Interactive Advertising Bureau of Canada (IAB Canada)

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Written Submission In Response To:
The Office Of the Privacy Commissioner’s Draft Report on the 2010 Consultations (With Specific Focus on Online Tracking, Profiling and Targeting)

Submitted to: Office of the Privacy Commissioner of Canada Re: 2010 Consumer Privacy Consultations

112 Kent Street
Ottawa, ON
K1A 1H3

Submitted by: IAB Canada

Date: Dec.6, 2010

The Intent Of This Submission

This submission is written on behalf of all of the Members of the Interactive Advertising Bureau of Canada (IAB Canada). IAB Canada would like to thank the Privacy Commissioner for the opportunity to participate in the Toronto Consultations, and in the call for comments with regard to the Draft Report On The 2010 Consultations.

Summary

• IAB Canada reiterates its position regarding self-regulation for interest-based advertising within the Interactive Publishing and Advertising Industry, consistent with the principles of the Personal Information Protection and Electronic Documents Act (PIPEDA) and seeks the OPC's endorsement of these best practices.
• IAB Canada calls for more opportunities to participate in the various research projects currently being funded by the OPC that have an impact upon IAB Canada and its Members.
• IAB Canada summarizes recent research that demonstrates the negative effects of over-regulation of interactive advertising and interest based advertising.

About IAB Canada…

Who We Are

The Interactive Advertising Bureau of Canada (www.iabcanada.com), is the national voice and thought leader of the Canadian Interactive marketing and advertising industry. As a not-for-profit association, IAB Canada represents over 240 of Canada's most well-known and respected Advertisers, Agencies, Media Companies, Service Associates, Educational Institutions and Government Associations.

Mission Statement

In concert with our Members, IAB Canada works to establish and communicate Interactive advertising best practices that optimize investments across all areas of the buying chain, leading to increased value for all stakeholders.

We do this by:

• Being the pre-eminent source of Canadian cross-media (CMOST) and other Interactive advertising Research;
• Setting Standards and Guidelines that make Interactive media easier for all parties concerned, to plan, buy, design, execute, track and evaluate;
• Promoting research, standards and the overall effectiveness of Interactive advertising to the Canadian marketing community and the Press, via various types of Education, including Courses, Events, and through the IAB Canada Newsletter and Website;
• Assisting the industry in Attracting, Training and Motivating Human Resources;
• Being an Advocate for the Canadian Interactive advertising industry to the Canadian government; and,
• Expanding the breadth and depth of IAB Canada Membership, to increase communication and Networking between industry stakeholders and Members.

INTEREST BASED ADVERTISING IS IMPORTANT FOR CANADIAN BUSINESS AND CANADIAN CONSUMERS

Canadian Consumers have become accustomed to having access to a huge range of beneficial Online services for free and indeed they have expressed a strong preference against paying for content. The reason why Canadian consumers have access to free content is because those content providers are supported by effective advertising. Consumers are aware of this exchange and are willing to be exposed to advertising to keep Online content free.

IAB Canada and its Members serve two very important constituencies: On one hand, they serve Canadian Businesses who either want to promote their products or who provide advertising space to pay for Online services that are provided to consumers. On the other hand, our Members serve Canadian Consumers by providing content for free or at significantly reduced prices.

Online advertising can be roughly divided into two categories, depending on whether targeting techniques are used. In the first category, users are shown advertising that may be tailored to the page the consumer is visiting but there is a strong likelihood that the ad will not be particularly relevant to the consumers. The second category is tailored to the page and to the user, resulting in a more relevant ad that is more likely to be perceived by the consumer as informative and is more effective for the advertiser.

Consumers are not being fooled or manipulated by targeted advertising, but rather, are responding to it, because it is able to deliver relevant advertising messages when Consumers are making choices re: purchase decisions. Because these advertisements are more effective and more informative to the consumer, they generate more revenue for the content creators, allowing them to create more free content for users. It is a virtuous circle.

Conversely, if interest-based advertising were more heavily regulated or otherwise limited, Canadian content providers would be at a disadvantage as they would not have access to such important revenue sources that are available to competitors in other jurisdictions. In fact, recent research shows that over-regulation results in a 65% decrease in advertising effectiveness. Canadian content providers cannot participate equally in the Online marketplace if their principal sources of revenue are 65% less valuable than for their competitors who are a click away. Effectively, over-regulation is a tax or surcharge that is borne by the Canadian content producer and, ultimately, the Canadian consumer.

THE SOLUTION

IAB Canada and its seven industry partners propose the adoption of best practices, consistent with the world-leading privacy principles contained in PIPEDA, which results in a win/win solution so that Canadian consumers will continue to have access to diverse, high-quality Canadian content for free, while allowing the web publishers and platform developers who produce that content to remain economically viable in Canada.

