Why Microsoft Is Going It Alone With Do-Not-Track

Microsoft got into hot water with the FTC and ad industry self-regulators recently over its decision to ship its next version of Internet Explorer, version 10, with the “Do Not Track” option turned on by default.

How could anyone be against Microsoft – which is about to ship millions of copies of Windows 8 with IE 10 aboard – making the reasonable assumption that users would like to start their online computing experience in some level of anonymity, a state that they can of course modify should they positively elect to be tracked at a Web site of their own choice? Seems like a very smart move to make that most ordinary people would support.

The problem isn’t what Microsoft did, but the way Microsoft did it: by taking a unilateral step that effectively pre-empted the work that an industry group called the Digital Advertising Alliance had done on the Do Not Track issue, and even the W3C (which hasn’t finalized how tracking issues need to be worked into the Web’s next iteration). Microsoft’s “bad” behavior isn’t exactly new when it comes to working with outside organizations – for years its view of public standards seems to be “tolerate while innovating our own,” an extension of its famous and highly successful “embrace and extend” method for broadening its own market share.

I suppose we can all agree that Microsoft could have used more tact when it made its decision, but that’s not the real story here. What I think is really going on is that Microsoft realized – probably a long time ago – that issues like DNT aren’t relevant as online computing migrates from the Web to closed systems where policies for cross-vendor collection of data aren’t issues at all. After all, when you’re on Facebook, you consent to being tracked by Facebook; the same is true when you’re on Microsoft’s Xbox Live network on ITunes. Like it or not, we’re moving into an era in which most of the tracking will occur across private, not public networks.

Viewed strategically, DNT isn’t a significant issue for Microsoft. The company certainly doesn’t depend on Web-based user tracking technologies to support any significant business units. Nor does it have an economic incentive to encourage third-party tracking technologies.  I think these fundamentals inform its apparently impatient attitude toward the whole DNT formalization process.

Nor does an issue like DNT bear more than marginal relevance to where Microsoft is going with ad targeting. Interestingly, Microsoft’s vision for an entirely new generation of ad tracking and targeting technologies was revealed in a recent patent filing for a system that will target advertisements based on emotion. One can debate whether it makes sense to target happy ads to happy users, but the impressive thing about this filing is how it integrates an entire universe of tracking data – from search queries to e-mail text to facial expressions – to produce optimal ad monetization rates. The public Web is just one component of this environment, and issues like DNT really don’t have much traction.

Nor do online advertisers currently using cookies to target users need to worry much for the near-term. IE currently has a 25% to 30% percent share of the browser market, and the Windows 8 rollout is unlikely to alter this scenario much. Microsoft may sometimes behave as if it’s the only 800-pound gorilla in the room, but it’s certainly not the only gorilla in the jungle, and tracking and targeting will continue to be potent weapons in marketers’ arsenals for many years to come.

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