Internet giants such as Facebook and Google (GOOG) hope to make serious money over the next decade by allowing their advertisers to target pitches to consumers based on online behavior. Potentially standing in the way is Edward W. Felten, who was just named to be the Federal Trade Commission's first chief technologist.
The 49-year-old Princeton University computer science professor has been hired by FTC Chairman Jon Leibowitz to help find the middle ground between consumer groups' demands for digital privacy protections and marketers' hunger for unfettered access to consumers. "He is a rocket scientist who can explain technical issues to the non-cognoscenti and serve as an ombudsperson across the agency," Leibowitz says.
At stake is an online advertising market that's projected to grow to $40 billion by 2015, from about $26 billion in 2010, according to Brian Wieser, director for global forecasting at MagnaGlobal, a unit of Interpublic Group, a New York-based owner of advertising agencies.
Felten has been meeting with industry experts and researchers since his November appointment. His technology background helps bridge the language gap between the public and industry, Felten says. "As an engineer, I can have a different kind of conversation with people," he said during an interview at the commission's headquarters. Felten is taking a one-year leave of absence from Princeton and his position as head of the university's Center for Information Technology Policy. He will be spending less time writing his blog, Freedom to Tinker.
Felten's first task is to help the FTC convince Internet companies to voluntarily let consumers opt-out from having their browsing data collected by Web marketers, a move the FTC called for on Dec. 1. The question of how best to accomplish this "is something we are still discussing," Felten says. He is studying blocking mechanisms, including a tracking protection option offered in Microsoft's (MSFT) Explorer 9 browser, released on Dec. 7, and Google's advertising preferences manager. Researchers at Stanford University also have developed a way for browsers to notify websites that a visitor doesn't want personal information collected. "These are feasible options," Felten says.
The better approach, Felten says, may be to give the consumer—not companies—the choice of how much information can be collected. Data that people volunteer "may be more accurate than what the company has deduced about the user," Felten says. "And the user may have a higher comfort level deciding what information to provide rather than worrying about what inferences might be made from what they've gathered."
Known for cracking the music industry's digital-copyright protection code in 2000 (in response to a challenge from the music industry), Felten boasts a résumé that includes exposing security weaknesses in electronic voting machines. In 1998 he testified for the government in its antitrust case against Microsoft, saying that the company's Internet Explorer Web browser could be separated from the Windows 98 operating system without impairing the functionality of Windows.
"For years online marketers have tried to pull the wool over the eyes of the FTC," says Jeff Chester, executive director of the Washington-based Center for Digital Democracy, a consumer advocacy group. "Now the FTC has a one-person truth squad who understands the technobabble."
Behavioral advertising, which targets individual consumers based on their interests, is "the Holy Grail for marketers," says Lisa Sotto, a privacy lawyer with Hunton & Williams in New York who advises companies on advertising, data, and security matters. "Everybody is trying to figure out what the future looks like, both in terms of technology and the legal guidelines," Sotto says. "Companies should include him in their discussions, and not view him as an adversary."
Consumer advocates hail Felten's appointment as a sign the government is getting serious about regulating online advertising. So far the online industry has also welcomed Felten to the job. "We respect his work and think he was an excellent hire for the FTC," says Google's privacy spokeswoman, Christine Chen. The good feeling could dissipate, however, as companies face mounting calls from regulators, consumer groups, and lawmakers to further safeguard privacy on the Web.
The bottom line: By hiring Princeton's Felten, the FTC shows it's serious about regulating targeted ads, the Holy Grail for Web companies.