NAI Blog

Today, the NAI released its 2011 Annual Compliance Report, the third annual report published under the 2008 NAI Code of Conduct. The results of our 2011 annual review are encouraging. Overall, our member companies continue to meet the obligations of the NAI Code and to adopt best practices even where not required by the Code. Here, we summarize a few key findings:

Transparency: In 2011, our member companies vastly increased the transparency of online behavioral advertising (OBA). Our members, early adopters of in-ad notice, have been instrumental in rolling out the DAA’s Advertising Options Icon, an icon that is served tens of billions of times a day. Our members also ramped up efforts to educate consumers about OBA, collectively contributing 4.1 billion ad impressions to the NAI’s education campaign. Those ad impressions lead users to the NAI’s education site, which saw 2.5 million unique visits in 2011, a five-fold increase in visitors over the prior year. Members also began in 2011 to disclose the interest segments related to health that they use for OBA in accordance with the NAI’s new health transparency policy.

Choice: As a result of our members’ efforts to increase the transparency of OBA practices, traffic to the NAI website increased dramatically, with 8.5 million unique user visits in 2011. Six million unique users visited the NAI opt out site, and 840,000 opted out of one or more NAI member company on the NAI’s opt out page. These numbers suggest that users are increasingly aware of OBA practices and the choices available to them.

Looking forward: As in past years, we used the compliance process not only to assess the state of our members’ compliance and spread best practice recommendations, but also to identify areas in which we think the NAI and its members could do better. To that end, the report recommends that the NAI increase its technical monitoring, and that members be required to regularly report the domains they are using for OBA to supplement that monitoring. We think these additions to our compliance process will help ensure that user choice is reliably and fully honored at all times.

We believe that 2012 will see even more advances for the NAI and self-regulation. We expect transparency to continue to increase at an exponential rate through the continued deployment of the Advertising Options Icon, through educational banner ads, and through other innovative tools. As noted, we intend to add further accountability to our compliance program in the form of increased technical monitoring. We will review even more companies — we reviewed 23 companies as part of our first compliance review in 2009, 34 in 2010, and 60 in 2011 — and we expect to review more than 80 in 2012. By 2013, we expect to review more than 100 companies. As a result, each year, more companies not only agree to abide by the principles encompassed in the NAI Code, but also are held to those promises through our compliance process. To keep pace with this growth in membership, we plan on bringing on additional staff dedicated to compliance. We also plan to update our website to make it easier for users to find relevant information and to opt out if they wish. We think these changes will benefit our members and consumers alike.

We are proud of the work we do in our annual compliance reviews and throughout the year to help ensure the ongoing compliance of our growing membership with the NAI Code and NAI policies. Our compliance program includes not only reactive investigations into allegations or evidence of non-compliance, but also proactive, in-depth examinations of members’ business practices and policies on an annual basis. It also helps to inform the development of NAI policies by identifying new technologies, best practices, and evolving business models. We are delighted to work with member companies who, on the whole, express commitment to and a desire to learn from the compliance review process. We are excited to continue and improve our compliance program in 2012.

If you would like to learn more about our findings and our plans for the future, we encourage you to read the 2011 Annual Compliance Report and accompanying press release.

–Meredith Halama, Assistant General Counsel for Compliance

Earlier this week a Stanford graduate student posted a blog entry announcing “preliminary findings from experimental software” about how companies participating in the Network Advertising Initiative (NAI) handle opt outs to online behavioral advertising.

Unfortunately, these preliminary findings confuse the important distinction between longstanding “Do Not Target” choices offered by online advertisers, and new browser technologies that offer users the promise of not being “tracked.”

Under the NAI self-regulatory code, companies commit to providing an opt out to the use of online data for online behavioral advertising purposes. We’ve long recognized that consumers should be provided a choice about whether data about their likely interests can be used to make their ads more relevant. But the NAI code also recognizes that companies sometimes need to continue to collect data for operational reasons that are separate from ad targeting based on a user’s online behavior. For example, online advertising companies may need to gather data to prove to advertisers that an ad has been delivered and should be paid for; to limit the number of times a user sees the same ad; or to prevent fraud. Gathering this operational data may involve the use of cookies separate from those used to enable interest-based ad targeting, or to maintain a consumer’s opt out preference.

We want to be very clear that we are firmly committed to enforcing the NAI Code’s requirements that companies provide users with an opt out to behaviorally-targeted ads. As part of our annual review process, we routinely review a broad variety of inputs, including reports in the media and from advocates. The online medium is remarkably transparent, allowing for evaluation of company data collection practices and of the effectiveness of self regulation. If there are credible allegations of a violation of the NAI Code, we investigate them; and if there are violations, we report them.

However, it’s also important to draw a fair distinction between existing industry self regulatory commitments to limit ad targeting based on user interests, and the views of proponents of newly emerging “Do Not Track” technologies who argue that advertising companies should be stopped from collecting any data. We’ve been following with interest the recent introduction by browser manufacturers of “Do Not Track” features that promise in various degrees to limit browser data collection. A robust debate is going on about how these browser features might be integrated with the existing industry self-regulatory programs, but for now there is no universally agreed upon definition of what “Do Not Track” means.

