ISP-level behavioral targeting stands in the spotlight

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The issues surrounding behavioral targeting moved front and center last week with the news that ISP-level targeting firm NebuAd had effectively shuttered operations in the U.S, though to many the closure came as no surprise, thanks to the scrutiny surrounding their practices.

ISP-level behavioral targeting, in which Internet service providers use cookie-based targeting to track all consumer surfing behavior to serve up ads – as opposed to traditional behavioral targeting, in which a cookie is only placed on specific publisher sites with established privacy policies – has received increased attention over the past few months. The Federal Trade Commission published revised principles for behavioral targeting earlier this year and reiterated its position at last week's Online Marketing Summit Conference in Washington, DC.

According to Peder Magee, a lawyer with the FTC, that call for better self-regulatory efforts in the behavioral advertising market included not just traditional third-party Web based targeting but also the ISP-level model.

“Our principles basically said you should give consumers notice and consumer control over the practices, reasonable security and opt-in consent if you have material change for your practices,” he said. “We believe those principles apply to the ISP-based model – some of the comments filed with us noted that there are some challenges to providing notice in that model, but despite the challenges consumers still need to get notice.”

But Nick Barnett, UK managing director for Phorm, an ISP-level behavioral targeting firm that has also been under increased scrutiny recently in Great Britain, insisted that his company stands “head and shoulders above the rest of the industry from a privacy perspective.”

He explained that ISP's are actually in a unique position to provide privacy notices and that their model offers the opportunity to display an admissible notice with an option to opt-out when the program is rolled out to ISP subscribers in the U.K. In addition, he pointed out that Phorm does not hold onto any data and that the cookie ID is completely anonymous.

“We do not know who people are, we don't know where they have been, and it is a transparent choice for users,” he said.

But Jeff Hirsch, CEO of Audience Science, a U.S. firm that specializes in traditional publisher cookie-based behavioral targeting, said his company does not believe in the ISP-level model that Phorm promotes.

“We chose early on not to get involved with NebuAd or Phorm because we don't believe in the level of information they gather,” he said. “[That is], ISPs providing a connection to the Internet are able to view all of your surfing behavior everywhere you go and are able to know all that data and use it to target you – it could be any publisher that offers inappropriate material or ones who don't give you the ability to opt-out.”

Hirsch pointed out that education is key in order for consumers to understanding the behavioral targeting industry generally and how different techniques differ.  “In general, I think one of the important points about all of this is we need to find a way to do a better job of educating consumers as to the value of the behavioral targeting and online advertising and how it is beneficial to the consumer,” he said. “So much of this focuses on what harms the consumer and I certainly understand that, but we don't talk enough about what benefits the consumer – the value proposition that on the Internet you get free media in exchange for relevant advertising.”

Barnett agreed, saying he firmly believes in educating consumers about behavioral targeting to eliminate misconceptions. “There are genuinely honest misconceptions about how we operate,” he said. “The natural assumption is that we work like a database marketing company where everything you buy is recorded and the database is mined for interesting patterns. That couldn't be further from the truth about how we operate. We want to help people understand this revolutionary technology we've built that can understand people's interests without storing any specific data. We don't even use IP addresses as a lot of companies do, let alone names and addresses.”

The FTC's Magee said there has been a lot of movement in terms of self-regulatory efforts by individual companies in the U.S. as well as trade groups such as the National Advertising Initiative (NAI).

“A lot of companies have started to reduce the amount of time they retain consumer data and they are experimenting with offering consumers new controls and notice about behavioral ads,” he said, adding that Google's ad preferences manager is a step in the right direction.

“Companies need to take to heart the guidance that we put forth in our report and incorporate the principles we've recommended into their business,” he concluded. “If they don't do that they risk the government becoming more involved, alienating consumers and losing consumer trust.”  

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