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Why You And Your Favorite Web Sites Will Feel The Pain If “Do Not Track” Passes

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Editor’s note: Eric Wheeler is CEO and co-founder of 33Across. He has 20 years of experience leading successful Internet businesses. Follow him on Twitter: @ericwheeler.

Much has already been discussed in the media regarding the threat that the $300 billion advertising industry faces if Congress passes a strict interpretation of Do Not Track. Most of the discussion has focused on how “adtech” companies would get hurt: ad networks, third-party data providers, DSPs, and marketers.

However, what has gotten far less attention is that many of the web publishers that consumers enjoy on a daily basis would also have their businesses severely squeezed if such legislation were enacted.

Those vulnerable range from seemingly invincible Fortune 500 tech behemoths such as Facebook and Google, to myriad small online publishers. Essentially, any company that relies on partners to help drive revenue from advertising that accesses anonymous, third-party cookie data could be severely exposed. Moreover, we as consumers would suffer. While Do Not Track was conceived in order to protect consumers, it would actually make our time on the Internet a noticeably worse experience by forcing us to watch untargeted, annoying ads aimed at getting our attention (think “Lose Weight Now!”) versus receiving relevant ads that better align with our interests. It could take the industry back 12 years in terms of consumer experience with the DNT privacy notice pop-ups appearing with almost every click.  And worse, Do Not Track puts us all on a path to paying subscription fees to visit sites that today we freely consume (thanks advertisers!).

Most of the content we like would go away, because these publishers won’t be able to survive on subscription fees alone…ask The New York Times. Do Not Track actually threatens the very existence of the “Free Internet.” With our economy in such disrepair, is this the time to put the screws to small businesses and industries that drive domestic innovation?

Even A 950 Million-Strong Community Relies On 3rd-Party Data

Prior to its IPO, Facebook got away with setting its own rules for advertisers. But that has all changed. With intense pressure from Wall Street to boost earnings – as well as from large advertisers who have long clamored for more effective forms of advertising from the social network – Facebook has sought out new revenue streams. The recent introduction of the Facebook Exchange provides great promise, as it will allow brands to appeal to Facebook users with significantly more targeted and measurable advertising. As TechCrunch’s Josh Constine noted, “Facebook has been generally viewed as a home for institutional or brand advertising. However, it’s seen as much less useful to direct marketers than search ads because users on Facebook haven’t shown purchase intent as when they search for a related keyword on engines like Google. Facebook Exchange could change all that.”

But, here’s the rub: If Do Not Track becomes law– one that would, by default, opt consumers out of behavioral advertising – the Facebook Exchange would be rendered virtually useless overnight. Why? Because the Facebook Exchange needs anonymous cookie data about consumers who browse off Facebook in order to target them with relevant ads on Facebook. And what’s more, advertisers mandate being able to measure the online ads they run on Facebook in the same way they measure performance on other sites. Doing so requires utilizing anonymous third-party cookies.

Of course, Facebook isn’t the only behemoth first-party data company that relies upon third-party data. The same is true of Yahoo with its Right Media Exchange and AOL with its Advertising.com. Even Google’s bottom line would be hit hard as its advertising businesses are predicated on serving and measuring relevant ads based on interest and demographic information gathered from third-party cookie data. While Do Not Track wouldn’t necessarily spell the end for some of tech’s biggest giants, you can bet that their bottom lines would take a massive hit. Along with your retirement savings if you have invested heavily in some of these companies.

Small Publishers Are Especially Vulnerable

If flat-out threatening entrepreneurism weren’t enough, how about the hundreds of thousands of small publishers whose revenues are fully reliant on behavioral advertising? The authentic, user-generated content that we love so much would quickly wither and die without the premium ad revenue they get from behavioral advertising. To this point, a Borrell Associates study from earlier this year found that targeted display advertising will represent 45 percent of the total local/social spend by small to medium sized businesses by year’s end. Which, frankly, shouldn’t shock anyone. So unless you’re NBC or Microsoft and have a brand that’s been long established, Do Not Track will make it nearly impossible to build a small publishing business.

The Ultimate Victim: Consumers

A Do Not Track approach that automatically “opts out” consumers would harm virtually everyone who uses or earns a living from the Internet. If advertisers and publishers can no longer utilize targeted advertising, it’s hard to see a scenario that doesn’t result in a pay-for-content model. Just for a moment, imagine a future where a “Free Internet” no longer exists: In addition to paying to get online each month, you would find yourself paying for most every piece of content you access on the Web. So only those with disposable incomes can afford to pay for online content? Suddenly the Internet seems a lot less egalitarian, doesn’t it?

The Internet Should Not Be A Luxury

Nearly everyone, especially TechCrunch readers, recognize that data is incredibly valuable, drives innovation, and is the foundation for a broad range of industries. And we all agree that the industry should continue to take every step to protect users and disclose how data is used. But it’s time to move beyond inflammatory debates to a rational discourse.

My conclusion: the Internet economy is already highly respectful of consumer privacy. And any fears consumers have to the contrary are certainly not centered on third-party anonymous data. Their concerns are about first-party sites with which they share personal information such as their credit card numbers and email and physical addresses. The online advertising industry has been aggressive about opt-out standards and that won’t change. Hopefully innovation, “Free Internet” content, and continued economic growth won’t change either.

[Image: 33Across]