Commentary Addressing Risks and Opportunities Through the Lifecycle of Data, Technology, Advertising and Innovation

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<img class="alignright wp-image-3993 size-medium" src="http://dataprivacymonitor.bakerhostetlerblogs.com/wp-content/uploads/sites/5/2015/06/Advertising_536878397-300x206.jpg" alt="Advertising_536878397" width="300" height="206" />Gone are the days of single-browser tracking. Accordingly, cross-device tracking – the process of tracking a single consumer across all of the consumer’s devices – is the new Holy Grail for marketers. Both the Federal Trade Commission (FTC) and the Digital Advertising Alliance (DAA), a U.S. advertising industry self-regulatory program, have taken notice.

On November 16, 2015, the FTC hosted a <a href="https://www.ftc.gov/news-events/events-calendar/2015/11/cross-device-tracking">workshop</a> to address issues specific to cross-device tracking. That same day, the DAA issued its <a href="http://www.aboutads.info/sites/default/files/DAA_Cross-Device_Guidance-Final.pdf">Application of the Self-Regulatory Principles of Transparency and Control to Data Used Across Devices</a> (DAA Guidance) on how its self-regulatory principles apply to cross-device tracking. Companies that engage in or intend to engage in cross-device tracking should review the workshop transcript and possible comments, as well as the DAA Guidance, in order to better understand how the principles of transparency (consumer notice) and control (consumer choice), as applied to cross-device data, are evolving under U.S. legal and self-regulatory privacy schemes.

Cross-Device Tracking 101

Historically, companies have used cookies (i.e., code attached to a consumer’s web browser) to track consumers online and often target them with relevant content or ads. However, cookies are limited in that they do not capture information outside a single browser. With the proliferation of devices and platforms over the past several years, and <a href="https://www.emarketer.com/public_media/docs/eMarketer_Cross_Device_Trends_Roundup.pdf">consumers spending more time across devices</a>, companies have needed a means to capture information beyond that of a single browser to effectively conduct analysis, improve consumer experiences, and target relevant content and ads.

Enter cross-device tracking.

Cross-device tracking involves linking a wide range of digital or Internet-connected devices to a particular consumer. Linking is accomplished through one of two methods (and sometimes a combination of both).

The first method – deterministic – ties multiple devices to a persistent identifier, such as an email address, login credential, or hashed personally identifiable information. For example, where a consumer logs in to services using social media network credentials (e.g., Facebook Connect) via various devices, the social media network can determine that the consumer’s phone, desktop, and tablet all belong to the consumer. This enables highly reliable cross-device data collection, and creates an advantage for walled-garden platforms and providers that are able to control the persistent identifier.

The second method – probabilistic – makes inferences based on information passively collected from multiple devices. For example, where a phone and a tablet are consistently used in the same location, a company can infer that the phone and the tablet belong to the same consumer or household. Various companies have developed “black box” databases running algorithms on big data from multiple sources to attempt to link device identifiers to likely common consumers. This data can then be supplemented with advertiser and ad network databases to further match consumers and their devices and activities.

Information from devices linked to a particular consumer is pooled together into a device graph. Companies may use and share such device graphs for a multitude of reasons, such as to authenticate consumers or for targeted advertising.

