels between the pattern of the World Wars and the Privacy Wars. Whether one wants to say that the "opening shot" of Privacy War II was fired yesterday or at one of the hearings or FTC Town Hall meetings held over the last two years, we clearly are in a sitzkrieg phase of this great Conflict of Visions over information, the great currency of the online economy: The shooting has started, but the real battle won't start until Chairman Boucher actually introduces his much-anticipated legislation.

Privacy War I raged from the mid-1990s to 2001, with the FTC first encouraging self-regulation, then concluding that industry was doing too little and asking Congress for rule-making authority beyond its existing authority to enforce the privacy promises websites and online intermediaries make to users. Much like World War I, Privacy War I ended not with a bang but a whimper: Hearings held in spring 2001 emphasized the benefits of education, user empowerment and self-regulation as parts of a layered approach to privacy concerns. (The terrorist attacks of 9/11 probably also helped to shift legislative priorities away from the push for preemptive privacy regulation.) Subsequent legislative proposals went nowhere.

Thus, regulatory advocates lost the first war, but Congressional inaction ultimately benefited consumers by giving the advertising industry the opportunity to develop self-regulatory systems based on the FTC's core principles (Notice, Choice, Access & Security) and ultimately enforced by the FTC's authority to punish "unfair and deceptive trade practices." This opportunity also allowed the industry to innovate technologically and to mature as a business. Over the last eight years, U.S. online advertising revenue grew by 350% to roughly $25 billion/year. That revenue stream (a mere ~$82/American) has funded the transition of media into the digital era, supporting not only the consumer offerings of giants like Google, Microsoft and Yahoo!, but the hundreds of thousands of publishers in the "Long Tail" of the Internet who rely on advertising revenue to fund "free" content (news, commentary, video, and a boundless wealth of easily accessible information) and services (search engines, webmail, documents, calendars, social networking tools, anti-virus software, etc.). Without this funding stream, the Digital Revolution would have been a pale, content-less shadow of its current self.

It's certainly possible that, with issues like socializing health care taking center stage, onerous data use legislation simply won't go anywhere in this Congress. (This Privatsitzkrieg could be a very long one indeed!) But if those who appreciate the downside for consumers of such legislation are to win real war, whenever it finally comes, we'll need to explain the benefits of personalized advertising and the costs of regulation, while presenting a positive, principled alternative grounded in consumer welfare. Only by doing so can we divide the two camps pushing for regulation:

  1. Those who truly want to do more to empower consumers (as I do), but who have concluded (however reluctantly) that only "strong privacy" legislation (or at least the threat thereof) can make industry get serious about user empowerment. Frustrated by what they see as insufficient technical innovation and delays in bolstering the requirements and enforcement mechanisms of self-regulation, these sincere (if sometimes prodigal) consumer advocates have forged an unholy alliance with:

  2. The anti-advertising zealots who veil their contempt for capitalism in the guise of defending "privacy"--not from the government, mind you, but from the "real Big Brother": corporate America! Their paranoid delusions about the manipulativeness of advertising are exceeded only by their elitist arrogance: on the one hand, presuming that consumers are too stupid or lazy to make their own decisions about privacy, and on the other, ignoring the benefits of personalized advertising to consumers: more relevant advertising plus more and better content.

Like any True Believer, the zealots seem to be impervious to persuasion. But their political effectiveness demands a facade of pragmatism--which only the collaboration of less hysterical, more pragmatic consumer advocates can give them. While the latter group (like EFF, which signed on to the letter, and CDT, which did not, but which has advocated other forms of privacy regulation) may waver in their commitment to user empowerment at times, their core instincts are sound and they may not yet be beyond persuasion.

Convincing them not to endorse sweeping preemptive regulation will require steps:

  1. Getting serious about not only how to empower users but also how to maintain the incentive for industry to do so

  2. Thinking through the costs and unintended consequences of regulation

  3. Establishing once and for all what clear, non-conjectural harms require regulation

I'm not sure it will work, but those of us who cherish the online content cornucopia as a creative miracle of capitalism must try. This is a war of ideas. Others may give despair but for my part, like Churchill, I say:
we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender!

Churchill said of the debt owed by the British people to the heroic airmen of the RAF during the Battle of Britain: "Never was so much owed by so many to so few." Never before has advertising done so much good for consumers in funding innovation and creativity. Yet never before has advertising been so reviled, at least in Washington, as now.

posted by Berin Szoka @ 9:43 PM | Advertising & Marketing , Mass Media , Privacy