In older, simpler times, families would gather together and watch the TV. A key takeaway from last week's Federal Trade Commission Fall Technology seminar is that now TV will also be watching the family.
Last week the FTC held a half-day panel discussion bringing together industry representatives, academics, and consumer advocates to discuss one of the new frontiers of the Internet of Things (IoT)—the Smart TV. The discussion was dominated by the tensions between the virtues and vices of tracking, and as so often happens with privacy discussions, it devolved into a dissection of the efficacy of the notice and choice regime for consumer privacy. The big lesson for marketers is that Smart TVs have the ability to allow for household-specific targeted marketing. The big question raised by the seminar is whether consumers receive adequate notice of TV tracking, a question made all the more interesting since the Trump Administration will make appointments to the Federal Communications Commission and FTC.
The core areas of Smart TV tracking center on delivery standards, product improvement, measurement and ratings, advertising, and cross-device tracking. In the first two, the TV sends signals back for maintenance and product monitoring purposes. Measurement, ratings, and device tracking (for example, allowing for a seamless transition from a tablet to a TV) involve collecting data to create a detailed household profile, which in turn allows for ads to be targeted to specific households.
Panelists noted that the tracking of viewer habits allowed for the development of content. The revivals of Gilmore Girls, The Mindy Project, and Arrested Development are examples of how consumers benefit from increased tracking. In addition, consumer viewing habits can be accurately tracked to determine just how broad—and engaged—the audience is, which benefits both marketers and content developers. For example, some studies have concluded that as much as 25% of a program's audience is watching on an app and most of the audience is not watching live. Panelists also noted that there were consumer benefits to marketing, as traditional survey data—based on small population samples—could miss entire demographics. With a larger pool of data on users, more relevant ads can be served.
As with other aspects of IoT, security is an issue. Concerns were raised about the likelihood that devices could be hacked and unauthorized third parties could monitor a household's habits. As was witnessed several weeks ago, IoT devices can be used in denial of service attacks, and this is no less a concern with Smart TVs. Issues about the frequency of security updates from manufacturers as well as how long manufacturers will support devices to ensure up-to-date security standards have been raised.
In addition to security, notice to the consumer is a major concern. The FTC noted that in the TVs it studied, the devices had their privacy settings defaulted to a consumer-friendly standard, but the clarity of the notice provisions varied greatly. The FTC noticed, however, that data collected by the TV appeared to be encrypted prior to any transmission.
The most spirited part of the panel centered on the effectiveness of the notice and choice regime when it comes to consumer privacy. One panelist cited the frequently repeated adage in all privacy discussions that "if you're not paying for the product, you are the product." While it was noted that industry takes care to separate personally identifiable information from viewing data and uses anonymous and random ID numbers for marketing purposes, a number of the consumer advocate panelists stated that claims of anonymous tracking with household-specific targeting were logically inconsistent. Their views track a frequently cited concern about privacy; namely, is there a point where data can be both useful to a marketer yet incapable of being de-anonymized? As some studies have shown, the chances are greater than 80% that the person can be identified if his/her date of birth, gender, and ZIP code are known.
Regardless of the practices that manufacturers or content providers may employ, panelists noted that consumer perception and understanding of privacy are out of sync with the way data is collected and used. For example, one panelist noted that although most consumers believed that privacy laws address most aspects of data sharing and collecting, some studies show they generally do not truly understand data policies. As applied to Smart TVs, some evidence suggests that consumers do not understand that the device tracks what the viewer sees on the TV—regardless of whether the content is broadcast through a traditional channel or watched on a DVD player. The panel also noted that 72% of consumers believe that extensive personal data can be used against them. Consumers are informed of Smart TV's data collection practices at the time they activate the device. One panelist noted, however, that for companies that have operations in multiple countries, the privacy standards used for all consumer data will often be the jurisdiction with the strictest privacy standards—not surprisingly, this often turns out to be the EU.
The panel's views were, in large part, a continuation of the privacy debates that have run parallel to the growth of the digital age. In Web 1.0 we saw debates over tracking of browser history, and in Web 2.0 we saw debates over the monitoring of the trove of data divulged via social media. Now, with the IoT, we are seeing the debate move to consumer awareness over what devices are tracking them, and how. In many ways this panel discussion demonstrated just how the old wine of the notice and choice privacy standards will be poured into the new bottles of TVs that monitor a user's watching habits. We can expect this conversation will be repeated when our food comes in digitally connected boxes that connect to your phone and simultaneously suggest what you can have for dinner, while providing enough data for marketers and financial institutions to determine how healthy you are. The upsides (relevant ads delivered to specific homes watching content that only massive data could have predicted would have an audience) and downsides (consumer ignorance as to the extremely detailed portrait of the interests and habits that can be developed) for the IoT were on full display last week. With numerous vacancies on the FTC and several expected at the FCC in short order, the Trump Administration will put its fingerprints on these issues very soon.
Companies that have an interest in the issue should note that the FTC will accept comments until January 6, 2017.