Given the rapidly evolving nature of Internet technology, it’s entirely appropriate for self regulatory programs to evaluate how best to adapt these new browser technologies. But in order for consumers and companies to understand what is being offered on the “Do Not Track” playing field, the goal posts can’t be a moving target. More importantly, we should be clear about when rules changes will have profound consequences: prohibiting the gathering and use of operational data may inhibit the ability of companies to serve even non-targeted ads; impair efforts to stop fraud by bad actors; and seriously jeopardize the viability of advertising supported free content and services on the Web. There is a vital distinction between limiting the use of online data for ad targeting, and banning data collection outright. We look forward to being part of the dialogue about how best to define – and deploy – a “rulebook” for online choices that are not only consistent with consumers’ privacy expectations, but that also preserves the viability of ad-supported online services that millions of consumers enjoy every day.

-Chuck Curran, Executive Director, NAI

In December, the Department of Commerce’s Internet Policy Task Force issued a Green Paper for public comment: “Commercial Data Privacy and Innovation in the Internet Economy: A Dynamic Policy Framework.”

The NAI has now submitted comments that address the Task Force’s questions that relate to online behavioral advertising. The NAI’s comments explain how the Fair Information Privacy Principles have helped inform sector-specific self-regulatory efforts like the NAI.  The NAI comments also show how voluntary, enforceable codes of conduct can serve as the most effective means to enforce basic privacy principles and foster marketplace certainty, while at the same time securing deployment of innovative approaches to consumer transparency and choice in a dynamic technology marketplace.

The NAI’s comments can be found here.

–Meredith Halama, NAI Assistant General Counsel, Policy

Today the NAI is joining leading advertising and marketing associations in the launch of the cross-industry program for self-regulation of online behavioral advertising. At the program’s web site, www.aboutads.info, companies can now register to use an enhanced notice icon (the “Advertising Option Icon”) to be displayed within or near online ads or on Web pages where data is collected and used for interest-based ads.

Additionally, the program will soon offer an easy-to-use consumer opt out mechanism in which NAI members will participate.

NAI member companies are already deploying enhanced notice mechanisms for hundreds of millions of online advertisements, and the NAI looks forward to working with the cross-industry effort to deploy a comprehensive approach to consumer transparency and choice.

-Chuck Curran, NAI Executive Director

The Department of Commerce’s Internet Policy Task Force recently initiated a comprehensive review of the nexus between privacy and innovation in the Internet economy, seeking public comment from all Internet stakeholders. The Department intends to analyze the comments received and then issue a report that will contribute to the Administration’s domestic policy and international engagement in the area of Internet commerce.

The NAI yesterday filed comments with the Department addressing specific questions posed in its Notice of Inquiry as applied in the context of online behavioral advertising. Our comments discuss how the free flow of data has been critical to innovation on the Internet by enabling advertising models that permit increasingly diverse content and services to be offered to consumers free of charge. We then address some of the Department’s questions with respect to the U.S. privacy framework going forward, with particular emphasis on the importance of self-regulation. Finally, we describe privacy-enhancing technologies that have recently been developed by the NAI and its member companies to offer consumers greater transparency and choice with respect to the collection and use of data for online advertising, including the development of technical specifications for in-ad notice, ad preference managers developed by various NAI member companies, and the NAI’s durable opt-out protector.

The NAI’s comments can be found here. We look forward to working with the Department and other policymakers in addressing these important issues.

–Meredith Halama, NAI Assistant General Counsel, Policy

Today the NAI is releasing a first-of-its-kind study about the economic value of behavioral advertising.   The study was conducted by former FTC Consumer Protection Bureau Chief Howard Beales, based on data from twelve NAI members with total ad revenue of $3.32 billion in 2009. Read the study and the NAI’s accompanying press release.

The study finds that behavioral-targeted ads sell for twice the price and offer twice the effectiveness of ordinary run-of-network advertising.   This added revenue flows back to publishers: the survey found that more than half (54.6%) of revenue went towards the purchase of advertising inventory. The study also finds that behavioral advertising revenue accounted for an average of 17.9% of the survey respondents’ overall revenue.
 
The Beales/NAI study highlights the importance of behavioral targeting to the advertising model that supports free online content and services for consumers.  The growing significance of behavioral advertising as a source of revenue for Internet content and services providers underscores the need for careful consideration of policies that would affect the current advertising marketplace and the innovation it supports.
 
We hope that this new economic data will help inform the public policy debate, and the NAI will be filing the study as a comment for the FTC’s “Exploring Privacy” Roundtable process.

Chuck Curran
NAI Executive Director

For its third town hall on online privacy issues, the FTC asked for comment from the online advertising industry and other interested parties on how we could achieve accountability for best practices or standards for commercial handling of data.  The NAI filed comments on that issue last week that we thought might be of interest. NAIFTCThirdRoundtableComments

Our comments focus on how the NAI’s self-regulatory program helps ensure compliance by the 40 companies who have pledged to abide by the NAI’s code for online behavioral advertising.  We also review how the NAI’s compliance process serves as an effective “first line” of accountability that helps the government by allowing it to focus its enforcement efforts on emerging privacy threats and true “bad actors.”  We also discuss the breadth of participation in the NAI’s compliance program by companies in the OBA marketplace and how such broad participation in self regulation promotes continued technological innovation for consumer privacy protection and the adoption of best practices.  We encourage you to take a look and see what you think.

–Chuck Curran, NAI Executive Director