A close look at the questions in a recent survey of consumer attitudes towards online privacy shows that the strongly-held privacy values of the researchers are likely biasing the results.
Why ITIF Rejects Your “Do Not Track” Request
Today ITIF implemented a new feature on our website that detects whether visitors to our website have “Do Not Track” enabled in their browser. Users who request that ITIF not track their online behavior will receive a notice (shown below) telling them that their request has been denied.
Do Not Track is a preference that users can set in some web browsers to inform websites that they do not want to be tracked. Currently, IE8, IE9, and Firefox support various versions of Do Not Track. Do Not Track has been heavily promoted by various groups, including the Federal Trade Commission (FTC) and the White House. However, as I stated in my Congressional testimony, Do Not Track is a detrimental policy that undermines the economic foundation of the Internet. Moreover, while Do Not Track might work in the short-term, it will be a failure in the long-term.
Let me explain why.
Advertising revenue supports most of the free content, services, and apps available on the Internet. In exchange for viewing online ads, users get access to a wide range of free content (e.g., news, music, movies, and games), free services (e.g., email, storage, and personal productivity tools), and increasingly free mobile apps. Online advertising has improved in recent years thank to behavioral advertising which uses information about Internet users to deliver to them more relevant ads based on their browsing history. For example, someone who spends a lot of time on bridal websites might start to see more ads for local bakeries, photographers, jewelry stores, and dress shops. For the most part, this is done without revealing the identity of users to the advertisers. Not surprisingly advertisers are willing to pay more to advertise to individuals who are more likely to be interested in their products. In general, everyone wins: ad-supported websites increase their revenue, users receive fewer irrelevant ads and more free content, and advertisers get to be front of their target audiences.
However, privacy advocates do not like this so they have been pushing for the creation and implementation of a Do Not Track standard. The problem is that if users are not tracked, then websites cannot deliver targeted advertising. Instead, websites would only be able to use non-targeted advertising which does not generate as much revenue. Less revenue means less free content and services for Internet users. But privacy advocates are pushing forward, regardless of the consequences.
Realistically, these advocates face many challenges. To be effective, privacy advocates must get Do Not Track adopted as a universal standard on the Internet, implemented by millions of websites, and enforced by the FTC (or another regulatory body). However, even if they succeed at that, Do Not Track is simply not sustainable long term.
Let’s consider how this might play out over the next few years.
First, users must decide whether to enable Do Not Track in their browsers. If this happens on a small scale, nothing really changes. If only a small minority of users enable Do Not Track (and consequently opt out of targeted advertising), then websites may experience a minimal decrease in revenue, but the overall impact will be fairly minor and dispersed.
The real problem occurs if this happens on a large scale. If this occurs on a large scale, i.e. if large numbers of users enable Do Not Track, then website operators will see a substantial decrease in revenue (and potential revenue growth). A substantial decrease in revenue means a corresponding substantial decrease in free (or low-cost) content, apps and services. Or websites could try make up lost revenue by filling their websites with more untargeted ads.
So which is more likely? I think that if Do Not Track were widely available today most users would enable Do Not Track, especially if it was turned on by default in their browsers. The average user will likely believe that the benefit from protecting their privacy (or at least the perception that they are doing so) outweighs any cost to them in terms of less relevant advertising. This is especially likely given the typical fear-mongering that privacy advocates tend to engage in (and that the media tends to subsequently report). This is a classic case of economic externalities: individuals may receive a small benefit from enabling Do Not Track, but in doing that, they impose costs on the rest of Internet users.
So what will happen if website operators who rely on ad revenue face a substantive number of users accessing their sites with Do Not Track enabled? The assumption of privacy advocates seems to be that websites will not do anything in response.
However, one possible response is for websites to block users who enable Do Not Track in their browsers. Just as some websites have enacted paywalls to block non-paying users from their content, similarly websites can block users who refuse to allow targeted ads. There are already many plugins for WordPress, a common blog platform, that allow website owners to easily block users who run ad-blocking software (see here, here, and here). Website owners will likely have similar tools if Do Not Track becomes widespread.
But if websites block users who have enabled Do Not Track, this drastically changes the cost-benefit calculation for most users. Is enabling Do Not Track worth not being able to access free content on the Internet for most users? Probably not. So users who wanted to access sites for free would have to disable Do Not Track. And that would bring us back full circle to where we are today.
Really, the only way that Do Not Track would be viable is if policymakers passed legislation that would require websites to allow users who opt out of tracking to access to their sites. Would that ever happen? It’s certainly within the realm of possibility. After all, COPPA includes a similar provision for children’s privacy. But I’m still optimistic that such insanity would not prevail.
Right now the likely situation is that companies will spend millions of dollars developing Do Not Track standards, incorporating these standards into web browsers, educating users about their options, and implementing these features on their websites so that we basically end up exactly where we are today…less all the time and effort that went into this.
