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Is the draft privacy bill a threat to mobile marketing?

The Congressional draft bill has potentially sweeping repercussions for mobile marketing. Industry experts fear if the bill is passed users may be required to opt-in to all forms of targeted mobile marketing.

A statement released with the draft legislation acknowledges the importance of online advertising and stated that the bill would not disrupt its well-established and successful business model. However, the bill goes far beyond the long-recognized standard of opt-out for third-party sharing of data, instead requiring affirmative prior consent.

?A number of the provisions in the discussion draft privacy bill proposed by Representatives Boucher and Stearns would, if enacted, affect the mobile environment and how companies use phone numbers collected from consumers for marketing purposes,? said Christopher M. Loeffler, an attorney in the advertising and marketing group at Kelley Drye & Warren LLP, Washington.

?A consumer's telephone number is squarely within the definition of ?covered information?? the term used in the bill to describe a broad range of consumer information and identifiers,? he said.

Stern provisions
If the bill is enacted, one of the most notable requirements for mobile marketers would be the obligation to display a privacy policy describing the business' information collection and use practices prior to the collection of any covered information.

?There are also very distinct requirements regarding the information that must be contained in the privacy policy," Mr. Loeffler said. "Notably, this would apply to information collected offline as well as online.?

What is worse is that if a mobile marketer uses an unaffiliated third party to implement its campaign ? as many marketers do ? disclosure to that third party would require a consumer's opt-in consent, unless the third party meets the bill's definition of a service provider and certain requirements are satisfied, per Mr. Loeffler.

Location-based marketing will also be affected.

The bill would require a consumer's opt-in consent to disclose location-based information. This would directly affect SMS campaigns that use GPS to deliver location-based messages.

?Although the manner by which consumers will opt-in and consent to have their data collected is not yet known, what is clear is that Congress is seemingly putting the onus on companies rather than consumers to make their data collection practices known,? said Shira Simmonds, president of Ping Mobile, Englewood Cliffs, NJ.

?One question that arises is whether the transparency of a company's data practices will outweigh the potential bottleneck of having to get a consumer's consent," she said. "In addition, because mobile marketing is so dynamic, impulsive and immediate, it could very likely be encumbered by having to get consumer consent every time an offer of value is available.?

DM gets dimmer
The Direct Marketing Association expressed disappointment with the scope and broadly restrictive nature of the draft privacy legislation proposed by Representatives Rick Boucher (D-VA) and Cliff Stearns (R-FL).

Requiring notice and consent from an individual prior to any collection, use, or disclosure of information for any purpose, would threaten the most basic of direct marketing practices, according to the DMA.

?The proposed privacy legislation, if enacted, would have a significant negative impact on mobile marketing,? said Andy Lustigman, principal attorney at The Lustigman Firm, New York. ?Clearly, by exempting marketing and advertising services from operational services, it is aimed at restricting marketing practices.

?While consent is based mostly on a notice and opt-out paradigm, the legislation fails to address current data collection and consent processes, or how such processes can be utilized should the law go into effect,? he said.

?Moreover, smaller businesses will have difficulty complying with all aspects of the disclosure restrictions, who would be faced with significant liability for engaging in long-standing legitimate practices.?

Although the bill would not require consent for data collected for ?operational purposes,? it specifically excludes marketing, advertising and sales activities from that operational definition, making it clear that lawmakers intend to focus on the marketing and advertising community.

An opt-in consent requirement would be detrimental to the delivery of online and mobile advertising that increasingly supports the convenient access to content, services, and applications over the Internet that consumers have come to expect at no cost to them.

This could potentially have a crippling effect on Internet commerce and innovation. It would also limit access to small publishers who survive on ad revenue and, ultimately, reduce the amount of competition and growth of new business models in the online space.

?From a mobile consumer standpoint, the draft bill has a positive provision that would forbid companies from using your phone?s geo-location without your explicit consent,? said Neil Strother, Kirkland, WA-based practice director at ABI Research.

?From a marketer?s standpoint, some of the opt-in requirements could make it more difficult to target advertising to mobile users,? he said. ?So, it will have to be a balancing act between respect for individual privacy and the needs of marketers to target their messages.

?The proposal is aimed at that, but will likely go through several iterations to arrive at some form of compromise.?

The bill would require Web publishers and ad networks ? both PC and mobile ? to publicly disclose when they collect data on Internet users. But it would not require that users actively opt-in to have data about them collected for advertising and commerce purposes.

Mobile ad network Jumptap claims it is armed and ready for this bill.

The company is already applying a lot of what is being proposed in the bill, including the ability for individuals to review, modify and opt out of a preference profile.

?We recently announced a first in mobile ? consumer managed profiles ? allowing not just the ability for consumers to opt out of relevant mobile ads, but for them to see and manage their own preferences," said Paran Johar, chief marketing officer of Jumptap, New York.

?Our mobile advertising marketplace is built on transparency, privacy and preference,? he said. 

Consumer privacy advocates have been rallying for a bill such as this for a while.

On Monday, May 3 eleven consumer privacy advocate groups teamed up to persuade the House of Representatives to support principles for shaping strong privacy legislation.

The groups claim that there are growing privacy threats to consumers from the practice of online and mobile real-time data targeting, for example.

The organizations are also concerned about the fact that there is expanding availability of online and mobile consumer data for sale.

These groups claim that companies are employing practices that fail to protect consumer privacy or provide reasonable understanding of the data collection process, including variations in how cookies are stored and the outside data sources used.

The bill will address these concerns for consumer advocacy groups, but at what cost?

?These bills tend to be huge, complex undertakings and, as we've seen, many reps vote on them without even reading them ? years later we always seem to find everyone pointing fingers when things aren't working correctly,? said Dave Everett, CEO of Kaooga, Boston.

?But fundamentally, we believe responsible and ethical retailers and marketing agencies are not going to be hurt by any legislation that protects the public from unsolicited sales entreaties,? he said.

?Furthermore, the clean operators want their customers, in fact their entire engaged database, to have absolute confidence that their personal information and wireless activity profiles will be respected and protected from any abuse.

?Remember, the successful firms are the ones able to maintain a sustained relationship with that customer  ? and that requires trust.?