Editors' note: This is a guest column. See Eric Wheeler's bio below.
Let's start with the good news: Congress won't pass any laws this year to halt the collection of anonymous online user data for ad targeting purposes. But as a consensus on "Do Not Track" continues to elude industry leaders and consumer groups -- to date, the World Wide Web Consortium (W3C) has yet to settle on a definition of what "Do Not Track" even means -- the current DNT chaos suggests that the specter of political action looms ever larger. That should strike fear into the hearts of every company that does business online -- particularly startups, but also the Googles and Facebooks of the world.
While the specifics of "Do Not Track" vary greatly depending on whom you talk to, the FTC is likely to go beyond the online industry's highly successful self-regulatory privacy practices, wherein consumers can easily opt out of receiving targeted ads from specific companies and ad networks, and advocate companies stop collecting anonymous user data entirely, or coerce browsers to prevent such tracking by default. This may sound like a good idea to online privacy absolutists, but the practical implications of such regulations would be devastating -- not just for advertisers and the online publishers who depend on their money, but for the technology industry and economy as a whole.
Most painful, consumers themselves would end up suffering, gaining "privacy" (whatever that means in the context of anonymous data collection) at the cost of online subscription fees, less interesting and innovative online experiences, and less relevant advertising. On top of that, get ready for maximally confusing, overboard, opt-in mechanisms on every Website you visit. We are headed for what feels like an anti-Internet, not a privacy movement.
New "Do Not Track" policy could come out as soon as next year, so before it's too late, we need to step back and consider what's really at stake.
Compromising a $300 billion industry
Online advertising has been one of the few unqualified success stories in our economy in recent years. By building a better infrastructure -- enabling brands to underwrite content and show relevant advertising -- the online ad industry has achieved an enviable growth rate. The Interactive Advertising Bureau (IAB) recently reported record ad revenues of $8.4 billion for the first quarter of 2012, a 15 percent increase year-over-year. According to a recent Harvard study commissioned by the IAB, the online advertising ecosystem now accounts for $300 billion of economic activity and 3.1 million jobs within the U.S.
But take away ad targeting, and the anonymous data collection that makes it possible, and the bottom drops out virtually overnight. Goodbye, relevant and effective ads, healthy rates, and healthy growth; welcome back, paywalls, jumping monkey ads, static tech growth, opt-in consent mechanisms and deep profiles tied to your personal information to replace anonymous, cookie-based behavioral advertising.
Handicapping small business
The perils of "Do Not Track" extend well beyond the ad industry. Small publishers and startup ventures alike stand to lose the most under more stringent online restrictions. Most of these companies depend heavily on advertising to generate revenue. Not just any advertising--but interest-based advertising provided by responsible third parties committed to strict industry regulation. Unable to leverage a targeted ad model, they'll likely drive consumers away when left only with paltry generic ads that scream for attention rather than attracting it through relevance -- and they'd have to run a lot more of them, cluttering the screen and infuriating consumers.
Better yet, they would have to employ subscription models where consumers pay a la carte to visit websites, for email, social networking, music, casual games, and other services. A double hit on the economy: take away small businesses' means to make money and make consumers spend more. Good luck with that one.
Anonymous user data is far more than just a lens for ad delivery; for many startups, it's the life's blood of innovation. Once upon a time, a startup called Amazon revolutionized online retail, in part by leveraging behavioral shopping data that it gathered about its customers: by all accounts, this data has become a core piece of its shopping recommendation engine.
Similarly, Netflix uses anonymous, real-time user data to inform recommendations for its customers. The data Trulia processes helps real estate agents improve their listings, and enables consumers to buy or sell homes at the optimal time. Groupon uses mobile location data, as well as anonymous information on users' habits and interests, to help local businesses deliver daily deals to the right consumer at the right time and place.
The common denominator among all of these companies is that they use anonymous data to gain insight into their customers' favorite activities, interests, and connections, enabling them to create highly valuable online experiences that otherwise would have been impossible to deliver. Is the FTC or W3C really aiming to prevent the next Amazon or Netflix from emerging?
Taken as a whole, the potentially dire impact of Do Not Track is clear: the end of a free Internet and a crippling blow to the technology industry. The next W3C gathering will come in early October, providing a natural forum for further discussions on anonymous data collection. A "lame duck" session in Washington following the November election will make it easier for new FTC policy to gain traction.
Industry groups like the IAB, the Digital Advertising Alliance, and the Network Advertising Initiative have developed and enforced strict standards and best practices for consumer privacy. Over 2.25 million consumers have already opted out of various online ads via just one channel, and the industry not only honors these but enforces them strictly. Fully. Hundreds of thousands of small and medium-sized businesses and startups have shown their commitment to protecting consumer privacy online. Now, it's the FTC's turn to honor its commitment to these businesses and the millions of Americans they employ--the very constituents the government agency exists to protect.
What you can do
Don't take it on faith that the FTC will do what's in the best interest of users and businesses. In fact, the agency is under intense pressure from many within the W3C and other privacy hawks to do just the opposite. To ensure that our economy keeps on its path of recovery, you need to lend your voice to the debate. Start by contacting your representative in Congress and let him or her know your position. You can also reach the FTC directly at email@example.com. You can also contribute to the discussion online by tweeting your view at "#KeeptheWebFree #DNTrack #W3C." There's simply too much at stake to sit on the sidelines.