Contracts and Behavioral
Advertising
Contracts
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No one would suggest that you enter a contract
with the New York Times when you scan the
headlines as you stand in line at Starbucks, or
with a bookstore when you leaf through a book,
even if you read several pages.
So how you enter a contract when, you visit the
news site, CNN.com, for a two-minute glance at
the latest headlines?
Non-lawyers: “That’s not just wrong. That’s
bizarre.”
Exchanges of Value
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Websites typically offer free products and
services that would simply not be available
offline, at least not for free.
Our information generates advertising revenue
that offsets the cost of providing the good or
service, so there is and exchange of value.
Like any traditional exchange of value—with just
one difference: the value we exchange is the
permission to collect our information and use it
to send us advertising.
Pay-With-Data Exchanges
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Billions of such pay-with-data transactions occur
daily, whenever someone visits a website to
obtain a product or service for free or for a fee—
plus allowing the use of information for
advertising or other commercial purposes such
as market analysis or sale to third parties.
The provisions in the contracts governing these
exchanges determine the tradeoff between
privacy and the benefits of information
processing.
The ecosystem: A Simple Model
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Five entities
 profilers
 advertising agencies
 advertising networks or exchanges
 websites that display the advertisements
 businesses that purchase the
advertisements.
Profilers
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Profilers segment buyers into groups in order
to predict their willingness to buy.
eXelate collects information about age, sex,
ethnicity, marital status, profession, Internet
search information, and information about
sites visited. It combines this data with data
from offline sources.
Exelate
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“We are capturing billions of deep granular data
points . . . . We analyze [these data points] . . .
and roll them into specific Targeting Segments .
. . . These categorizations include Demographic
data . . ., consumer Interest data gathered from
specific site activity . . . (such as parenting and
auto enthusiast sites), and deep purchase Intent
data culled from relevant activity on top
transactional sites. We further segment and subsegment this data into relevant buckets that in
many cases drill down to the product and
keyword level.”
Identification of Individuals
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Profiles routinely identify particular individuals.
TARGUSinfo
 “With our authoritative data and proprietary
linking logic, no other company can match our
ability to accurately identify businesses and
consumers in real time—helping you target and
recognize your best prospects, even at the
moment of live interaction.” The data includes
“names, addresses, landline phone numbers,
mobile phone numbers, email addresses, IP
addresses and predictive attributes.”
Advertising Exchanges
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Advertising exchanges deliver text and display
advertisements to the websites.
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Google’s AdSense, Interclick
The Interclick network
Website
Advertisers
Interclick
Website
Website
Website
Website
Visitors
Exchanges and Advertisers
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“Advertisers bid against each other in real
time for the ability to direct a message at a
single Web surfer.”
 Garett Sloane, amNY Special Report:
New York City’s 10 Hottest Tech
Startups, AMNY (Jan. 25, 2010).
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When a buyer visits a website, an
advertising exchange combines the
buyer’s profile with information about
current website activity to more precisely
target advertisements.
The Auction
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The exchange then conducts an auction in which
businesses bid for the opportunity to present
their targeted advertisements (the whole process
takes milliseconds).
 Datran Media promises “to identify who is
visiting your Web site, who is being exposed to
your advertisers’ campaigns, and who is
responding to specific ads. Real-time reports
paint an accurate picture of whom your
audience really is and who is responding to
your communications—at the household level!”
Buyers’ Lack of Choice
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Advertising is personalized, information processing is
not. Information processing does not vary to
conform to the privacy preferences of individual
buyers.
Technological reason: Efficient information
processing requires standardized routines.
Marketing reasons: “technology drives results for
advertisers by automatically leveraging massive
amounts of internal and third-party external data and
serving only the best impressions in the context of
each advertiser’s unique marketing objectives.”
 Rocket Fuel CEO John Says Ad Exchanges More Like a
Technology Platform than Media Source, ADEXCHANGER .
Buyers Acquiesce
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The vast majority of buyers acquiesce in
information-processing practices, thereby
guaranteeing sellers significant advertising
revenues.
 We are about to explain why.
Thus, sellers can easily afford to ignore the
relatively few buyers who refuse to do business
with them unless they adjust their informationprocessing practices.
Phil’s Preferences
Phil
Phoebe
Chicken!
(Don’t Swerve, Swerve)
(Swerve, Swerve)
(mutual cowardice)
Chicken!
(Swerve, Don’t Swerve)
(unilateral cowardice)
(Don’t Swerve, Don’t Swerve)
Phil
Chicken
Phoebe
Chicken!
Chicken!
Chicken!
Chicken!
Phil
One-Sided Chicken
Phoebe
Chicken!
Chicken!
Chicken!
Chicken!
Pay-With-Data Exchanges As One-Sided
Chicken
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We name the players’ choices
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“Give In,” (the “swerve” equivalent) and
“Demand” (the “do not swerve” equivalent).
Buyers’ preferences parallel Phil’s.
Sellers’ preferences parallel heart-broken,
“collision-second” Phoebe’s.
Demand/Give In for Buyers
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For buyers:
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“Demand” = refusing to use the website unless
the seller’s data-collection practices conform
to the buyer’s privacy preferences.
