Have many people realize the digital advertising industry stood witness to two important developments recently? One was a highly publicized incident and the second one, lesser so. First, on Monday of last week, Aflac announced that it was terminating Gilbert Gottfried as the voice for its iconic duck, as a result of a series of inappropriate tweets that he posted the previous weekend about the crisis in Japan.

The second incident, which in this author’s humble opinion has greater industry-wide implications, was the announcement by the Federal Trade Commission that it reached a settlement with the online ad company Chitika, Inc. over the company’s “opt-out” settings. Chitika is a data analytics and online ad network that utilizes user information to sell and target ads based on likely interest.

According to the FTC, Chitika offered users an opt-out feature that allowed them to “opt-out” of being tracked and targeted online, though only for a mere 10 days. After the 10-day period expired (and each one thereafter), Chitika would resume tracking a user’s online activity unless he/she underwent the same opt-out exercise. According to Chitika, the 10-day timer was an inadvertent and unintentional glitch in the code.

In theFTC’s settlement:

  • Chitika is restricted from making misleading statements about the way in which it collects and uses consumer data
  • Chitika is required to post a permanent opt-out link on each targeted ad that provides consumers the choice not to be tracked or targeted for at least five years
  • Chitika must destroy any and all identifiable user data that was collected from users who previously sought to opt out before March 1, 2010, and more…

Why is this FTC action so important and relevant to advertisers, ad networks, agencies, data aggregators, etc.? For many reasons, including:

  • It demonstrates through actions, and not just through rhetoric or policies, just how seriously the FTC is taking and policing online behavioral advertising
  • Although this case turns primarily on an ad network saying one thing to consumers/users and seemingly doing something else, the FTC nevertheless believes that it can assert a section 5 FTC Act claim (i.e., deceptive and misleading advertising practices) against a company engaged in online behavioral advertising
  • The FTC seems to reconfirm its belief in the benefits of an opt-out system, and apparently believes that a five-year opt-out is a reasonable period of time
  • In painstaking detail, the FTC actually lays out what it believes to be an acceptable opt-out notice and system, from the number of clicks away a consumer can be from the opt-out notice to the actual opt-out notice text
  • The FTC has ordered Chitika to deliver a copy of the FTC settlement/order to all current and future employees, agents and representatives who are responsible for upholding and enforcing the FTC’s mandate

While this case clearly raises more questions than it delivers answers, it’s essential to appreciate that Chitika’s conduct was deemed deceptive by the FTC, not because it failed to offer a more robust opt-out program to consumers, but because it led consumers to believe they had opted-out permanently, when in reality it was for just 10 days at a time. Although players within the online behavioral advertising ecosystem should begin to look carefully for trends and whispers of best practices according to the FTC, these are not simple issues, and the privacy landscape is getting considerably more complicated and complex. Between proposed federal and state legislation, governmental agency policies and positions, and the DAA’s self-regulatory program taking shape, advertisers, ad networks and agencies alike should be increasingly turning to their privacy officers and legal counsel on these kinds of matters before they run afoul and become the next FTC test case.