BEFORE FEDERAL TRADE COMMISSION
of Rules and Guides for Electronic Media
July 9, 1998
Yahoo! Inc. ("Yahoo!") is a global Internet media company that offers a network of branded Web programming, serving millions of users daily. As the first online navigational guide to the Web, www.yahoo.com is the single largest guide in terms of traffic, advertising, household and business user reach, and is one of the most recognized brands associated with the Internet. Yahoo! provides targeted Internet resources and communications services for a broad range of audiences, based on demographic, key-subject and geographic interests. Yahoo! is headquartered in Santa Clara, California.
Yahoo! is pleased to submit this statement in response to the Federal Trade Commission's request for comment on its proposal to issue a policy statement regarding the applicability of its rules and guides to newer forms of electronic media ("proposal"). Yahoo! would also be pleased to participate in any public workshop that the Federal Trade Commission ("FTC") may convene.
Yahoo! has two specific concerns with the FTC's proposal; the definition of direct mail and the FTC's interpretation of online disclosures.
1. Direct Mail
Yahoo! notes that the FTC has requested comment on whether advertising banners should be considered direct mail advertising. Specifically, the FTC queries whether targeted advertising based on a consumer's interest, determined through clickstream or search terms, is in fact equivalent to direct mail, as the advertising presented to the consumer is capable of being received privately by that consumer.
Yahoo! believes that there is a significant distinction between traditional direct mail and online advertising banners. The mere fact that banner advertising delivers targeted messages to end users does not render such advertising equivalent to direct mail. The desire of an advertiser to deliver a targeted message to various categories of consumers is a cornerstone of all broad-based mass media advertising. Online banners are intended to target a "class" of persons that may share demographic or psychographic characteristics in certain interests. An appropriate analogy is an advertising buy in a newspaper. An advertiser that wishes to sell mutual funds will run his advertisement in the business section, more specifically in the stock listing pages, as readers who are interested in business-related issues and are likely to purchase shares in a mutual fund, are more likely to see the ad in that section. The same goes for selling sports related items in the sports section and home decorating products in a home or lifestyles section.
A similar analogy could be made for network television advertising. Placing an advertisement during Monday Night Football to reach 18-34 year old men is much more cost-efficient than placing the same ad during day time soap operas. Similarly, targeting an ad banner to a specifically designated group does not transform a anonymously distributed banner advertisement to another category of marketing communications, namely direct mail.
As opposed to targeted banner advertising, direct mail is intended and directed to reach specifically named individuals and is received solely by that individual. The distinctions are not just in the areas of targeting and the degree of targeting, but also extend to the nature of the message customization, viewing environment and context of interaction. Target banner advertising simply seeks to reach a common "class" of people who share common characteristics. This is distinctly different from marketing to a specific individual who does not expect the message and may discard it if unwanted. Banner advertising, on the other hand, is much more similar to watching television or listening to the radio, where the consumer expects to see and hear advertisements. On the Internet, a consumer intentionally goes to and enters a search term on a search engine site, and expects to see an advertising banner near the submission box, or on the top of a results page. The consumer therefore initiates the activity and knows that he will be exposed to an ad banner. The value in target banner advertising lies in the site's ability to provide the consumer with information that may of interest to that consumer and other consumers who share a common interest in the same or similar search terms. In sum, Yahoo! believes that banner advertising is not similar to, and in fact is quite distinct from, direct mail, and should therefore not be considered direct mail.
Yahoo! agrees that consumers should have access to full information (consistent with relevant FTC rules and guides) when considering the purchase of products and services online and that such information should be readily available and comprehensive. Indeed, the efficient flow of relevant information is the heart and power of the Internet. Millions of consumers have raced to use the Internet because they value the ease of access and the ability to design their own "relevant" environment in which to seek and view information, when, where and how they want.
While the definitions of "clear and conspicuous," "prominent," and "in close proximity" have been generally articulated for traditional media, we have learned that these terms have developed different meanings and dimensions on the Internet. It is our experience that consumers have already learned to seek out and "consume" their information and media on the Internet in a way they deem most efficient and effective. For example, consumers know to click on to a word or icon that appears in a different color, which will bring them to another web page where they can view additional information about the word or icon. Any regulatory pronouncements concerning this medium and its advertising must therefore reflect these new "consumption" behaviors and their propensity for rapid change and evolution. Thus, any policy statement with respect to the medium must not restrict the current mode and future developments of "cyber" movement. It is with this information as background that Yahoo! suggests that the FTC not specifically proscribe how disclosures should be made and appear online. Instead, Yahoo! supports the FTC's continued use of a case by case, clear and conspicuous standard when evaluating whether a disclosure effectively communicates an intended message to a consumer.
Online advertising also allows an advertiser to provide a vast amount of information to consumers that is not available in traditional media. For example, a consumer that sees an advertisement for a new car in a print advertisement can read about the car's features and costs in the body copy but must refer to the fine print at the bottom of the advertisement (due to the cost of printing all necessary disclosures in the body copy), for all legally required disclosures. To obtain a competitor's costs, he will be required to make additional telephone calls and perhaps visit their physical location. On the Internet, the same consumer can access significantly more information and read all disclosures in full size type simply by clicking on a specific term. Fine print in cyberspace is virtually anachronistic, as disclosures can appear in full type size on their own separate pages. The access to information in this medium is infinite. An advertiser that does not provide disclosures in a clear and conspicuous manner will still be subject to traditional enforcement mechanisms under Section 5 of the FTC Act and the Commissions rules and guides.
Yahoo! believes that the FTC's requirement that any disclosure be "unavoidable" is not practical. Consumers that use the Internet are generally sophisticated enough to know that a word or icon that appears in a different color will allow them to link to another page with additional or related information about that word or icon. Consumers do click, scroll, page forward, and page back, and do it with great ease.
The FTC's prescription for how, when and where disclosures must appear will be ineffectual for at least two reasons that the FTC recognizes in its Notice: the technologies will change monthly, thus obscuring the proposed statement's objectives; and consumers have differing browser types that will enable or disable certain technologies and graphic presentations. In short, prescriptions at the level of specificity proposed by the FTC, such as required pop ups, persistent text messages, and proximity and placement of disclosures, will not likely work in the online area.
Yahoo! also notes that requiring disclosures to be made in the manners proposed by the Notice will affect a consumer's overall Internet experience. Instead of being fast, efficient, and fluid, and allowing the consumer to define and control his own environment, the Internet experience would be at risk of becoming a controlled activity, governed by content. Specifically regulating how information must be provided on line could effectively compromise and deteriorate the value of using the Internet.
Yahoo! appreciates the opportunity to offer this response to the FTC's Notice and would be pleased to participate in a public workshop should one be convened.
Hall Dickler Kent Friedman & Wood