Does your company have a marketing strategy powered by AI? California is stepping up its oversight of AI-powered decision-making tools with new AI Privacy Rules, which could reshape the way marketers use technology to process personal data.
In November of 2024, the California Privacy Protection Agency (CPPA) moved forward with proposed regulations targeting the use of automated decision-making technology (ADMT). While the rules are not yet finalized, they signal significant changes for businesses relying on data-driven strategies. Understanding these regulations now can help marketing professionals stay ahead of compliance challenges and adapt their practices effectively.
What Is Automated Decision-Making Technology?
For marketers, ADMT refers to tools and systems that process personal information to make or assist decisions, such as:
- Personalizing ads based on consumer data
- Automating audience segmentation using AI
- Scoring leads for marketing campaigns
The CPPA defines ADMT broadly as: "Technology that processes personal information and uses computation to execute a decision, replace human decision making, or substantially facilitate human decision making."
Key to this definition is the use of personal information, which includes data that identifies or could identify individuals. Notably, deidentified or aggregated data and HIPAA-protected health information are excluded. For example, using AI to generate targeted marketing campaigns based on consumers' purchasing history could qualify as ADMT, while aggregated demographic data for broad audience insights may not.
How Does “Substantially Facilitate” Apply to Marketers?
Marketers should pay close attention to how these regulations interpret "substantially facilitate." If a system’s output is a key factor in marketing decisions, such as determining ad placements or ranking potential leads, it may qualify as ADMT.
For instance, if an AI-driven tool assigns scores to potential customers based on behavioral data, and those scores heavily influence a marketing strategy, it may fall under the scope of ADMT and be subject to AI Privacy Rules. Comparatively, simple tools like email automation platforms that send newsletters based on a static list may not qualify.
Profiling and Personalized Marketing
The proposed regulations include profiling within the definition of ADMT as: “any form of automated processing of personal information to evaluate certain personal aspects relating to a natural person and in particular to analyze or predict aspects concerning that natural person’s intelligence, ability, aptitude, performance at work, economic situation; health, including mental health; personal preferences, interests, reliability, predispositions, behavior, location, or movements.”
This directly impacts marketers leveraging behavioral or predictive analytics to craft personalized ad campaigns. Tools analyzing browsing habits, predicting purchase intent, or recommending products based on prior behavior likely fall under ADMT. For example:
- Product Recommendations: AI recommending specific products based on past purchases would likely be regulated.
- Behavioral Targeting: Ad platforms using profiling to display ads tailored to individual users’ preferences may face stricter compliance requirements.
Tools Excluded from ADMT AI Privacy Rules
Not all technologies used in marketing fall under the proposed regulations. Excluded tools include:
- Basic analytics dashboards (e.g., Google Analytics) that do not make decisions or predictions
- Simple data storage systems, like CRMs used only to house customer data
- Non-decision-making tools like email spellcheckers or calculators
However, the line can blur. A CRM that applies AI to score leads or predict customer lifetime value may possibly qualify as ADMT.
Key Takeaways for Marketers
While the AI Privacy Rules are not yet finalized, businesses should prepare for change. Marketers using advanced tools powered by AI, machine learning, or predictive analytics should evaluate their strategies in light of these proposed regulations. Here’s how to stay ahead:
- Audit Your Tech Stack by identifying tools that involve personal data processing for decision-making, profiling, or predictive analysis.
- Focus on Transparency by updating privacy notices to ensure consumers understand how their data is being used in marketing decisions.
- Monitor Regulatory Changes, the rules are still evolving. Consider subscribing to our newsletter to stay informed about updates to ensure compliance once they’re finalized.
- Review Third-Party Partnerships. Many marketers rely on ad platforms and analytics tools. Ensure these partners comply with California’s regulations to avoid liability.
California’s approach to regulating AI-driven decision-making is part of a broader trend toward stricter consumer privacy standards. For businesses, this means rethinking how data is used to engage audiences while ensuring compliance.