This proposal is the product of the following partners who have been collaborating on this important project since June 2009 to support an industry-wide commitment to the widespread adoption of best practices to protect consumer privacy:

• IAB Canada
• Advertising Standards Canada (ASC)
• The Canadian Marketing Association (CMA)
• The Association of Canadian Advertisers (ACA)
• The Institute Of Canadian Communication Agencies (ICA)
• l’Association des agences de publicité du Québec (AAPQ)
• The Canadian Media Directors Council (CMDC)
• Le Conseil des directeurs médias du Québec (CDMQ)

WHY IT WILL WORK

IAB Canada and its Members propose the industry-wide adoption of the following four best practices that are consistent with the world-leading privacy principles contained in PIPEDA to educate and empower consumers in making meaningful and informed choices about interest-based advertising.

Consumers who understand how businesses collect and use their personal information are able to make informed choices, provided that businesses give clear information and allow for meaningful choices. PIPEDA sets a high standard for the protection of consumer privacy, but the principles of PIPEDA are completely compatible with interest-based advertising when adopted with the following measures:

Transparency

The transparency initiative of IAB Canada and its members gives Canadian consumers immediate notice when the Websites that they are visiting are displaying interest-based advertising. This would be done via a consistent and readily-recognized ?icon? placed either on the advertisements themselves or in prominent navigational areas on the Content Creators’ Webpages.

Education

Consumers will be given one-click access to clear and concise information about Online advertising practices, via an IAB Canada-hosted and -created ?PrivacyMattersCanada.com? Website, so that Consumers can understand how and when their privacy is protected within various targeted advertising processes. In addition, this IAB Canada Website will provide consumers with useful information about protecting themselves in other areas on the Internet, which represent greater risks to their personal privacy.

Choice

Consumers already have effective tools to control cookies through their browser settings. In most modern browsers, this control can be general, covering broad categories of cookies, or very specific, allowing a consumer to prevent individual sites, advertising networks or other third parties from deploying cookies.

The IAB Canada initiative provides Consumers who may not be familiar with how to change their browser’s security settings with one-click access to an effective opt-out from interest-based advertising for those who may wish to do so. While many Online publishers and advertising networks currently provide easy means to opt-out, this initiative will consolidate this for consumers and provide them with one stop for making effective choices across the Canadian Online advertising industry.

Accountability

IAB Canada and its industry partners will adopt and administer an accountability program to ensure that consumer opt-out preferences with respect to interest-based advertising are retained.

TIMING

IAB Canada is prepared to roll out this important self-regulatory initiative immediately.

A LAST NOTE ABOUT THE COOKIE: AN INTEGRAL PART OF OPTIMIZING ONLINE EXPERIENCES FOR CONSUMERS

Any understanding of targeted advertising requires a nuanced understanding of browser technology and cookies in particular. Cookies are fundamental to the effective delivery of advertising whether it is targeted or not. Cookies are neither good nor bad, but are a neutral technology that facilitate much of the modern Internet experience.

For consumers, for example, cookies maintain user preferences, can extend a user’s interaction with a Website for multiple browsing sessions and are necessary for the proper functioning of shopping baskets used on most e-commerce sites.

For advertisers, cookies facilitate the delivery of better ads. For example, recognizing a repeat visitor using a cookie can prevent a user from being presented with the same advertisement multiple times.

For content providers, cookies allow a better understanding of how visitors use a particular Website on a day-to-day basis.

For media researchers, cookies allow the comparison of ad effectiveness across various types of offline and Online advertising campaigns.

For Online audience measurement and Web analytic companies, cookies allow a day-to-day and month-to-month analysis of a Website’s performance, in either non-commercial or commercial contexts.

All modern browsers permit consumers to manage their cookie preferences, in both general terms and in great detail. Along with the new initiatives proposed by IAB Canada, consumers who are unsure of how to alter their browser settings will now have the additional ability to permanently opt-out of interest-based advertising though a simple, one-stop method.

EDUCATED CONSUMERS ARE MORE COMFORTABLE WITH TARGETED ADVERTISING

As Online advertisers and advertising networks have increased their transparency to consumers, interesting observations have emerged. On Websites where consumers are given the opportunity to manage the interests that are associated with them for the delivery of targeted advertising, very few consumers actually choose to opt-out from receiving targeted advertisements. On the contrary, the vast majority – up to 90% – instead choose to further refine the interests they are associated with. This delivers better and more interesting advertising to the consumer, while increasing the effectiveness of the advertising.