“Give In” = permitting the seller to collect and
process information in accord with whatever
information-processing policy it pursues.
Demand/Give In for Sellers
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For sellers:
“Demand” = refusing to alter their
information-processing practices even
when they conflict with a buyer’s
preferences.
“Give In” = conforming information
processing to a buyer’s preferences.
Pay-With-Data Exchanges: Buyers
Phil
Buyers
Chicken!
(Demand, Give In)
(Give In, Give In)
Chicken!
(Give In, Demand)
(Demand, Demand)
Pay-With-Data Exchanges: Sellers
Sellers
Phoebe
Chicken!
(Give In, Demand)
(Demand, Demand)
(Give In, Give In)
Chicken!
(Demand, Give In)
The Pay-With-Data One-Sided Chicken
Buyers
Sellers
(Demand, Give In)
(Give In, Demand)
(Give In, Give In)
(Demand, Demand)
(Give In, Demand)
(Give In, Give In)
(Demand,
Demand)
(Demand, Give In)
Buyers’ Only Options
Assume the buyer knows the seller has the
(Demand, Demand) preference second.
Then the buyer has only two options.
(Give In, Demand)
(Demand, Demand)
The buyer prefers giving in to not using the
site, so the buyer always gives in.
What IS Do Not Track?
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“When finished, the DNT standard will
create a simple machine-readable
preference expression mechanism ("Do
Not Track") and technologies for selectively
allowing or blocking tracking elements.”
“The charter tells us to create a technical
specification . . . and a compliance
specification . . . The compliance spec
‘sets out practices for Web sites to comply
with this [DNT] preference.’”
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Peter Swire, Full Steam On Do Not Track, W3C Blog,
ttp://www.w3.org/QA/2013/02/full_steam_on_do_not_track.html
Controversies
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Does “abiding by the do not track request” mean
that businesses do not collect any information for
the purpose of targeting advertising (or at all),
or does it permit data collection but merely bar the
delivery of targeted advertising? How users will be
asked to set their preferences.
 Most users never adjust the original settings of
a web browser, so the online advertising
industry seemed ready to accept “do not track”
if browsers would be delivered to users with the
do not track box unchecked.
Advertisers’ Attitudes
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Microsoft announced in June 2012 that it would ship the
next generation of Internet Explorer (Internet Explorer 10
in Windows 8) with the do not track box checked,
The online advertising industry revolted. The Network
Advertising Alliance (NAI), announced that “NAI can’t
accept a browser mechanism that threatens the health
and vitality of the entire online ecosystem.”
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Marc Gorman, “Why NAI Cannot Support DNT On-ByDefault,” NAI Blog, June 15, 2012,
http://naiblog.org/2012/06/why-nai-cannot-support-dnt-onby-default/.
Is Do Not Track On Track?
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“Outcomes of the group's latest face-to-face
meeting (minutes) in Washington, . . . We are
seeing tentative agreements on a number of
important topics:
The fundamental shape of first and third parties.
The basic notion that server logs can be held in
raw form for a limited amount of time.
Data that's not linked to a person can be used.”
 The state of Do Not Track, W3C Blog,
http://www.w3.org/QA/2012/04/the_state_of_do_not_
track.html.
FireFox’s Do Not Track Default Setting
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FireFox has just released a patch that
blocks third party cookies by default.
It plans to build this in as a default setting in
future versions of the browser.
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http://blog.mozilla.org/privacy/2013/02/25/firefox-gettingsmarter-about-third-party-cookies/
Advertisers’ Reaction
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"While the intentions of FireFox are most likely
good, the unintended consequences may
outweigh the benefit that's achieved," said
Ramsey McGrory, president and CEO of social
sharing platform and data firm AddThis. "It just
reinforces that the waters are choppy when it
comes to anything having to do with data and
privacy.“
 http://adage.com/article/digital/online-adindustry-ignore-firefox-s-trackfeature/240024/
Do Not Track and Norm-Generation
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Assume that every buyer possesses close-toperfect “do not track” technologies.
A tracking-prevention technology is perfect if it
 is completely effective in blocking
information processing for advertising
purposes,
 is completely transparent in its effect,
 is effortless to use, and
 permits a user full use of any website.
The Norm-Generation Argument
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(1) Buyers will use the “do not track”
technologies.
(2) Use of these technologies will threaten
sellers with a dramatic decline in advertising
revenue.
(3) Sellers will respond by offering buyers
information processing consistent with their
preferences.
(4) The ultimate result will be a collection of
value-optimal norms governing pay-with-data
transactions.
Norms? Yes. Value-Optimal? Yes, but. . .
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The result will be a number of behavioral regularities
of the form, “buyers demand such-and-such tradeoff.”
Eventually, not only will the trade-offs be valueoptimal, but buyers will also believe they are.
As advertising unites buyer demand into suitably
sized groups, buyers will continue to engage in
billions of pay-with-data exchanges daily.
 The trade-offs implemented in the exchanges will
cease to be merely accepted; they will become
acceptable. Buyers will ultimately recognize the
trade-offs as value-optimal.