Can Web Advertising Adjust to Privacy Rules Proposed by Big Government?

Worst of recession appears over, but now real work begins in age of creative destruction.

The Fed held its ground on interest rates today. Yesterday, the U.S. Labor Department said productivity in the second quarter gained 6.4 percent -- the biggest quarterly gain in nearly six years despite an ongoing contraction in the overall economy. More than a few economists have suggested companies are adjusting to the recession by cutting jobs and workers' hours. Or maybe companies are becoming more innovative. Mind you, that’s not the same as “doing more with less” because innovation is proactive and forward-thinking. “Doing more with less” is reactionary, and often a desperation tactic that leads ultimately to worker burnout and defection – not long term profitability when the economy rebounds.

With stocks at their highest levels since autumn, interest rates holding steady, unemployment not getting too much worse at least statistically (see Wall Street Journal video report and the “cash for clunkers” program injecting signs of hope into the auto industry, some analysts are predicting a correction.

Sure there are plenty of signals about this being a “suckers rally,” but even bearish traders are giving credence to the market turnaround. “You can’t knock this market down,” Joe Saluzzi, co-head of equity trading told the New York Times last week. “Every dip is bought. Any sort of downdraft is picked up right away. I’m extremely bearish but I will not short this.” What’s more, the National Association of Realtors said the increase in pending sales – a forward looking measure of the market offered signs that the market is on the mend. New and previously owned sales have leveled off and single family home prices have begun to show some stability.

So just as consumers and businesses are getting their wallet-opening muscles limbered up, the government. may want to throw a wet blanket on the hottest area of ad growth during the past decade, including the recession.

Government online privacy rules a ‘setback to innovation’?

“We’re not committing ourselves to imposing regulation; what we would like to do is figure out useful tools and a more comprehensive way of looking at privacy protections that may obviate the need for rules,” said David Vladek new head of the Federal Trade Commission’s (FTC) Bureau of Consumer Protection in a recent statement. The message is you have to be more transparent about what you’re doing and the privacy “frameworks” the industry has been using historically are no longer sufficient, he said.

Vladek wants sites collecting personal data to get consumers consent whenever they visit the site (opt in)…. But marketers say such a tactic would be disastrous. “It’s impossible to communicate the value prop to a consumer at the point of and advertisement,” Matt Wise CEO of Q Interactive a Chicago online marketing firm told the New York Times and other trade media last week. It would be a tremendous setback to innovation.“

At HB, we think the solution relies somewhere in between in the form of a mutual trust system between innovators and regulators. Marketers and other data gatherers need to be more accountable, if not necessarily transparent, to regulators and consumers about the proprietary personal data they’re gathering – and how they’re gathering it. On the flip side, regulators need to take the time to understand fully how the online marketing mechanism works, why it’s so powerful, and how it’s changing the future of commerce worldwide. Regulators, shouldn’t be allowed to introduce sweeping legislation to punish a few bad apples, without fully understanding the industry they’re trying to govern. Otherwise their actions could bring one of the few growing sectors of our economy to a halt. And that includes emerging platforms such as online video (see below)

Keep your eye on online video

Online video viewing has grown across all age groups, according to new research (pdf) from the Pew Research Center's Internet & American Life project. Not surprisingly, young adults continue to lead the adoption curve in online video viewing, though adults ages 30-49 also showed big gains over the past year; 67 percent now use video-sharing sites, up from 57% in 2008 according to the Pew study, Researchers found nearly two thirds (62%) of adult internet users have watched online video on a video-sharing website, a figure that has nearly doubled from 33 percent in 2006. The study also found that 19 percent of online adults use video-sharing sites on a typical day (compared with 8 percent in 2006).

While much of the content on video-sharing sites is still user-generated, a growing archive of professional content is becoming increasingly available through YouTube and network-sponsored video portals such as Hulu, MarketingCharts reports. In response, more than one-third (35%) of internet users now say they have viewed a TV show or movie online. This compares with just 16% of internet users who had watched or downloaded movies or TV shows in 2007.

Video outranks social networks, twitter

Pew noted that the use of video-sharing sites currently outranks many other online pastimes of American adults, though video viewing does not always get a proportionate amount of media attention. Watching online videos on sites such as YouTube and Google Video is more prevalent than the use of social networking sites (46% of adult internet users are active on such sites), podcast downloading (19% of internet users) and the use of micro-blogging tools such as Twitter (11% of internet users).

The darkest days are over, but the good times are a long way off. Innovation, whether benign or in the form of “creative destruction” is the only thing that will get us back on the path to prosperity. Let’s just be responsible about how we innovate (or monitor those who innovate).