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ACTION-216 - Financial Reporting "Exceptions"

From: Dobbs, Brooks <Brooks.Dobbs@kbmg.com>
Date: Mon, 23 Jul 2012 22:29:45 +0000
To: "public-tracking@w3.org" <public-tracking@w3.org>
CC: Nicholas Doty <npdoty@w3.org>, "Dobbs, Brooks" <Brooks.Dobbs@kbmg.com>
Message-ID: <c7c79b51-b2b8-42e8-af7a-7af06a70929f@KBMEXCHTPR02.kbm1.loc>
I was apparently assigned the unenviable task of summarizing the need for financial reporting exceptions.  Please find below a condensed examination of the issue and a broad exception that data used exclusively for financial reporting ought to be out of scope for DNT.

I am cognizant that this is a very broad exception, but I think the basis for discussion is laid out below.   In looking at this I am specifically aware of the danger of creating exceptions which may favor one sales basis over another or indeed one entity over another.

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Internet based advertising is typically sold based on one of, or a combination of, three bases: 1) CPM – where the billable event is an individual ad serve (though prices are generally quoted in terms of thousands), 2) CPC – where the billable event is an individual click or interaction with the ad unit or 3) CPA – where the billable event is an action or post click activity subsequent and attributable to some interaction with the ad unit.  The dollar value of each billable event generally rises through the above progression and while prices for each vary with other factors, including ad targeting, the specific revenues measured per event are often in the order of the following:  CPM events in the fraction of cents per event, CPC events in the whole dollar per event and CPA events in the 10s of dollars or potentially higher per event.

It goes without saying that it is only the ability for the purchaser to maintain confidence in the quality of the billable event that allows for the value exchange to work, and, as per event prices rise, so does the need for unique events to be associated with supporting data which allows for increased repudiation.  This said, even were the value of unique billable events is relatively low (CPM), the sum of their values may not be low requiring commensurate examination of the underlying quality of each billable event.

A closer look at each form of advertising and the need for quality assurance is below:

- CPM billing contracts may vary, but for the fundamental confidence in the system to be maintained the purchasing advertiser needs to ensure the quality of their ad buy by examining all event level data pointswhich could reasonably allow them to conclude charges where not made to, e.g.: non-human activity or to delivery at times, in places or in contexts outside of agreed upon terms.

- CPC billing is based on the purchaser’s confidence that the quality of the click is sufficient to warrant the relatively high per event expenditure.  To validate this the advertiser needs data showing the event was, for instance: not resultant of a non-human activity and not initiated by a party with ulterior financial motivation.

- CPA billing is often based on the advertiser sharing part of its realized revenue with the supplier of such advertising opportunity.  Unlike CPM and CPC, CPA requires data collection at minimum at two times and two addresses.  At the relatively high per event cost of CPA advertising, the advertiser must feel confident not only that the sale was linkable to a previous ad view through the collection of both post ad serve and ad serve event level data, but further the ability to maintain that offlinecollection of revenues (or lack thereof) can be referenced back to the billing/payment system.

Each of these systems currently utilizes a wide range of event level data to ensure billable quality.  In the US alone, 2011 confidence in these models allowed over 31 billion dollars in advertising and subsequent ad supported services to be provided.   Of note here is that confidence in quality of billable events is distinct from issues of fraud, as most events in need of billing correction do not rise to the level of legal fraud, e.g. a technologist spidering a site and “calling” all resultant CPM ads is not “fraud” on the part of either the technologist or the unknowing website, but is still an event which may be contractually prohibited from billing.  For this reason, exceptions tied to “fraud prevention” are too narrow to maintain confidence in the ecosystem.

Owing to the diversity in techniques used to determinequality, any restriction on the collection and/or use of data which is reasonably stored or processed solely for ensuring the quality of terms of a contract or other agreement as between buyer and seller should not be considered “tracking” and should be out of scope of requirements of a Do Not Track guideline.  Data collected and used under a financial reporting exception, which would otherwise be impacted by this specification, may not be used for any other purpose not covered by this or another exception.



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Brooks Dobbs, CIPP | Chief Privacy Officer | KBM Group | Part of the Wunderman Network
(Tel) 678 580 2683 | (Mob) 678 492 1662 | kbmg.com
brooks.dobbs@kbmg.com

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Received on Monday, 23 July 2012 22:30:19 UTC

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