EU Examines Behavioral Targeting, Privacy

As online advertising comes under greater scrutiny in the United States, European authorities reportedly are also preparing to take a closer look at whether some marketing techniques violate privacy.

The Article 29 Working Party, an arm of the European Union that regulates protection of consumer data, is about to embark on an investigation of behavioral targeting--or sending ads to people based on their Web-surfing history--according to Reuters.

While any rules the EU issues won't directly affect companies in the United States, some companies as a practical matter will implement changes across the board. For example, in response to separate concerns of the EU Working Party, Google recently said it would "anonymize" search logs after 18 months, making it harder to connect specific IP addresses to search queries. That change is taking effect in the United States as well as Europe, although Google didn't face similar regulatory pressure here.

The Article 29 group's move to investigate behavioral targeting comes as privacy groups and consumer advocates in the United States are urging the Federal Trade Commission and other authorities to more closely regulate such techniques. Last month, a coalition of groups proposed that the FTC create a do-not-track list for consumers who don't wish online advertising companies to monitor the Web sites they visit and then send them ads based on their presumed interests.

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Earlier this month, the FTC held a two-day town hall meeting about some of the privacy issues raised by behavioral targeting. Ad industry groups like the Interactive Advertising Bureau and Online Publishers Association weighed in against a do-not-track list, arguing that many companies allow consumers to opt out of behavioral targeting. Currently, many big U.S. ad networks participate in the Network Advertising Initiative--a group that formed in 2000 in response to privacy concerns, and that requires member companies to allow consumers to opt out of behavioral targeting programs.

Online ad industry executives also argued to the FTC that behavioral targeting doesn't compromise privacy because the ad companies don't collect so-called personally identifiable information, like names or addresses.

In the last few weeks, however, new variations of online advertising that arguably affect privacy have emerged. Most famously, Facebook earlier this month launched its Beacon program, which informs users' friends about purchases made at other sites. While users can opt out of sharing that data, some people say that Facebook shouldn't publicize information about purchases unless users have affirmatively consented to the program.

Last Tuesday, advocacy group MoveOn.org started a group on Facebook to protest the Beacon program. MoveOn is calling for Facebook to make the program opt-in rather than opt-out. By Sunday evening, around 20,000 Facebook members had joined the group, "Petition: Facebook, stop invading my privacy!"

Some privacy advocates say that any new regulation of online ad techniques abroad will inevitably lead to new policies in the United States as well. "It's a global business," says Jeff Chester, executive director of the Center for Digital Democracy, adding that behavioral targeting companies aren't likely to give consumers more privacy protections in Europe than the U.S. The Center for Digital Democracy argues that companies shouldn't use behavioral targeting techniques unless consumers explicitly consent.

Not all online ad industry executives think the EU investigation will necessarily lead to new regulation. Tacoda founder Dave Morgan, now executive vice president, global advertising strategy at AOL, says he's hopeful that reviews such as the EU's "will spur the online ad industry to adopt more and stronger consumer notice regimes and will drive greater participation in self-regulatory programs like the Network Advertising Initiative."

The investigation by the Article 29 group is separate from the probe by the EU's antitrust arm, the European Commission, about what effect the merger will have on the online ad industry. Two weeks ago, that body said its initial investigation indicated that a combined Google/DoubleClick entity might harm competition in online advertising.

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