It is not good news for advertisers, search engines, digital agencies and affiliates. The European Data privacy regulators have published an Opinion (22nd June 2010) which states that behavioural advertising, which drives more than 23 billion dollar revenues on the Internet , must change its approach to collecting data on web users and cease delivering advertising to children.

What is clear is that Regulators and Politicians across Europe and internationally are aware of the growing public concern about online data privacy, whether justified or not. Authors of the Opinion state that what is at stake is that many consumers are not aware that their surfing behavior is being monitored and data are being stored for advertising purposes.

The  EC press release states that although online behavioural advertising may bring advantages to online business and users alike, its implications for personal data protection and privacy are significant.

In a strong rebuttal, Europe’s media and advertising industry united to reject the Opinion, which the Word Federation of Advertisers, the IAB and EACA and others claim is out of step with the relationships that businesses and consumers are building online and flies in the face of the reality of the Internet.  The authors of the Opinion say that while they do not question the economic benefits that behavioural advertising may bring for stakeholders’, such practice must not be carried out at the expense of individuals’ rights to privacy and data protection.

The 22 June Opinion also recommends a total ban on behavioural advertising directed at children.

“This opinion takes no account of the support we get from our consumers for interest-based advertising nor of the exchange in value they receive between effective advertising and access to high quality media content for free.” said Stephan Loerke, Managing Director, World Federation of Advertisers (WFA).

Why does this Opinion matter? It could of course impact on how national governments interpret the ePrivacy Directive and implement national law making opt in a requirement. In practical terms, in the worse case scenario for marketers and consumers, such a requirement would mean that Internet users would have to confirm every single cookie placed on their PCs!

According to the Opinion, ‘data subjects cannot be deemed to have consented simply because they acquired/used a web browser, which by default enables the collection and processing of their informationIn general users lack the basic understanding of the collection of any data…As a result, in practice very few people exercise the opt-out option, not because they have made an informed decision to accept behavioural advertising, but rather because they do not realise that by not using the opt out, they are in fact accepting’.

This means opt in rather than opt out is becoming increasingly likely outcome though the European privacy watchdog however said previously that it is ‘conscious of the current practical problems related to obtaining consent, particularly if consent is necessary every time a cookie is read for the purpose of delivering targeted advertising. To avoid this problem. users’ acceptance of cookies could be understood to be valid not only for the sending of the cookie, but also for subsequent collection of data arising from such a cookie. In other words, the consent obtained to place the cookie and use the information to send targeted advertising would cover subsequent “readings” of the cookie that take place every time the user visits a website partner of the ad network provider which initially placed the cookie’.

If a sensible approach is not adopted there is a real danger and concern that the Internet in Europe would become less attractive to users  leading to an undermining of the growth potential of the digital economy.  The simple fact is that it is in everyone’s interest that marketers are able to  reach consumers through tailored, targeted content based on users’ interests and cookies are essential to the smooth functionality underlying such sensible and effective models. Consumers are also now used to receiving information that is useful and targeted. The notion promulgated by some very vociferous privacy groups that this is somehow an invasion of privacy is misplaced and inaccurate. Scaremongering may cause irreparable damage to the digital economy and consumer choice.

For a full guide to the implications of the ePrivacy Directive and on line behavioural advertising see the Reed Smith Client Alert.