Using Behavioral Targeting to Reach Fans: New Laws on the Horizon

Action sports often appeal to a specific demographic. A teenage snowboarder is a target for the action sports marketer, but the retirement-age opera fan probably isn't. Behavioral advertising, also known as behavioral targeting, is tailor-made for action sports because it allows a marketer to analyze and use consumer data in order to deliver ads tailored to an individual's interests. The most obvious forms of behavioral targeting are online behavioral targeting (tracking a consumer's online activities and then displaying a banner ad relating to those activities) and location-based marketing (delivering an ad to a mobile device based on a consumer's location).

Behavioral targeting is great for advertising products and events that a consumer is interested in. For example, a consumer may visit an e-commerce site selling motocross products and accessories and later the consumer will see an ad for an upcoming motocross event or a new magazine devoted to the sport. Or a consumer may receive a message on a smartphone triggered by the consumer's location; the message might contain a coupon for a snowboard store that is a few blocks from where the consumer is.

Although advertisers and marketers love behavioral targeting, it raises privacy concerns because it requires collecting and disclosing information.

Privacy advocates argue that behavioral targeting takes place largely out of sight and that consumers may not know who is collecting the data, what the data is used for, and who it is shared with. In addition, the information collected through behavioral targeting is usually anonymous, but it can be merged with personally identifiable data (often provided by a consumer when registering or making a purchase). Privacy advocates argue that the data is being kept for longer than necessary and the amount of data collected per consumer is increasing.

Right now there are very few laws that specifically regulate behavioral targeting, but that seems likely to change. Two Congressmen just released a draft version of a new privacy law that, if enacted, would for the first time specifically address behavioral targeting and would impose some limits and requirements on these practices. This bill would, among other things, require an advertiser to get prior consent from a smartphone user before using his or her precise geographical location to send an ad or coupon. Advertisers would also have to provide some information about how they collect information, what...