• by Wendy Davis , Staff Writer @wendyndavis, September 3, 2008

ISPs abandoned the company. Lawmakers condemned its tactics. And now, Bob Dykes, former CEO of NebuAd, is taking a job as CFO at VeriFone Holdings.

His departure as CEO (he will remain as chairman), coming after months of setbacks, marks yet another challenge for the controversial company. What's more, it could signal trouble for other ad companies that intend to purchase data about consumers from ISPs.

Online behavioral targeting isn't new, but using ISPs to gather data about consumers is. ISPs know every site Web users visit and every search query entered. Which means that companies like NebuAd, that purchase data from ISPs, are theoretically well-positioned to figure out what consumers want to purchase and serve them ads accordingly. Older behavioral targeting companies also serve ads based on users' Web activity, but they only collect information across a limited number of sites.

But it's precisely because ISPs have such comprehensive information about subscribers that privacy advocates and others object to ISP-based behavioral targeting.

Faced with the emergence of ISP-based targeting, the House and Senate held hearings this summer about online privacy and behavioral targeting. At one, Rep. Ed Markey of Massachusetts said he thought that NebuAd and other similar companies should not deploy their platforms without first obtaining consumers' explicit opt-in consent.

Markey and other lawmakers also put pressure on ISPs, demanding answers about their use of NebuAd. A total of six ISPs admitted they tested the service recently, but none were still working with NebuAd as of last month.

For his part, Dykes insisted that NebuAd would preserve users' privacy. He said that all data collection and ad-serving was anonymous, in that the company didn't know the names or addresses of users. He also stressed that users would be able to opt out of the service -- though, as it turned out, The Washington Post Company-owned Cable One did not allow subscribers to opt out of a test earlier this year. Several other ISPs to test the service notified subscribers about the test and their ability to opt out, but did so by revising the fine print of privacy policies that were posted online.

NebuAd isn't the only ISP-based behavioral targeting company. Others include Phorm and Front Porch. But the events of this summer call into serious question whether these companies will be able to operate as they originally planned. Certainly, if they intend to deploy their platforms, they would be well-advised to make sure consumers know about the initiative and consent to participate.