• by Mark Walsh  @markfwal, February 27, 2009

If behavioral targeting is the key to providing Web users with advertising that's better tailored to their particular needs and interests--instead of banner ads that they ignore--then what's the harm to consumers?

That was a central question tackled by a panel of privacy and online marketing experts Thursday at the OMMA Behavioral conference in New York. Whether online user tracking--even when anonymous--represents a growing threat to privacy has become a hotly debated issue in the last year, with FTC, Congress and state governments considering increased regulation of behavioral targeting.

For Jules Polonetsky, co-chair and director of the AT&T-funded think tank Future of Privacy Forum, that debate has become almost superfluous. Whatever side one takes, he emphasized that there is now a widespread perception among consumers and regulators that online tracking is creepy at the very least.

The key to diffusing the controversy is for publishers and marketers to give Web users notice that their behavior is being tracked in order to provide them with more relevant content, recommendations and marketing offers.

Indeed, new voluntary guidelines for behavioral targeting issued earlier this month by the FTC state that companies should provide "clear, concise, consumer-friendly, and prominent" notice of the practice, and allow consumers to opt out.

"If sites said to users, we try to work with ad networks to give you more relevant advertising, and we're not trying to hide this, no one would run away," said Polonetsky. He pointed to companies such as Amazon and eBay that have headed off backlash by letting customers know upfront that they use behavioral targeting in recommendation engines and advertising.

Justin Weiss, associate counsel at the Network Advertising Initiative, a self-regulatory group, agreed that disclosure is critical to assuaging concerns around targeting. "It's a reality everyone needs to accept. Consumers are inclined to disengage if you're not being transparent, so notice and choice are key elements," he said.

But Matt Wise, CEO of online marketing firm Q Interactive, argued that it's not always so easy to let users know when they're being tracked when so much of the data collection goes on behind the scenes. "If we can show the benefit to users at the experience level that's great," he said. "But the reality is 90% of the time ad networks are doing something in the background (unseen by users) but helping to create a more efficient advertising economy."

By putting up barriers to the sharing of user information online, he continued, "you're materially harming our industry."

Panel moderator Wendy Davis of MediaPost asked if self-regulation really works. Jerry Cerasale, senior vice president for government affairs at the Direct Marketing Association, maintained that existing laws, oversight by the FTC, active press coverage, and the DMA's own ethics code together already provide a sufficient deterrent to bad practices.

But Polonetsky suggested there was still more the industry could do to self-regulate. He noted that practices like retargeting, now considered a subset of behavioral targeting, are not covered in many Web sites' terms and conditions or the NAI rules. "We didn't do enough to show that when it came to this we really were self-policing," he said. "But retargeting is on the table now."

And then there's mobile. Steven Baker, a BusinessWeek writer and author of the newly released book "The Numerati," warned that privacy issues online pale in comparison to those in the mobile realm. "The harm is going to be almost imperceptible compared to harm that comes from tracking people's mobile behavior," he said. "You get a better read on what an individual does and that's where the battle is going to be."