SPEECH/10/452

Neelie Kroes

Vice-President of the European Commission responsible for the

Digital Agenda

Towards more confidence and more

value for European Digital Citizens

European Roundtable on the Benefits of Online Advertising for

Consumers
Brussels, 17 September 2010
Ladies and Gentlemen,

I am very pleased to be here today with you. I always feel inspired when meeting
with people at the digital coal face – and I highly appreciate those efforts. Without
you, and thousands more like you, Europe’s digital future would look very different.
First I have to make clear that I speak to you here in my overall responsibility for
the Digital Agenda, one of the Flagships of the EU2020 Strategy of the European
Union. And in my specific responsibility for implementing and enforcing the
electronic communications and privacy directive (Directive 2002/58/EC).
As you will know it is my colleague responsible for Justice, Fundamental Rights
and Citizenship who is looking after the Data Protection Directive and who will
conduct a review of its provisions. A very important and relevant perspective for the
discussions we will have today.
From the view of the Digital Agenda, my first message to you is a simple one: I
recognise the value of online advertising. As a growing market and one that
delivers many benefits to European citizens, online advertising is very important,
and targeted advertising is a particularly important part of this market.
The evidence on the importance of online advertising for the development of the
World Wide Web is quite clear. The latest data from IAB Europe puts estimated
advertising expenditure in Europe at €14.7bn in 2009 and €16.3bn in the US – this
is an economic contribution that is impossible to ignore.
The beauty of Internet marketing is, in the first place, its accessibility. Anyone can
be an advertiser online; whereas other forms of advertising can be impractical or
impossible for small businesses trying to reach specific audiences or those in
faraway places. The Internet bridges the gap between all audiences and levels the
playing field for those interested in marketing their small business in an efficient
way.
Moreover, online advertising can be very successful because it allows the kind of
direct response that is beneficial to both the consumer and the seller. It is therefore
clear that online advertising opens up a world of convenience that might not be
possible otherwise.
Furthermore, many of the “free” services now used by billions on the Internet would
not be possible without the income derived from the various forms of online
advertising. Advertising revenues – or at least the prospect of such revenues – are
the basis of a wave of innovative services that are transforming our economy and
society. That goes for all types of ads be they display or banner ads, video,
sponsored search results, and of course the latest buzz: targeted or “interest-
based” advertising.
So it is clear in my mind that internet users can benefit from online advertising in a
range of ways:
1. to get access to services free at the point of use, many of them not even thought
of 5 or 10 years ago
2. to get advertising from a more diverse range of sources
3. the advertising experience is amongst the most sophisticated available in terms
of convenience, relevance, depth of information and so on.
It sounds great, doesn’t it? So what is the catch here?
The catch is that personal preferences vary. What is efficient to one consumer can
be irritating to another. What is helpful to one citizen is an invasion of privacy to
another. And there must be an effective means for personal preferences to be

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respected.
Let me give you an example. Like anyone I can feel bored or annoyed when faced
with endless ads or ads I am not interested in. Like the unaddressed leaflets in my
post-box, the TV commercial selling jeans to young men, not to me or the 30 pages
of ads at the start of a fashion magazine. So the idea of only seeing ads that are
likely to interest me is an appealing one. But for that to happen, you need to know
more about me: my likes and dislikes, what I buy in the online shop, what sort of
gifts I give, perhaps even the things I write about in my emails.
But, how much information about myself would I want to disclose for that purpose?
This brings us to a key question for the near future: How to get the balance right
between the protection of personal data and enabling innovation in advertising.
Privacy and data protection have a particular value for Europeans: we consider
them our fundamental rights and have put in place laws and regulations to protect
them. Of course, these rules apply not only to European companies, but to all
businesses having an establishment or data processing operations in the EU. In
addition, companies operating in Europe and elsewhere find that a high level of
protection for their privacy and personal data is a necessary condition to
establishing a trusted relationship with their customers. Recognising this, the
‘Digital Agenda for Europe’ - the EU’s action plan for enabling our digital future -
aims to enhance individuals’ confidence in order to drive future growth in the digital
economy.
At the same time, compliance with privacy and data protection rules is perceived by
some as a burden and an additional cost on the way to higher growth and more
jobs. So there is a lot of scope for tension between stakeholders – it makes the
balance even harder to reach.
For instance, a lot has been said in recent months about a growing conflict
between the interests of the industry – including your interests as digital advertisers
– and the fundamental rights to privacy and data protection of European citizens. I
do not believe that such a conflict is inevitable. In fact (and this seems to be
confirmed by some of the results you are about to present today), many Internet
users value both their privacy and the online services supported by advertising. In
other words – consumers want both, and it is our job to deliver that. That is a
responsibility for political bodies such as the Commission and the EU legislative
institutions, to make policy that takes into account both sides of the equation and
that does not throw out the baby with the bathwater. But it is also a responsibility of
the business sectors involved, to develop business models that make the
necessary trade-offs.
How can we best do that?
Many online advertising techniques – display, contextual, certain search-related
ads, etc. - do not involve any tracking of users’ behaviour (and they do not require
personal data to be processed). These techniques are not a subject of major
concern.
But on the other hand, there are techniques that match advertisements very closely
to what a user has previously done on the Internet. Users get uneasy when they
get the feeling that all their movements on the web are observed, in particular if this
is done without them knowing what is going on. We have heard consumers and
even lawmakers calling this experience 'creepy'. By following clear rules on the
tracking of user behaviour, we can minimise the chances of the conflict I just
mentioned. And I firmly believe that it is essential to apply techniques involving
user profiling in a manner that is respectful of user privacy.
By that I mean that the users should feel they have the effective possibility to

