JEFFREY BROWN: And finally tonight: how some websites follow what you do online, and a government response to growing concerns.
Ray Suarez has our story.
RAY SUAREZ: For most Americans, browsing, shopping and messaging online have all become part of the fabric of daily life.
But one major concern has garnered new attention over the past year, the way websites and advertisers are regularly tracking and even selling information about the habits and interests of consumers, sometimes without their knowledge or understanding.
Now the government wants to push for more disclosure about personal privacy and tracking practices. The Commerce Department wants to establish a new watchdog monitoring Web privacy, and the Federal Trade Commission earlier this month proposed the creation of a so-called do-not-track option for Web users. That would allow individuals to click a button on their Web browser so they could not be tracked by specific websites.
The FTC proposal is called unworkable by the online advertising industry.
We look at these practices and how the proposal would work with Jon Leibowitz, chairman of the Federal Trade Commission, and Mike Zaneis, general counsel of the Interactive Advertising Bureau, which represents online companies that sell to advertisers, including Websites like Google, Yahoo! and Facebook.
And, Mr. Chairman, what is a surfing computer telling the site it visits? In other words, what do websites and Internet service providers know about your Web habits?
JON LEIBOWITZ, chairman, Federal Trade Commission: Well, that's a great question.
And one way to sort of think about this is, imagine you are in a mall, and there's a guy behind you, and he's sort of following you a few feet behind. And he doesn't know your name, but he sort of knows where you live and what kind of credit card you are using and what you are interested in buying.
And he's sending sort of e-mails off or calling people in front of you and saying, here is what Mr. Leibowitz is interested in. And people are coming out from stores and asking -- and asking whether you want to buy, you know, a particular item.
That's sort of what goes on with Web tracking today, where third-party -- what are known as third-party cookies sort of follow consumers around, surreptitiously on the Internet, to deliver targeted ads.
Now, what we have called for is the ability of consumers to be able to opt out of that kind of third-party cookie tracking.
RAY SUAREZ: So, would consent be given, when it's given, overall, any time you visit a website, any time you log on? I mean, how often would have you to give this permission?
JON LEIBOWITZ: Well, the way we think this system would work best is through Internet browsers. And, in fact, we were very heartened. After we released our report, Microsoft and Mozilla, the two largest browsers of browsers -- Mozilla runs Firefox -- endorsed our proposal and said they are going to come out with a do-not-track mechanism that would be in the browser. You could just use your browser to opt out of tracking.
Now, I might not opt out of tracking. I happened to like targeted advertisements. But consumers ought to have a choice.
RAY SUAREZ: Mike Zaneis, where does your association come down on that proposal?
MIKE ZANEIS, general counsel, Interactive Advertising Bureau: Well, there's no question that, as an industry, we agree that we need to increase consumer transparency about what data collection practices are ongoing on the Internet.
We also want to provide consumers with that choice, and easy to use, really, one click. If they want to opt out of this data collection and use, they should have that ability to do that. In fact, there are some options today, both through industry self-regulatory websites that allow them easily to do that, but also through their browser controls, by filtering out cookies, whether they are first-party or third-party cookies.
Sometimes, you know, some proposals can be a little heavy-handed, shall we say, things like the Internet Explorer option, which is a proposed tool for consumers. It's not a do-not-track mechanism, but it's actually a blocking tool.
And what that means is, it blocks content from third parties. And that could be third-party news content. It could be perhaps even information that a website needs to run their website. It's not just about advertising.
RAY SUAREZ: Well, what would change? If Mr. Leibowitz's proposal became the rules of the road, what would change about the user experience, in the view of your industry?
MIKE ZANEIS: Frankly, as far as exercising choice, not a whole lot. As I said, there are a number of tools out there that consumers can utilize. They are empowered if they want to opt out of the system today.
We, as an industry, need to do a little better around providing real-time, easily discoverable notice, so then consumers understand how information is being used, and easily can opt out if they want to. So, the consumer experience wouldn't be that different today, because the industry agrees with these high-level principles.
I think what we want to avoid and what we haven't talked a lot about is the economic value that online advertising, and in particular relevant advertising through targeted messaging, really provides to consumers, because there is no such thing as free content or services. There's only content and services that are freely available to consumers because they are paid for by advertising.
RAY SUAREZ: They are doing it already, they say; self-regulation is adequate to the task.
JON LEIBOWITZ: Well, I would say that I think Mr. Zaneis is pushing his organization in the right direction. And I want to commend him for that.
But we do think that the sort of opt-out regimes are very, very cumbersome right now. I don't think he would disagree with me. Not every company offers an opt out. And to have consumers go to each site that they don't want to be tracked by and click a button is a very, very hard thing to do.
