"Companies spend billions of dollars every year to ensure their advertisements are shown to the right types of users at the right time. With that amount of investment, it was only a matter of time before the consumer class actions were filed.

At least eight class actions have been filed against several well-known companies in the last couple of months, including Trade Desk Inc. and Experian Data Corp. The suits each claim that the companies’ participation in real-time bidding violates California and federal wiretapping statutes, invades users’ privacy, and unjustly enriches the defendants.

These class actions could have a significant effect on how companies engage in digital advertising in the future, and being willfully blind to their progress only exposes companies to increased litigation exposure.

RTB Process

RTB is the process by which website operators decide which ads to show their users. When a user visits a website with available ad space, the website operator (publisher) auctions off that ad space to interested companies (advertisers). Because this auction occurs in near real time, the user is usually unaware that it has occurred.

Nevertheless, the auction involves several key players, including the publishers and advertisers; the supply-side platforms, or SSPs, that work directly with the publishers to sell their available ad space; the demand-side platforms, or DSPs, that work directly with the advertisers to bid on the available ad space; and the ad exchanges that host the auction.

Advertisers rely on “bidstream data” to determine which users to bid on and how much to bid. Bidstream data includes information on the ad space being sold, user device information (such as screen size and resolution), and the user’s public IP address. It may even contain some user some browsing history. The success of a specific advertisement often depends on the ability to extrapolate from the available data the user’s interests and align those interests with the advertised product.

Plaintiffs’ New Theory

In the past, plaintiffs’ lawsuits have focused almost exclusively on the collection of bidstream or other similar data by publishers. Large media companies found themselves the defendants in putative class actions alleging that they had engaged in unlawful wiretapping—or in installing and/or using a pen register or trap-and-trace device—under California’s Invasion of Privacy Act.

Plaintiffs have now shifted focus, filing suit against SSPs and DSPs instead of publishers. While this change in defendants does affect the types of claims asserted (as discussed below), the real impact is in the scope of the claims asserted. Because SSPs offer for-sale ad space across multiple web properties and because DSPs bid on ad space across multiple web properties, these platforms obtain more bidstream data than could otherwise be obtained by a single publisher or advertiser.

In fact, the plaintiff in one RTB class action claims that this sharing of information happens “178 trillion times annually across the U.S. and Europe..."

This article was originally published in Bloomberg Law