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choose whether they want to be tracked and profiled or not. Irrespective of their
legality, any such practices are damaging – they damage the already fragile
confidence in the online digital economy. Today only 12% of Europeans fully trust
online transactions, so this sort of behaviour is a case of the industry ‘shooting
itself in the foot.’ It is first and foremost the industry’s responsibility to work to
ensure that users have a genuine possibility to exercise personal choice. That is a
matter of self-interest, in addition to the public interest it serves.
On the other hand, an overly cautious or restrictive approach to these issues could
invalidate promising future business models and thus deprive users of clear
benefits in terms of better services. I do not want to see that either.
So again I return to the point about getting the balance right between protection of
personal data and enabling innovation in advertising.
I would like to pass a strong political message here: privacy regulation does not
exist in a values vacuum. We have to consider the effects of such regulation on
industry, we have to consider their practicality, and we have to consider the long-
term health of digital environments.
Implementation of new legislation presents certain challenges
As I am sure you are aware, Member States are currently transposing into their
national legislation the provisions of the privacy and electronic communications
Directive (Directive 2002/58/EC) which were amended in 2009. Implementation will
bring benefits such as notifications in cases of personal data breaches in the
telecoms sector and more secure services. But I am sure what interests you the
most is Article 5(3). This is the paragraph which sets out rules for the use of ‘HTTP
cookies’ and similar devices on users’ computers and smart phones.
We will all want to make sure the Directive does not inhibit the development of the
EU digital economy, especially the roll-out of a digital single market. We must
ensure a level playing field for all economic operators across the European Union,
which means avoiding divergences in national implementation. Harmonisation is
the very purpose of EU single market legislation.
The Internet is global, and we also have to think of the global playing field. No
region or country alone can set the rules for everybody, but we should not start a
race to the bottom. Therefore, we will have to work not just with EU Member
States, but also with third countries to ensure the most common approach possible.
As we see that similar discussions on behavioural advertising are going on
elsewhere, this seems to be a good time for dialogue.
In particular I wish to assure you that I am well aware of your concerns and how
important the use of ‘cookies’ and similar techniques is for your business. Your
views will be part of the efforts to properly implement and apply in practice the new
rules at the national level. I am convinced that, if applied in a balanced manner, the
new consent provision poses no threat to the advertising business itself.
How should we implement the new provision?
While today is not the time or place to go into too much technical detail, we should
work towards a realistic solution which will enhance users’ trust. The solution must
be a driver, and not an impediment, to the growth of the digital economy.
I believe that a self-regulatory solution is possible. But it will need to be one clearly
based on the applicable EU legislation. Such a solution can go a long way towards
facilitating compliance and avoiding divergence among the Member States.
To get to such a solution, the self-regulatory framework would – in my view - have
to include at least the following four elements.
First and foremost, we need effective transparency. This means that users should

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be provided with clear notice about any targeting activity that is taking place.
Secondly, we need consent, i.e. an appropriate form of affirmation on the part of
the user that he or she accepts to be subject to targeting.
Third, we need a user-friendly solution, possibly based on browser (or another
application) settings. Obviously we want to avoid solutions which would have a
negative impact on the user experience. On that basis it would be prudent to avoid
options such as recurring pop-up windows. On the other hand, it will not be
sufficient to bury the necessary information deep in a website’s privacy policies. We
need to find a middle way.
On a related note, I would expect from you a clear condemnation of illegal
practices which are unfortunately still taking place, such as ‘re-spawning’ of
standard HTTP cookies against the explicit wishes of users.
Fourth and finally: effective enforcement. It is essential that any self-regulation
system includes clear and simple complaint handling, reliable third-party
compliance auditing and effective sanctioning mechanisms. If there is no way to
detect breaches and enforce sanctions against those who break the rules, then
self-regulation will not only be a fiction, it will be a failure. Besides, a system of
reliable third party compliance auditing should be in place.
I realise this is setting the bar high. So we will need to work together to achieve
these outcomes. These basic principles will also be reflected in the guidance we
intend to give shortly to Member States to help them implement Article 5(3) by the
deadline of May next year.
Within that, there is a tremendous role for your industry in shaping the appropriate
instruments. The need to find efficient ways to respect user privacy can be seen as
just another incentive for you to build on current business models and experiment
with new ones.
The next step of course is hearing how you think the details of self-regulation could
work.
On the basis of the exploratory contacts I have had with industry so far, I believe all
of this is do-able. I would not ask it of you if I thought otherwise. I welcome the
clear commitment from all the leading business organisations to work with us
towards a self-regulatory regime compliant with the law.
Having said that, I also have to say that the ideas so far tabled fall short of meeting
the principles I have set out. Given that time is very short to reach a self-regulatory
solution, the industry needs to act quickly. The alternative is a more interventionist
approach. If you don't want to see that, then you need to act quickly and
responsibly. I have instructed my services to work hard towards developing with
you an approach that puts the needs of regulators, consumers and the industry
together and that can be applied at EU level in a uniform manner.
Conclusion
My overall goal is a balanced and realistic solution. I want to see a level playing
field and legal certainty for the European online advertising industry for the years to
come. With that you can continue to play a leading role in getting ‘Every European
Digital. ’