The Center for Digital Democracy and the U.S. Public Interest Research Group have joined forces and petitioned the Federal Trade Commission to investigate mobile marketing practices.

The two groups called on the agency to conduct an investigation into mobile marketing privacy threats and wrong practices targeting children, adolescents and multicultural consumers.

"The basic business model for mobile marketing is the adoption of behavioral targeting and marketing and now location is a part of the model as well," said Jeffrey Chester, executive director of the Center for Digital Democracy, Washington. "The idea that companies have profiles of mobile consumers raises privacy issues.

"It is disheartening because behavioral targeting is becoming controversial," he said. "There are data collection problems."

The groups previously filed two petitions, questioning online advertising practices such as behavioral profiling. Those petitions played a key role in prompting the FTC to investigate online marketing.

"Right before the Commission's eyes, many of the same consumer data collection, profiling and behavioral targeting techniques that raise concern in the more traditional online world have been purposefully brought into the mobile marketplace," the complaint to Donald S. Clark, secretary of the FTC, said.

"Many mobile marketers are eager to exploit what they correctly perceive as a unique opportunity to target consumers by taking advantage of our highly personal relationships with these extremely pervasive devices to provoke an immediate consumer response," the complaint says.

The organizations claim that the FTC has failed to address the unique threats to privacy and consumer welfare.

The jointly filed petition asks that the FTC require true notice and disclosure of data collection on mobile devices.

"I think the MMA has been behaving in a stand-up manner and it takes us by surprise that no one reached out to us for evidence of the claims," said Mike Wehrs, the new president/CEO of the Mobile Marketing Association, New York. "It seems odd that a letter like that would be written.

"The situations the letter describes are worst-case scenarios of what could happen," he said. "We have standards and all members have signed agreements. This provides a responsible recourse mechanism and escalation pods.

"We recognize that people who misbehave could do that, but as an industry we have self-regulated and policed."

According to the complaint, consumers don't really understand what they are getting themselves into.

The first example that the petition cites is SMS answer service ChaCha. The company claims that it does not have a complicated opt-in process. Users become a part of ChaCha when they ask their first question.

"It is not likely that many users fully understand the privacy implications of every discount coupon, free download or ringtone offer that comes their way," the complaint says.

The petition asks that the FTC redefine "Unfair and Deceptive" practices in the mobile marketing arena. It names Velti as a company that should be investigated for being deceptive.

Velti collects information on people and uses its data insight and personalization engine to understand each customer's profile in terms of their value, activity, demographics and historical behavior.

The company then takes this information and develops mobile loyalty campaigns for clients.

Through Velti's campaigns, managed by its Mobile Communities Manager tool, users are prompted to opt-in and provide profiling information for better targeting.

Successful submission is rewarded with free content, ringtones, JAVA games, coupons, discounts and gifts.

"Mobile marketing engages consumers, allowing them to dictate what content they are served," said Alex Moukas, CEO of Velti, in a statement. "Unfortunately, this report does not take into account that consumers are more eager to decide what services or products they are served than to be exposed to random ads based on statistical assumptions.

"Our first priority is to respect the privacy of the user, while giving them the right tools to get the content they want on their mobile devices," he said. "Every mobile campaign that runs on the Velti network requires an opt-in."

Velti claims it adheres to a high level of self-regulation.

For the industry, consumer privacy is essential to the health of mobile marketing.

"If users choose to opt-in to a program after seeing an offer, they should always have the option to opt-out," Mr. Moukas said. "Mobile marketing needs to be useful and provide consumers with content that they need, when they need it, without being intrusive."

Consumers can join the MMA or visit the MMA Web site at http://www.mmaglobal.com to report suspicions of inappropriate marketing.

"I am shocked that no one even asked us for information regarding how many complaints we've gotten on this," the MMA's Mr. Wehrs said.

But the consumer groups feel that this is not enough.

"The FTC has not seriously analyzed the implications of the engagement metric on consumer welfare, especially their relationships to what we believe are fundamentally unfair and deceptive practices," the complaint says.

"Velti, a mobile marketer, employs just these tactics, along with what we believe are manipulative loyalty campaigns, in its efforts to persuade users to click away their privacy rights," it says.

Many parts of the petition question the advertising-based model in which consumers get free content or offers in exchange for something.

The petition asks the FTC to analyze the opt-in process to get a better understanding of how the various components that underlie the process -- including rich media, free offers, personalization capabilities and discounts -- play a role in "undermining" the ability of consumers to make an informed decision.

For its part, Bango said it helps content providers and marketers understand the effectiveness of their ad campaigns and how users interact with their mobile Web sites.

"We do not provide personal information about consumers, except where a user actively opts-in to request information from named third parties in which they are interested," said Ray Anderson, CEO of Bango, based both in Cambridge, England, and New York.

This is not what the complaint claims, tough.

Bango contends that its mobile identity technology is designed specifically to enable mobile analytics without ever compromising consumer privacy.

