October 1, 2010, 10:35 AM

Who's watching?

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“At best, those profiles are pseudonymous, but they’re still based on what you individually do online, meaning networks can track what you do on hundreds of sites, which can still be personally invasive even if those networks don’t know your name,” says Justin Brookman, senior fellow at the Center for Democracy and Technology, a nonprofit civil liberties group. “But often those pseudonymous profiles can be linked back to your real name identity—either because someone subpoenaed your IP address for your name or because the data stored about you could be traced back to you.”

Some Internet users may not mind having that information gathered because they’re accustomed to trading some level of privacy for value, says attorney Lisa Sotto of law firm Hunton & Williams LLP, who has worked with a number of retailers on privacy-related issues. “Take, for instance, Facebook,” she says. “There is huge value to be gained by using Facebook. There are many stories about the privacy concerns with the site, but that hasn’t led to declines in Facebook usage.”

But Facebook’s popularity doesn’t mean participants aren’t concerned about privacy. For instance, 65% of adult social networking users have changed the privacy settings on their profiles to limit what they share online, according to a recent Pew Research Center Internet & American Life Project report.

Government action

For all the concern, so far there’s been no broad government action against behavioral targeting. But the FTC has made clear it’s following the issue.

And the FTC did more than talk last year when it went after retailer Sears Holdings Corp. The FTC claimed that Sears failed to adequately explain how it would collect data from members of its “My SHC Community” after Sears invited consumers to participate in the interactive online community in exchange for a $10 payment.

After a consumer downloaded the needed software, Sears was able to monitor the consumer’s Internet activity, both on Sears.com and on other sites. That included, according to the FTC, tracking what individuals put into shopping carts, their online bank statements, prescription drug records, and with whom they exchanged e-mails. As part of the settlement, Sears agreed to destroy the data collected, remove any software still on participants’ computers and prominently disclose the type of data it would collect in any similar program in the future.

Now the FTC is considering creating a federal “do not track” registry modeled on the National Do Not Call Registry. Such a registry would likely attract a lot of consumers, which could seriously hamstring behavioral targeting, says Brookman, the privacy advocate. However, implementing such a program would be cumbersome, which is why he doesn’t expect it to happen in the near future.

“There’s no clear way to put it into effect or to ensure that data wasn’t being tracked,” he says. “Even if you enter an e-mail address into a system, that’s not what’s being tracked—it’s an IP address or a cookie. It’s not clear how the system would work.”

Congress is also weighing regulations on online advertising that would make it easier for consumers to opt out of ad networks watching their online behavior. Two privacy bills were introduced this year. One, introduced by Rep. Bobby Rush (D-Ill.) would require sites to obtain opt-in permission from consumers before sharing data with third parties—unless companies meet certain self-regulation standards. A second bill, introduced by Reps. Rick Boucher (D-Va.) and Cliff Stearns (R-Fla.), would regulate how retailers and ad networks track visitors and use that information for ad targeting.

“Congress is concerned about giving consumers better access to the information and the ability to opt out,” says Marc Roth, a partner in the law firm Manatt, Phelps & Phillips LLP, who specializes in advertising, marketing and media. Roth and others don’t believe that Congress will act before next month’s elections. However, if Democrats maintain control of Congress he thinks there could be movement on the legislation next year.


To forestall government action, the IAB and NAI have proposed guidelines for online ad networks. They propose that networks place a clickable icon in or near online ads that consumers can click to get additional information about behavioral advertising and to opt out of being targeted with ads.

In another effort to allay consumer privacy concerns, Wal-Mart last year unveiled an unusually detailed and easy-to-understand privacy policy which it publicized broadly in its stores and online. As part of the launch, Wal-Mart created a Privacy Preference Center where customers can choose what information they want to receive from Wal-Mart and whether the retailer can share their personal data with other companies. Consumers have to opt in to permit data-sharing, and for receiving information by phone and text message. Wal-Mart says that the privacy center puts all of Wal-Mart’s customer data policies together in one accessible area.

Similarly, Google simplified its privacy policies this month, cutting down sections that were redundant and rewriting the more legalistic elements. On its revamped Privacy Policy page the search giant details the information it collects, and allows a consumer to opt out of being shown targeted ads. The consumer can also choose an option that prevents Google Analytics from collecting data on his web site visits.

In another nod to privacy concerns, 24/7 RealMedia and several other ad networks place caps—generally 13 to 17 impressions a month—on the number of times a consumer is presented ads from a particular retailer. “As an online user, I don’t want to see 100 ads of the same thing,” Pangis says.

Those moves represent progress, says Brookman. “It should be the consumer’s choice whether he wants to see ads based on the web sites he visits,” he says. “That hasn’t been the case. But with regulatory pressure the ad networks are doing a better job of messaging. We’re not there yet, but we’re moving to a better place.”



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