Brands and the agencies that help market them have full plates. Just keeping up with the way technology has changed, and how brands communicate with customers is, to say the least, a full time job. But, there are so many things that affect businesses, not the least of which is how government regulation can either help or hinder what we do.
That’s why organizations like the American Association of Advertising Agencies (4A’s) are so important. Among its many roles, the 4A’s advocates for advertising and marketing agencies and the other businesses it supports on a wide variety of issues. Some of the biggest items on its current docket:
The deductibility of advertising spending: Tax law has traditionally treated advertising as a fully deductible cost of doing business. But, as part of conversations around reforming corporate tax rates, Congress is considering lowering the deductibility by fifty percent.
Protection against patent trolls: Legislation recently under consideration in Congress would curb the ability of shell companies to buy up dormant patents and pursue companies allegedly violating those patents for licensing fees just below what it would be worth to litigate. We’re talking about patents that can affect a wide range of business and marketing activities, for things like a store locator tool on a website.
Consumer privacy protection: The ability to track consumer behavior and target advertising based on that behavior has been part and parcel of the digital age since its inception. Of course, the National Security Agency has been at it, too, and its methods and goals are much more opaque than trying to identify a basket of consumers who might want to by a snow blower or a cupcake. Establishing policies that protect consumer privacy, and allay consumer fears without disrupting how digital advertising works, is a big concern of both industry and government.
The Way I See It
- I see these being charged issues. Discussions of taxation and privacy can get very heated, and a lot of times voters, congressional representatives, and regulators feel an extra urgency to act. Unfortunately, because emotions sometimes get ahead of the understanding of the issues, actions can be more reactive then proactive.
- I see this being a time of extreme congressional gridlock. The flip side to the reactivity I mentioned is often no action at all.
The Way the Industry Sees It
I sat down with Dick O’Brien, Executive Vice President of Government Relations at the American Association of Advertising Agencies, to discuss the regulatory issues it’s currently responding to.
I know the regulatory landscape is constantly changing. What are the three top issues that 4A’s is currently focusing on? In addition, what is the 4A’s doing to advocate for ad agencies on these issues?
The most financially damaging threat we’re currently facing is a proposed change to the corporate tax code that would dilute the full deduction of advertising as a necessary business expense and, in the process, result in an increase in the cost of advertising of $169 billion over a ten year time frame. The most systemic threat we’re encountering is the proposed restriction of our use of big data to revolutionize how we target advertising. And, the last of the three hottest issues is actually an opportunity – we’re pressuring the government to place severe restrictions on patent trolls whose extortionate practices have become a serious problem for advertising agencies. On each of these issues and others, 4A’s maintains a dedicated office in Washington that provides an early warning system of when an issue is moving into dangerous territory and that advocates at the White House, Congress, the regulators, the courts, and the states against any activity that would be detrimental to the best interests of the advertising agency business. I’m pleased to say that we’ve maintained a very strong track record in playing that role and in fending off unwarranted government regulation.
What’s your current prediction for how these issues will resolve themselves?
There’s a temptation to believe that nothing significant will be enacted in the current state of paralysis in Washington, which would leave us home free for a while. It’s a real mistake to believe that. External events can make even this government come together and do something. For instance, the recent spotlight on corporate inversions may be what it takes to get the government to get serious about corporate tax reform which would put the change in ad deductibility in play. Or, the revelations by Edward Snowden and the high profile data breaches at Target and Neiman Marcus may cause enough public anxiety to generate limits on how big data can be used even by advertisers. We could find ourselves going to battle stations on either, or both, of those issues next year. I believe we’ll prevail as we always have in the past, but I suspect it’d be a pretty rough work out.
Are there other regulatory issues the 4A’s is focusing on? Why are they important?
The regulators, principally the FTC, are looking at a number of issues that could shape how advertising agencies will be able to benefit from the advances of the digital revolution – from new rules around native advertising to limits on our ability to segment audiences for fear we’d be discriminating against those groups not included in a target audience. That discrimination issue is particularly serious since it could undermine the principle of segmentation which has been a foundation principle of the advertising industry since its inception.
To what degree are consumers – voters – a part of your target audience? What do they understand or misunderstand about the issues with which you’re dealing, particularly the privacy issue?
While our first, and most direct, audience are policy makers, we do focus on the public on certain issues as well. Privacy is a good case in point. The push among legislators and regulators to limit our ability to use big data for more precise targeting reflects a public anxiety about how much information advertisers have about an individual’s personal life. To the extent that the public can be educated about the lengths we go to in order to protect their data, that anxiety should be lessened and the pressure for regulation should be similarly lessened. For that reason, we’re now undertaking a serious consumer education campaign to set the record straight on how benign the use of data for marketing purposes is.
Whether its voters or ad agencies, what are people worried about that they probably don’t need to be, and what are they not worried about that they should be?
There’s no contest on what the public shouldn’t be worried about – it’s the use of data for advertising targeting. That data is totally anonymized so an individual’s specific data isn’t even part of the equation. Conversely, the thing that all advertisers should be more worried about than they are is the dreadful state of political advertising. Most of the rules that govern the responsible use of product advertising don’t apply to political advertising. As a result the public is submerged in an ocean of negative, often marginally truthful, advertising that undermines their faith in the credibility of all types of advertising.
What’s the coolest object in your office?
It’s a tie. There’s a picture of President George W. Bush giving me a personal tour of the Oval Office. He turned out to be a really nice guy – the opposite of his on-camera persona. The other object is a picture of my two grandsons (aged four and two) climbing all over me. That turned out to be even cooler than the Oval Office tour!