When advertisers adopt greater transparency and consumer education, consumers not only choose to continue to receive interest-based advertising but they choose to receive better advertising. Consumers and content providers win.

CONSUMERS RESPOND FAVOURABLY TO INTEREST-BASED ADVERTISING

Though most Online advertising is not targeted or based on perceived consumer interests, the results of interest-based advertising campaigns show that they are more effective and more meaningful to consumers. Side-by-side comparison of interest-based and non-interest-based campaigns show that consumers respond 3X to 23X better to targeted campaigns.

Ordinary Online advertising can often be an interruption or a distraction to the consumer’s primary purpose for visiting a Website. When the advertisements are relevant to the user, they are informative and a service to the consumer.

OVER-REGULATION HARMS INDUSTRY WITH NO BENEFIT TO CONSUMERS

Recent research published by Professor Avi Goldfarb of the University of Toronto has clearly demonstrated the negative effects that are associated with the over-regulation of interest-based advertising.

Over the course of eight years, Professor Goldfarb traced the effects of European regulations that strictly curtailed the use of targeted advertising. The regulatory measures examined include:

• Requirements that Websites proactively and explicitly inform consumers about the use of cookies;
• Restrictions on pixel-tracking of a consumer's progress across different Webpages;
• Limitations on the collection of clickstream data; and
• Limitations on the use of past browsing behavior to categorize potential customers based on perceived interests.

With the above regulations in place, advertising effectiveness was 65% lower than in jurisdictions where such limitations were not in place.

Adopting measures such as those described above reduce advertising effectiveness by 65%, which devalues advertising by 65% and reduces revenue to Online content providers by 65%.

Professor Goldfarb also demonstrated that the devaluation of Online advertising was even worse for general interest Websites, which leads to the conclusion that these sites would be harder hit if Canada were to adopt such a model of regulation.

If Online advertising becomes 65% less effective than it currently is, current spending for Online advertising would have to increase from $1.82 billion to $5.2 billion to keep up. Realistically, advertisers would not increase their expenditures to this level, meaning that content providers would have to significantly decrease their prices to compensate for this lack of efficiency.

This would result in both job losses and a significant decrease in quality Canadian content being made available to Canadian consumers.

This is not simply an abstract matter of decreased revenues for advertisers, but is a significant challenge to keeping quality Canadian content Online. In the borderless world, Canadian content producers are competing in a global marketplace. If Canadian producers are under-funded as a result of over-regulation, they will simply disappear and be replaced by non-Canadian content that can be efficiently funded by advertising revenues.

How Do We Know It Was Over-Regulation Which Reduced Online Ad Effectiveness?

To check that it was the Regulation that created with the reduction in advertising effectiveness, rather than unobserved changes in European Consumers' attitudes towards Online advertising, the study used the fact that sometimes people browse Websites outside their country...

The study found that when Europeans browsed Websites outside of Europe) that were NOT affected by such laws, there was NO reduction in advertising effectiveness.

Conversely, when non-Europeans browsed EU Websites that were covered by the laws, there WAS a reduction in ad effectiveness.

WORKING TOGETHER

In order to find a balanced solution that allows for long-term Canadian business viability and innovation, as well as Canadian consumer protection and quality content for Canadian consumers, the OPC, industry and research organizations need to continue to work together.

The interactive advertising industry and its key stakeholders need to be involved in evolving research on targeted advertising where research results will be used to inform policy development. This is particularly important in connection with research being funded by the OPC.

Specifically, industry should be involved with and kept up to date on developments related to the following OPC research projects:

• The Privacy Risks of De-identified and Aggregated Consumer Data, currently being conducted by PIAC.
• A Privacy Protective "Proportionate ID Digital Wallet" for Canadians: Open Prototyping and Public Policy Alternatives, currently being conducted by the University of Toronto.

On an on-going basis, the OPC should be encouraging industry participation in all research projects that implicate all stakeholders in the debate over targeted advertising.

IN SUMMARY

PIPEDA is flexible, robust and does not need any changes to address targeted advertising. IAB Canada advocates for the adoption of industry-standard best practices in the form of the four new, self-regulatory industry initiatives described earlier (Transparency, Education, Choice and Accountability), which are entirely consistent with PIPEDA.

These best practices support existing obligations of notice, consent, openness and accountability contained in PIPEDA, and facilitate Canadian consumers’ continued access to the widest range of quality, free Canadian content Online, and support the continued economic viability of Canadian publishers, advertisers, agencies and innovators within the Canadian and global media ecosystem.

Sincerely,
Paula Gignac
President, IAB Canada
www.iabcanada.com