We would like to see -- and, again, we have been very, very heartened by this -- we would like to see the browser community do this voluntarily. They seem to be stepping up to the plate. What we have heard privately from advertisers is that they are very supportive of putting more restrictions or allowing consumers the choice of whether to be followed by third-party advertisers and third-party...
RAY SUAREZ: Well, right now, if you go to the choices, row of choices on the top of your navigating program...
JON LEIBOWITZ: Right.
RAY SUAREZ: ... can you disable that function yourself, or is that something that is really hard to do?
JON LEIBOWITZ: I think, if you look hard enough, some companies will give you the option of doing that.
So, for example, Google's Chrome browser allows to you travel incognito. It is hard to find that incognito mechanism. And what we would like to do is see that it is a little clearer to consumers, so that, again, they can opt out of third-party tracking, because people ought to know what -- people ought to have a choice about where their information is going.
You know, it's different between, when -- if you go on a site like an Amazon, you have a first-party relationship with that site. You don't mind if they collect your information and give you -- tell you what books might be relevant based on what you have purchased before.
But, when it comes to companies sort of surreptitiously collecting information about you and possibly selling it to other companies, you ought to be able to make a choice. You ought to be able to opt out from that.
JEFFREY BROWN: This information has value, as Mr. Leibowitz just implied. If I give it to you, if I tell where you I am coming from and where I am going to, because my computer has a thumbprint...
MIKE ZANEIS: Right.
JEFFREY BROWN: ... shouldn't I get something for that from your members? Here, Ray Suarez. Here is a coupon. Here is a little something to recognize that you have just given me something of value?
MIKE ZANEIS: I think that's right. I think what you are pointing to is the value exchange, Ray.
And what happens today technically is, as you go from one website to another to another on the Internet, this site has to, through what is called a refer, know where you have come from and where you are going. That technically is third-party tracking.
We don't want to shut that off. I don't think that's what the chairman is talking about. And so what we want to do is give -- around behavioral advertising, that relevant ad, we do want to empower consumers to opt out of that, because what we know is that the industry is really dependent upon sending relevant messages at the right time.
We know -- at the IAB, we conducted a survey earlier this year and demonstrated that greater than 80 percent of the online ad spend would be affected by -- under the FTC's definition. I'm not saying negatively affected, because we don't know exactly what do not track may mean.
But we also know that targeted ads are two-and-a-half times more effective and worth that much more revenue to the publishers and to the marketers than non-targeted ads, which really are just spam.
RAY SUAREZ: Uh-huh. Well, he's bringing up something that would threaten...
JON LEIBOWITZ: Well, I...
JEFFREY BROWN: ... the value of commerce. Do you have to tread carefully here?
JON LEIBOWITZ: Well, I think you do have to tread carefully.
But I also think that the notion that the sky is going to be falling down if consumers are allowed to opt out of targeted ads is some -- and I don't -- and you haven't said it, but others have -- is somewhat exaggerated.
So, for example, in 2003, before I came to the commission, but when we passed the rule requiring do not call, allowing people to join the do-not-call registry, people said and the opponents said that this would be the end of commerce as we know it.
And, of course, it turned out to be one of the best programs for protecting Americans' dinner hours and giving them some peace and quiet at home. The humorist Dave Barry has called it the most effective government program since the Elvis stamp.
And right before we issued this report, a very respected Washington lobbyist called me up. And he said, if you issue this report, and you even call for a do-not-track mechanism, it will be the end of the Christmas season. There will be -- you know, Internet -- Internet purchases will go down enormously because Americans will be afraid to use -- to buy goods online.
Well, it turns out this has been one of the best Christmas seasons in recent years. And I think that there is a way to allow targeted marketing for those people who want it and also allow people to opt out for those people who want that and don't want targeted ads.
MIKE ZANEIS: And I wasn't that lobbyist who made a call, just for the record.
JON LEIBOWITZ: No, you were not that lobbyist.
JON LEIBOWITZ: That is exactly right.
MIKE ZANEIS: But I think the chairman makes a great point, which is we do have to be careful, because we are coming off of a fantastic Christmas shopping season.
And the online ad industry is about to finish up its best year ever. And so there's not a failure of the marketplace. What we need to do is understand that consumers care about privacy, and we need to -- proactively. We have done this as an industry through the guidance of the FTC's own privacy principles. We need to be responsive and to continue to push out solutions.
RAY SUAREZ: Gentlemen, thank you both.
MIKE ZANEIS: Thank you.
JON LEIBOWITZ: Thank you.