The FTC Workshop

The FTC workshop was an information-gathering exercise carried out by the FTC that involved participation from various panelists, FTC staff, and Chairwoman Edith Ramirez. While the workshop did not result in FTC guidance, at the end of the workshop, Maneesha Mithal, associate director of the FTC’s Division of Privacy and Identity Protection, identified the following five takeaways, which may shed light into the FTC’s potentially emerging position on cross-device tracking and warrant consideration by companies that engage in or intend to engage in cross-device tracking:
<ol>
	<li>Cross-device tracking has many benefits. Cross-device tracking allows for seamless, consistent consumer experiences across devices and better techniques for protecting consumers from fraud. It also allows for improved ad efficiency, reduced ad fatigue, and better monetization practices. At the same time, cross-device tracking raises certain privacy concerns. Chairwoman Edith Ramirez emphasized this point early in the workshop when she explained how cross-device tracking blurs the line between aspects of consumers’ lives that they may intend to keep separate. One of the workshop panelists also made this point when he argued that companies, and not consumers, seem to benefit most from cross-device tracking.</li>
	<li>Companies need to work toward providing greater transparency, choices, and education for consumers. In the workshop, several panelists argued that there are few tools that allow consumers to understand which devices are linked to their device graphs. Where such tools do exist, they only allow for opting out of targeted advertising. One panelist suggested that consumers should be able to opt out of entire device graphs using a single opt-out.</li>
	<li>Companies should engage consumers in a way that will not cause consumers to lose trust in the marketplace. This point was based on arguments from several panelists that although consumers know tracking exists, consumers may not understand the extent of data mining or that anonymous identifiers and hashed personally identifiable information can still be linked to a particular consumer. Further, consumers may not expect that sensitive data could be derived from pieces of data that are not traditionally sensitive (e.g., websites visited). One panelist, in particular, argued that as data sets become more easily cross-referenceable and aggregable, the distinction between personally identifiable information and non-personally identifiable information may diminish.</li>
	<li>There is room for companies to improve transparency and innovate through new ideas. As Chairwoman Ramirez emphasized earlier in the workshop, data minimization policies and technologies will become more important as device graphs increase in size.</li>
	<li>Companies should be mindful of the representations they make. Ms. Mithal specifically pointed out that companies risk violating Section 5 of the FTC Act (prohibiting deception or unfairness in commerce) if they provide opt-outs that are unclear or deceptive, or that conflict with consumer expectations. The same applies to publishers who describe third-party opt-out programs in their privacy policies.</li>
</ol>
Synthesizing these five takeaways articulated by the FTC, the chief lesson is that companies, now more than ever, need to be aware of the data collection activities associated with their services, including those conducted by third parties on their services, and know that the FTC is closely monitoring cross-device tracking for deceptive or unfair practices. By applying privacy-by-design, companies can access the data collection and use that they and third parties are doing in connection with their consumers, and apply principles of data minimization and consumer notice and choice.

This workshop was just the first step. The public comment period for the workshop is open through December 16, 2015. Historically, the FTC follows workshops with additional public and industry input. Where it concludes that a practice has potential for deception or unfairness, the FTC will issue guidance on what it thinks is necessary to avoid violation of Section 5 of the FTC Act or other laws the FTC enforces, such as the Fair Credit and Reporting Act. The FTC may initially propose guidance on the topic and invite further comment before finalizing its guidance. Guidance documents are not regulations, but an indication of how the FTC interprets the legality of certain practices. Industry should closely watch this process as it applies to cross-device data.

DAA Guidance

The advertising industry has already sought to get ahead of potential FTC guidance by issuing its own self-regulatory principles on cross-device data, timed to correspond with the workshop. The DAA Guidance applies the DAA’s existing principles of transparency and control to cross-device data, and most of the U.S. advertising ecosystem falls within its jurisdiction. Compliance is often contractually required by and amongst advertisers, ad agencies, ad networks, and publishers. DAA participants are expected to publicly commit to compliance within its principles, making failure to comply a false advertising statement the FTC and state regulators can prosecute as a deceptive practice.

The DAA Guidance provides for notice obligations regarding collection of <a href="http://www.aboutads.info/resource/download/Multi-Site-Data-Principles.pdf">Multi-Site Data</a> and/or <a href="http://www.aboutads.info/DAA_Mobile_Guidance.pdf">Cross-App Data</a> for both first parties (i.e., the site, app, or service on which data is collected) and third parties (i.e., a party other than the site, app, or service operator that collects such data on an unaffiliated site, app, or service). In addition, the DAA has made clear that for uses other than certain excepted uses (e.g., intellectual property protection, consumer safety, research, authentication, etc.), and most namely interest-based advertising, participants must provide a consumer opt-out, which could be accomplished through the DAA administered <a href="http://www.youradchoices.com/">AdChoices</a> and <a href="http://www.aboutads.info/appchoices">AppChoices</a> programs.

For more information on the DAA’s regulation of mobile technology, the DAA’s choice tools for mobile technology, what notices are required and by whom, consumer control and what methods of choice are sufficient, and tips on compliance, see our October 28, 2015, post <a href="https://www.dataprivacymonitor.com/behavioral-advertising/guidance-on-mobile-device-and-cross-app-data-collection-and-interest-based-ads/">here</a>. For more information on the DAA’s self-regulatory principles and program, click <a href="http://www.aboutads.info/obaprinciples">here</a>.

Conclusion

With the expansion of the Internet of Things and multidevice consumer behavior, cross-device tracking is certain to become increasingly common. The degree of consumer notice and choice required for that tracking, and various uses of the data collected, is evolving.

BakerHostetler’s Privacy and Data Protection, and Advertising, Retailing, and e-Commerce practices regularly counsel clients on privacy and data protection issues regarding big data, including interest-based advertising. For more information, contact the authors.

The FTC and DAA Set Their Sights on Cross-Device Tracking