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Online Behavioural Advertising: Advertising 2.0

Online behavioural adverting ("OBA") techniques which use information about a user’s web browsing behaviour to target adverts at specific consumers, is bringing about a revolution (or an e-volution depending how you look at it) in advertising. To the advertising industry, OBA represents online advertising growing up, yet OBA as a sector, in some respects, suffers from its own embarrassment: it is too successful at promoting goods and services to the individual and so, outside its own community, it does not want to draw too much attention to itself.

The traditional and less controversial OBA model revolves around the use of cookies, however other OBA techniques, including the use of "deep packet inspection" continue to push harder at the boundaries of acceptability in terms of privacy and present a range of challenge to laws that were never designed with such technology in mind.

What Are The Key Legal Issues In OBA?

OBA raises a wide range of potential legal issues, from the protection of the privacy rights of individuals, to broader questions of the effects of OBA on the advertising market.

• Consumer law. The Office of Fair Trading in 2010 conducted a market study to assess the impact of OBA on UK consumers. Some of its main concerns over OBA were the use of targeted pricing and pricing discrimination based on online behaviour and postcode targeting.
• I browse therefore I am? Following Phorm and strong public reaction, companies operating in the OBA arena tend to be acutely sensitive to the associated privacy issues. Nobody wants the tag of being the Big Brother of OBA. Consumer pressure, probably more so than regulators, is driving transparency. Google now includes labels next to behaviourally targeted advertisements it serves with details on how a user can opt-out, a practice that is reflected in recent industry proposals to address the requirements of the ePrivacy Directive
• Antitrust. Antitrust issues are likely to impact on the OBA environment in a number of ways, not least through the continued consolidation, alliances and agreements between the key players. Already there is tension between Google and Apple, with Apple allegedly taking steps to try to prevent Google from utilising iAd (iAd allows targeted advertising to take place when users use Apps) and voicing its concerns to regulators over the acquisition of AdMob by Google.

The Future Of The Oba Industry?

There are two potential trends which could significantly affect the future of the OBA industry.

• A tendency towards monopoly or oligopoly? In a recent column in the Wall Street Journal, Professor Tim Wu of Columbia University and now also a senior adviser to the Federal Trade Commission ("FTC") in the US on competition issues which affect internet and mobile markets, commented that "the Internet has long been held up as a model for what the free market is supposed to look like – competition in its purest form". However, as Professor Wu points out "Most of the major sectors today are controlled by one dominant company or an oligopoly. Google dominates search; Facebook, social networking; eBay rules auctions; Apple dominates online content delivery; Amazon, retail; and so on". It is highly likely then, that the OBA market, like other internet markets, will tend towards monopolisation over time.
• Mobile advertising. Mobile advertising takes the OBA ecosystem and applies it to the mobile phone environment. Forecasts for advertising in the mobile environment alone are that spend will triple by 2013.
  
  Mobile advertising also opens up the possibility of targeting based on location, where requirements and practice apply an opt-in approach from users.
  
  Market giants like Google and Apple are positioning themselves in the battle for the smartphone OBA market and have both made strategic acquisitions over the last few months. Apple recently announced that it was cutting the minimum iAd spend by 50%. This may be a consequence of the network only operating across iOS devices, whereas rival’s can target any platform. What is interesting at this time is the antitrust regulator’s approach in the sector. In relation to the Google / AdMob acquisition the FTC was forced to delve into a spot of future gazing because it was unable to realistically predict what the economic consequences of the acquisition would be.

Conclusion

The OBA ecosystem is still in its infancy. Targeting technologies will no doubt become more sophisticated and a key consideration for stakeholders should be the level of transparency and engagement with consumers. Success will likely be linked to consumer buy-in as one only has to look at Phorm to see the potential implications of not achieving this.

What is clear is that as the online community expands and new platforms develop, targeted OBA is a tide that won't be turned any time soon.

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