"We follow all network operator and industry guidelines on mobile consumer privacy, for example, as provided by the MMA and through the Payforit scheme in Britain," Mr. Anderson said.

"Advertisers and content providers use the Bango analytical tools with the confidence that data analysis provided is done according to industry best practice," he said.

In the complaint, the organizations claim that consumers are confused and don't realize what they are giving up when they try and get this free content.

"I think that when you do get to a certain level of penetration in marketplace you reach a threshold where certain groups question what this is about," the MMA's Mr. Wehrs said. "The worries are possible, if everyone in the industry practiced inappropriate marketing.

"But this isn't the practical reality and does not reflect any facts," he said. "This is more sensationalism than is required since our industry behaves beyond reproach."

If that's not enough, the petition claims that mobile marketers take advantage of the fact that consumers make impulsive purchases on mobile.

"The mobile industry is using a range of different strategies to get people to click," Mr. Chester said. "We are concerned with how the mobile marketing proposition is offered to consumers.

"Advertisements and offers that ask consumers to respond raises a concern that consumers will not understand what is actually being offered," he said.

The petition asks the FTC to analyze whether the mobile marketing system is truly fair to the average person.

Mr. Chester said the ongoing financial crisis underscores why the organizations are reaching out to the FTC.

"During a time of economic slowdown, consumers should not engage in impulsive buying," he said.

Another big concern for the two organizations is protecting youth from unfair or deceptive practices on mobile devices.

The petition questions the practices of Xtract, Amobee and Nokia's Enpocket, claiming that these companies' behavioral targeting practices are deceptive.

User's location has become part of the data collection and targeting process.

"While we support the growth of mobile communications and marketing in the U.S., and firmly believe in its critical role as a medium for democratic expression, we are also convinced that meaningful consumer safeguards are required at this crucial period," the filing says.

The petition asks for safeguards for the protection of children, teens, minorities and other groups specifically targeted by mobile marketers.

When technology can tell where a person lives and shops, advertisers will target using location as a proxy for demographics.

Also, all the data about income and household demographics are available to the public.

According to the filing, this information can be layered into the backend of search marketing platforms and people can start using select cities to target.

"It makes search into a different animal tied to location," the complaint says.

Mr. Chester said the current self-regulatory privacy and marketing policies in the mobile arena are inadequate.

Marketing policies are apparently inadequate in the area of disclosure. They fail to inform users what data is being collected and how it will be used.

In an eerie coincidence, four leading marketing and advertising industry associations yesterday announced that they are working together to develop enhanced self-regulatory principles for online behavioral advertising to address privacy concerns and to increase consumers' trust and confidence in how online information is gathered and used.

This cross-industry, self-regulatory initiative represents the first time the entire marketing media ecosystem has come together to develop practices in interactive advertising.

The associations are the American Association of Advertising Agencies, the Association of National Advertisers, the Direct Marketing Association and the Interactive Advertising Bureau. The Council of Better Business Bureaus also participated.

The joint industry task force plans to engage with policymakers, a broad cross section of business, consumers and other important stakeholders as it addresses the public policy issues raised regarding online behavioral advertising.

The task force is currently discussing the areas for self-regulation set forth in the FTC's proposed self-regulatory principles issued in December 2007, including education and transparency, consumer notification and choice, data security and self-regulatory enforcement.

The initiative also will seek to address concerns about the use of online consumer data for behavioral advertising purposes, while preserving the advertising that supports the vast array of free online content.

Meanwhile, the Center for Digital Democracy and the U.S. Public Interest Research Group's petition asks the FTC to protect consumers from unfair and deceptive practices by using its authority under Section 5 of the FTC Act to address this issue.

The complaint asks the Commission to:

â?¢ Launch an immediate investigation into the impact of interactive, targeted advertising on the mobile marketplace

â?¢ Identify specific mobile marketing practices that compromise user privacy and threaten consumer welfare

â?¢ Examine opt-in procedures in the mobile marketing arena, ensuring that consumers receive full disclosure of the nature and use of any data collected

â?¢ Conduct a special investigation into mobile marketing privacy threats and inappropriate practices targeting children, adolescents and multicultural consumers

â?¢ Issue the necessary policies and actions to halt current practices that abuse consumer rights

â?¢ Recommend federal legislation and whatever new enforcement measures deemed necessary by the commission to prevent such abuses in the future.

Essentially, the Center for Digital Democracy and the U.S. Public Interest Research Group ask that the FTC act to protect consumers from a growing number of deceptive and unfair marketing practices and the resultant threats to consumer privacy that are a part of the growing U.S. mobile advertising landscape.

"It will be essential, as mobile marketing evolves and becomes an established platform, that the commercial systems in place preserve the rights of consumers," the complaint says.

"It is especially critical that the FTC act now to protect the interests of the public, while the mobile platform is still in development and as an even more interactive Mobile 2.0 environment looms on the horizon," it says.

Please click here to download a PDF copy of the full complaint.