Privacy:The More You Know
An industry coalition races to head off privacy regulation
When the startup NebuAd unveiled its behavioral targeting platform at the end of 2007, it's safe to say the company had no inkling of the push back it was about to get from privacy advocates.
Former CEO Bob Dykes certainly seemed surprised to be hauled before Congress, where his company's policies would be denounced as "contemptible."
"I feel like Galileo when he was viewed with skepticism on demonstrating that the Earth revolved around the sun," Dykes protested at one of several congressional hearings last summer. Dykes insisted the platform was privacy-friendly, but his spirited defense of NebuAd wasn't enough to save the company. He resigned last year and NebuAd suspended its plan to purchase information about people's Web activity from their broadband providers with the purpose of serving targeted ads.
Still, the controversy the company ignited continues to reverberate throughout the industry. It mobilized privacy advocates and lawmakers, sparking the very real threat of new legislation - a prospect the Interactive Advertising Bureau has vowed to oppose. The group takes the threat seriously enough that it has banded together with three other trade groups to develop new self-regulatory policies in an effort to forestall legislation. The coalition includes the Association of National Advertisers, the American Association of Advertising Agencies, and the Direct Marketing Association, and is also supported by the Council of Better Business Bureaus.
For all the turmoil the behavioral targeting industry faces, many on Madison Ave. are perplexed that anyone could object to the practice itself, which, after all, is aimed at improving ads. If targeting works as promised, marketers won't waste their ad dollars serving messages to people who aren't interested in their products, and consumers wouldn't be bombarded with ads for unwanted products. Everybody wins.
The industry contends it's "anonymous" - that targeting companies don't know people's names, addresses, emails or other so-called personally identifiable information. Instead, consumers are recognized based on data that's not attached to their names, like cookies in their computers. Additionally, many ad companies that target people anonymously notify those people about the tracking, and allow them to opt out.
But privacy watchdogs warn that tracking amounts to a form of surveillance that, even when supposedly anonymous, diminishes people. "It's marketers sanctioning a culture where people can know your innermost interests and thoughts and target you," says Jeff Chester, founder and executive director of the Center for Digital Democracy.
Chester's group, along with the U.S. Public Interest Research Group, filed an FTC complaint about behavioral targeting more than two years ago, prompting the agency to investigate behavioral targeting and online privacy.
In November of 2007, just as the FTC was about to hold a "town hall" meeting on the subject, a host of privacy groups, including the World Privacy Forum and Center for Democracy & Technology, presented the agency with their own ideas about behavioral targeting. They asked the FTC to create a do-not-track registry, similar to the do-not-call list.
That in and of itself got the iab's attention. "When you push really draconian regulatory proposals such as 'do not track,' that always gets people very concerned," says Mike Zaneis, vice-president for public policy at the iab. "'Do not call' was a huge consumer success, but sunk the telemarketing industry."
The FTC and iab each came out with proposed voluntary guidelines shortly after that hearing. Various industry groups and consumer advocates were mulling those proposals when Charter Communications made a game-changing move. Last May, the nation's fourth-largest cable company began notifying subscribers it had forged a deal with NebuAd.
News that Charter was going to sell data about subscribers to NebuAd quickly drew the attention of a range of critics - and even prompted Capitol Hill to take a close look at behavioral targeting and privacy.
If consumer groups thought that old-fashioned behavioral targeting was problematic, NebuAd's platform was considered downright alarming. The word used most often, even by other ad executives, was "creepy."
Washington might be known for moving at a glacial pace, but lawmakers' reactions to NebuAd was downright frantic. Congress members asked Charter to suspend its plans pending an investigation. By the end of the summer, lawmakers had convened for more than three hearings dealing specifically with privacy issues and online ad targeting.
How did one company catalyze a widespread debate about behavioral targeting? The answer lies in the unprecedented scope of information available to NebuAd.
The company worked with Internet service providers to glean information about subscribers' Web activity - including sites they visited, articles they read, and searches performed. isps don't just know about visits to commercial sites, but they also know about traffic to non-commercial sites, like those run by doctors or religious groups.
NebuAd then served people ads based on the search terms they typed as queries, or keywords that appeared in pages they visited. For instance, a user who searched for iPods on Google could later get an ad for an mp3 player while on the site of a publisher NebuAd worked with.
Before Congress got involved, NebuAd quietly tested its platform with six Internet service providers. Subscribers could have theoretically opted out of most of those tests, but few people even knew that the test was occurring, let alone realized there was an opt-out procedure. That's because Charter was the only company that sent letters to customers specifically telling them about the tests.
Lawmakers took issue with both NebuAd and the isps that tested the service without calling it to users' attention. "isp-based behavioral targeting was something that legislators and regulators could viscerally understand," says Mike Zaneis, vice-president for public policy at the iab. "Obviously, they had some negative feelings about it."
Sen. Byron Dorgan (D-N.D.), who chaired one of the hearings about NebuAd, made his distaste clear. Dorgan said that if an isp ever asked him to allow another company to view every site he visited, he knew how he would answer: "Of course it's not okay. Are you kidding me? N-O. No."
Meanwhile, Rep. Ed Markey (D-Mass.) went on record with the suggestion that companies that purchased information about subscribers' Web activity from their isps should first obtain their explicit opt-in consent. In other words, the default would be set to no-tracking. This mandate could sink behavioral targeting companies, because many consumers don't change default settings.
NebuAd didn't just roil privacy advocates. Older behavioral targeting companies that tracked users via cookies also felt threatened by the company. Companies like Revenue Science and Tacoda, which collect information from publishers' sites, can only track people across a limited number of pages and not on search engines.
It's one thing to know that someone has read an article about cars at nytimes.com, as an older behavioral company might. But NebuAd theoretically knew not only what someone read at the Times site, but also whether he had searched for cars on Yahoo or eBay. With that kind of comprehensive data, NebuAd was in a position to put older, publisher-based tracking companies out of business.
NebuAd has largely faded from the scene, but questions about how far marketers can go to target ads remain. Now that a new, potentially pro-regulatory administration has taken office, digital rights organizations have made clear they will advocate for new rules. Last December, a host of groups met with the Obama transition team to urge greater privacy protections.
Whether the new marketing coalition can successfully fend off laws remains unknown. But advocates like Chester, for one, are prepared for a lengthy fight. "This is not just a battle about data collection," he says. "It's about the nature of advertising itself, in the digital era."