Public Workshop on Online ProfilingNovember 8, 1999

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We are pleased to jointly sponsor today's workshop with the Commerce Department. Secretary Daley continues to be a leader advocating the United States' interests in electronic commerce around the globe. He has visited the Federal Trade Commission on a number of occasions to discuss eCommerce issues.

As many of you know, the FTC has been involved in online privacy issues for over four years. During that time we have held a number of workshops, issued several reports, and worked to bring together key players to find ways to ensure consumer confidence in the online marketplace.

Although electronic commerce has and continues to experience dramatic growth, it still remains a small percentage of the consumer economy. In order for electronic commerce to achieve its full potential, it remains critical that privacy issues be addressed.

Toward this end, the Commission has focused on the information practices of commercial Web sites that collect personal information directly from and about their own online visitors and customers: how they use this information; what notice they provide about these uses; and what choices they give consumers about how their information is used. We have worked to encourage these Web sites to implement fair information practices of notice, choice, access, and security; and our reports have chronicled industry's steady and significant progress in this area.

Just last month, we issued our final Children's Online Privacy Protection Rule, as required by Congress in the Children's Online Privacy Protection Act of 1998. The rule addresses the special concerns raised by Web sites' online collection of personal information from their visitors who are children under the age of thirteen, and is designed to put parents in control by requiring parental consent prior to the collection or use of this information.

Today we focus on a new and different, but related issue: the collection of personal information about online consumers by entities who have no direct relationship with them -- advertisers who place banner advertisements on Web sites using online profiling technology. Because online consumers have little, if any, knowledge that the banner ads that flash on their screens are vehicles for collecting information about them, this practice can be troubling and merits careful examination.

By all accounts, the growth of Internet advertising mirrors the pace of the growth of the World Wide Web as a commercial marketplace. Online advertising revenues in the United States grew from $300 million in 1996 to almost $2 billion in 1998, and are expected to reach as much as $11.5 billion by 2003. Billions of advertisements are delivered to online consumers as banner ads each month. As a steadfast advocate of the role advertising plays to benefit sellers, consumers and competition, I view this significant growth as a positive sign.

On a general level, online profiling technology makes it possible to track and gather the Web pages and images online consumers see, to draw inferences based on this information about online consumers' preferences, to use this information to make instant decisions about what banner ad should be sent to a particular consumer -- and to repeat this process for millions of online consumers, at millions of Web sites, every day. Clearly, consumers can benefit from online advertising that is tied to their specific interests. The use of conventional demographic information by advertisers to target consumers most likely to be interested in their products and services is a staple of the advertising industry, and does not raise any eyebrows.

Online profiling, however, looks like it may be a very different beast. When I see, read, or hear an ad in the offline market place, "it" takes away no information from me. But, the online entity placing the ad may have the ability to watch me as I surf across various web sites, record what ads I already have seen, make sure I do not see them again, and show me ads it presumes will be of interest to me based upon the sites I have visited and whether I have clicked on other ads I have seen. And, all of this can take place without my knowledge, let alone consent. On a personal level, I find this more than a bit disturbing.

This raises a central question for this workshop -- how can we preserve and develop consumer confidence in online commerce while balancing the interests of online marketers who want to target their ads to interested audiences and balancing certain benefits to competition and consumers that may flow from target marketing? The workshop addresses that challenge.

It begins with an overview of the current uses of online profiling technology, as well as applications contemplated in the future. Dr. Alan Westin will then present new findings on consumers' views about online profiling and the need for privacy disclosures by online profiling companies. The second session will explore both the privacy implications of online profiling technology and its costs and benefits for consumers and business. The workshop will conclude with a discussion of self-regulatory efforts currently under way or contemplated in the near future to implement fair information practices in the context of information collection through banner ads. I am pleased to hear reports that leaders in the online profiling industry have stepped up to the plate to address consumers' concerns by agreeing to provide consumers control over the creation of online profiles. I look forward to learning the details of this new initiative.

I am pleased that we have with us today technology experts, online advertising companies, trade associations, academics, government representatives, and privacy advocates, who are well versed in the particular issues and challenges that online profiling technology poses for consumer privacy. I look forward to hearing their views on this important topic.

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