Regulation. It’s something that could seriously disrupt your business model. With the rise of social networks and the growing sophistication of the Internet, online privacy is one area ripe for regulation — one that has been building in momentum for several years and is arguably at its peak.

Yesterday Lydia Parnes, the former Director of the Consumer Protection Bureau at the Federal Trade Commission (FTC), visited Boston. She spoke with a small group of investors, entrepreneurs and executives from online advertising, data storage, mobile, and analytics companies about what’s happening on Capitol Hill with regard to online privacy. The lunch event was hosted by Shopximity, a Boston startup at the intersection of ad targeting and privacy.

We’ve all seen it in the news: Google, Facebook among many others like Rapleaf and Pandora are getting a tap on the shoulder from the FTC about how they keep secure consumer data and personal information. “It’s an extremely exciting time. We’re really at a place of innovation right now. There are tremendous opportunities, as well as risk,” Parnes, who was at the FTC for over 25 years, opened up with.

On the risk side, Parnes, who could only share so much about her time at the FTC, shared past public examples: mainly, how Google and Facebook in particular basically now have an ongoing and continuous dialogue with the FTC to ensure online privacy.

But what should a company, say a startup in the ad tech space, without big money like Facebook or Google do if approached the FTC?

Parnes’ answer: “’We’re a startup’ just doesn’t make it on the Hill.” The best thing to do, she recommended, is to look at (a) your business from a privacy perspective and (b) what you tell consumers you do with their information. If those things match up and you get a call from the FTC you can have more confidence that what you’re doing is okay. She also recommended thinking about online privacy as a data supply chain. “You need to create responsible data supply chain management,” she said. “And that goes beyond ads.”

She also introduced the notion of privacy by design that’s currently being employed by the FTC. The idea is that when building your products, you should build them from the ground up thinking about online privacy. Google, for example, would say they practice privacy by design in that they have a privacy specialist on every single product team.

“Lydia Parnes provided great insight into how the privacy and regulatory landscape has changed and offered a strategy for companies to follow: privacy-by-design,” shared Sim Simeonov, co-founder and CTO of Shopximity. “This is the path we are following at Shopximity: from our business model to our patent-pending technology.”

Parnes noted that one big shift at the FTC is that the organization itself is now more technologist heavy (vs. just lawyers) than ever before. This, she said, means the organization understand much more robustly what’s happening, the factors involved, and what’s possible by savvy tech entrepreneurs. On the flip side, this also means it’s much more difficult to fly under the radar if you are practicing risky policies with consumer data.

And that applies to the nascent mobile space, as well. Location, among other factors, arguably brings an entirely new dimension to online privacy. With smartphone penetration to pass fifty percent here in the US this year, it’s becoming top of mind for the FTC. And while Parnes believes mobile privacy and online privacy can be approached similarly, that may not be the case currently at the FTC.

Given Boston’s thriving mobile sector, with leading mobile ad targeting networks like Jumptap and analytics companies like Localytics, a great discussion ensued. From what the equivalent of the online cookie is on the smartphone, to whether the comapny providing the plumbing vs. the consumer-facing app store should be the entity responsible, many questions remain unanswered. At least in the near term, the FTC seems to be relying on self-regulation.

“Protecting consumer privacy is of paramount importance for any ad tech organization. Today’s event underscored the current industry position of proactivity,” Eric Brown, co-founder of Media Armor, a mobile ad analytics startup here in Boston, shared with us after the event. “It is now a basic requirement for doing business, a stance that Media Armor fully embraces.”

Thanks to Lydia Parnes for sharing her insights with area entrepreneurs, investors and executives and to Shopximity for hosting the event.