Is it possible to stop the madness? Perhaps. If websites preemptively block users who enable Do Not Track, we might avoid getting sucked into this black hole. It is my hope that with this alert ITIF will be able to remind people how easy it would be for sites to block users who enable Do Not Track, and by outlining how this will likely play out, policy makers will realize this is a useless endeavor. Instead of chasing a proposal that is doomed from the start, they should focus on meaningful efforts to protect user privacy that do not undermine the economic system that has supported decades of innovation on the Internet.
Comments on the Children’s Online Privacy Protection Act (COPPA Rule)
The FTC is considering modifications to the COPPA Rule. In this supplemental notice of proposed rulemaking, the FTC has proposed modifying the Rule’s definition of “operator,” “Web site or online service directed to children”, “personal information,” and “support for internal operations” to impose more restrictive rules on what personal information can be collected about children and who is allowed to collect this information. In particular, this would restrict targeted advertising on websites directed at children under the age of 13. As described in this filing, ITIF believes the current effort to create more restrictions on the collection and use of information about children is misguided and likely leaves children worse off. Rather than impose additional rules on website operators, the FTC should instead explore ways to foster more development of child-directed sites and services on the Internet using market-friendly methods.
Comparing the 2012 Presidential Candidates’ Technology and Innovation Policies
Despite the obligatory acknowledgment of innovation’s central role in U.S. economic growth, the 2012 campaign has not yet seen a serious conversation emerge regarding the policies sorely needed to revitalize U.S. innovation-based economic competitiveness. Moreover, rather than adopt an “all of the above” approach to innovation policy that includes corporate tax and regulatory reform as well as increased federal investment in research and development (R&D), digital infrastructure, and skills, the candidates stress policies from “each column,” with Governor Romney focusing more on the former and President Obama more on the latter. This is unfortunate. For, as we write in the book Innovation Economics: The Race for Global Advantage, U.S. policymakers need to recognize that the United States is engaged in a fierce race for innovation-based economic growth. To win this race, the United States will need to adopt a new, bipartisan Washington Innovation Consensus that places science, technology, innovation, and entrepreneurship at the center of economic policy-making and recognizes that both parties bring good ideas to the table in this regard.
This report highlights the candidates' technology and innovation policies with the aim of amplifying the national dialogue around bolstering innovation-based economic growth. The report begins with an overview of each candidate’s general philosophy on technology, innovation, and trade policy, and then compares the candidates’ specific policy positions across 10 policy areas:
- Innovation and R&D
- Energy Innovation
- Education and Skills
- Broadband and Telecommunications
- Internet/Digital Economy
- Life Sciences and Biotechnology
The report is based on information gathered directly from the campaigns’ websites and policy documents or from media reports of statements made by the candidates. In some cases where a candidate has not articulated a specific position, the candidate’s record while in office or the position of the candidate’s party (as reflected in the Democratic or Republican party platforms) is used as a proxy.
ITIF is a non-partisan research and educational institution—a think tank—focused on innovation, productivity, and digital economy issues, and does not endorse either candidate. Rather, this report seeks to provide a factual, impartial comparison of the candidates’ technology and innovation policies.
Winning the Race 2012 Memos
As the 2012 presidential campaign moves in the final stage, ITIF is presenting general principles and specific recommendation ideas across several policy areas we believe the next President and Congress should adopt to restore U.S. global competiveness and prosperity.
As chronicled in Innovation Economic: The Race for Global Advantage, the United States is losing its once formidable edge as an innovator. Many other nations are putting in place better tax, talent, technology and trade policies, and reaping the rewards in terms of faster growth, more jobs, and faster income growth. It’s not too late for the United States to regain its lead but it will need to act boldly and with resolve.
Week by week until the November election, the Winning the Race series will put forward creative yet pragmatic ideas in policies affecting taxes, trade, education, broadband, the digital economy, clean energy, science and technology and other areas. Taken as a whole, the series represents a new Innovation Consensus to replace the outdated Washington Consensus.
Memo One (September 3, 2012): Boosting Innovation, Competitiveness, and Productivity
Memo Two (September 10, 2012): Trade and Globalization
Memo Three (September 17, 2012): Corporate Tax
Memo Four (September 24, 2012): Digital Communication Networks
Memo Five (October 1, 2012): Traded Sector Industries
Memo Six (October 9, 2012): Digital Economy
Memo Seven (October 15, 2012): STEM Skills
Memo Eight (October 22, 2012): Clean Energy
Memo Nine (October 29, 2012): Science and Technology
Memo Ten (November 5, 2012): Overcoming the Barriers
Complete List of Policy Recommendations: Top Policy Recommendations for the Obama Administration to Help the United States Win the Race for Global Advantage