Cookies

The European Union Versus Marketers

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EU e-Privacy Initiative attacks ad tracking via cookiesI wonder how many marketers are focused on what’s happening in Europe on the digital marketing front? While companies here are busily engaged in making sure ad tracking is being done to the nth degree, in the UK and Continental Europe, new legal restrictions on advertising tracking threaten to upend a lot of these efforts, particularly for multinational brands.

In short, the EU’s e-Privacy Directive restricts the use of “cookies” and virtually all other digital ad tracking methods. And the legal frameworks set up around this directive would require any marketer with users in any EU country to be subject to EU-wide and country-specific privacy legislation.

The new privacy initiatives are far more restrictive than the present US-EU “safe harbor” agreement, which merely requires American companies to notify users when cookies are used on a website. The new regs covering web pages, web apps and mobile apps would require giving notice each time a cookie is used, thereby setting up a flurry of endless notifications that promises to seriously degrade the online browsing experience.

The seemingly reasonable compromise of adding information to a “terms of use” agreement isn’t acceptable to the EU either, unless all users are issued the new agreement and they certify their acceptance.

And just to make sure everyone knows how serious all of this is, the new regs call for the imposition of financial and/or criminal penalties for the non-compliant use of cookies. But for the moment at least, only two relatively small countries besides the UK – Estonia and Denmark – have implemented controls to enforce the EU directives.

Here in the United States, privacy legislation slowly wends its way around Congress, with many legislators understanding that the key to successful commerce online is the ability for marketers to match marketing messages to interested consumers. It’s in Europe where governments appear more than willing to cripple the ability of marketers to do the job they’ve sought to do for decades: Target their audiences with as much precision as possible.

As a result, some European businesses are making noises about abandoning Europe for the United States. The problem is, in the digital age with so much of the branding and commerce blurred between countries, it’s impossible for restrictive moves in one region not to cause negative repercussions somewhere else.

Internet privacy legislation: What are the implications?

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Internet privacyThe issue of online privacy – the degree to which publishers are allowed to capture and use information derived from consumer online behavior – has been an undercurrent of concern since the very early days of the Internet. What is the right balance that allows the web to be used for marketing and commerce … but that also allows for an acceptable degree of consumer privacy?

The privacy issue has gathered steam in recent years. Today, proposed legislation affecting EU countries would dictate that web cookies (snippets of computer code) cannot be placed on a user’s computer unless it is strictly necessary for the purposes of enabling the use of a service explicitly requested by the user.

If such legislation is enacted, the implications for web publishers would be far-reaching. After all, cookies are currently used for many purposes, including web analytics, session management, content management, personalization, managing preferences, and calculating advertising revenues.

Cookies are the means by which all of these functions give the web its commercial foundation and functionality. Without them, the web would be little more than another broadcast medium for viewing non-customized information on a computer screen instead of on paper or on a TV screen.

And now those same privacy discussions are beginning to happen among U.S. lawmakers. Legislation is being crafted in Congress that may restrict the use of cookies along with other forms of “personally identifiable” information.

Is this a good development, or not?

It’s certainly true that some unscrupulous web sites and publishers have used cookies as a means to engage in nefarious behavior. But in an attempt to eliminate those exceptions, is it wise for legislation to wipe away all of the very real benefits web users derive from services that utilize cookies as the means to deliver them?

It’s pretty clear that one of the obvious impacts privacy legislation would have is on publishers who earn revenues from advertising. The inability to utilize cookies when serving online ads would affect the way the ads perform. Without cookies, ad servers are unable to perform the most basic functions such as fraud analysis and frequency capping (limiting the number of ads shown to a viewer).

In addition, publishers would lose the ability to measure “conversion” rates – tracking specific actions tied to ad revenue calculation such as downloading a white paper or to make a purchase – that is the foundation for many ad compensation packages. Or to serve a specific ad to someone who has expressed prior interest in a topic or product.

The data that these and other cookie-enabled actions provide is the basis of most online advertising programs. Without cookies, advertisers would have to purchase far more impressions served to swaths of people who may or may not be interested. Web analytics would also become more challenging; third-party services such as Web Trends and Google Analytics tap into cookies as a way to provide information and answers.

The claim that without legislation, people don’t have ways to limit the proliferation of cookies on their computers is just not accurate. Not only do many publishers provide ways for consumers to opt out of targeting techniques, surveys show that a significant proportion of Internet users — perhaps one third — routinely delete cookies from their computers. And ~10% have them permanently blocked.

It’s good for lawmakers to be looking at the privacy implications of the Internet. After all, the web continues to evolve at a quick pace, with new functionalities coming to the fore every day that may have implications on consumer privacy. But at the same time, it’s important to really think through the full ramifications of laws that, while well intentioned, would have negative consequences on everyone if enacted.

How are things clicking in Internet marketing at the moment?

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What’s happening with clickthrough behaviors on online ads these days? According to comScore, Inc., a digital market intelligence and measurement firm, activity today versus 2007 reveals that ~50% fewer people are clicking on Internet ads now compared to then. In fact, fewer than 10% of all Internet users accounts for ~85% of all ad clicks.

This may call to mind the old adage: “When a tree falls in the forest, does it make a sound … and does anybody know?”

On the other hand, it’s good to remember that banner advertising can have branding value. In fact, comScore research also shows that one in five users who click on an ad go on to conduct a search about the advertiser … and one in three visit the brand’s own web site.

Unfortunately, determining just how effective online advertising is can be a challenge to measure – reflective to some degree of the “bad old days” of print advertising. One reason for the difficulty is because of evolving consumer behaviors regarding “cookies.” When consumers delete tracking cookies from their computer, they’re counted as a “new customer” when returning to the site. Interestingly, comScore’s latest data find that nearly one-third of web users delete cookies – many as often as five times per month. And with the steady stream of news items warning of “Big Brother”-type information harvesting, it’s hardly a surprise that cookie deletion has grown by ~20% since 2007.

What’s the implication? Not accounting for cookie deletion can lead to an overstatement of unique visitors, reach and frequency – by about 2.5 times. (Relying on IP addresses doesn’t solve the issue either, because the typical computer in the U.S. has a multiple number of IP addresses.)

Of course, these hurdles don’t mean that an attempt to measure the effectiveness of online advertising is an exercise in futility. Just as in print advertising, there are clues marketers can hone in on that point to whether an online advertising campaign is a success. And prudent companies will discount web traffic statistics by a certain degree in order to paint a more realistic picture … not to mention incorporating conversion tracking triggered by specific actions on the web site such as a purchase, a customer query, or registering to download an informational document.