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Privacy & Data

Backing Down on Behavioral Advertising

Over the past few months, lawmakers on both sides of the Atlantic have been scrutinizing ISP involvement in online behavioral advertising, with three hearings in the U.S. Congress and multiple inquiries in the EU. For two U.S. firms, NebuAd and Adzilla, the spotlight seems to have shined too brightly. Both firms have lost their chief executives within the last several weeks. NebuAd is currently revisiting its business plans, while Adzilla has shuttered its North American operations altogether. The parting thoughts of Adzilla CEO Toby Gabriner may be instructive (though he certainly has reasons to be disappointed with the recent turn of events).

In a New York Times Bits blog post last week, Gabriner expressed doubts about the value proposition for ISP-based behavioral advertising, which several major ISPs have all agreed should operate only on an opt-in basis. Gabriner explained that he doesn't believe that "consumers want to opt in simply to get better ads." We have long held the view that if companies are offering a service of value to consumers, then consumers should want to sign up. Adzilla was unable to identify something to bundle with their ad targeting to get consumer buy-in, and Garbinger clearly doesn't think consumers value ad targeting enough on its own. Gabriner also questioned whether consumers would even take note of the difference between behaviorally targeted ads and other ads, saying that a behavioral ad network "can only impact a certain number of ad impressions, and there is no way that an end user will see that [small number of ads] as better." We have wondered about this as well: is the improvement of a behaviorally targeted ad over, say, a contextual ad enough for consumers to notice?

At least one ad industry veteran doesn't seem to think so. On the other side of the pond, Phorm, the leading UK behavioral ad company working with ISPs, is beginning its newest trial with British Telecom subscribers, this time using an opt-in model (in previous trials subscribers were signed up for the service without being informed about it). Many questions remain about the revamped model, particularly with respect to what information subscribers receive before signing up, how consent is obtained from multiple users of a shared computer, and what happens to subscribers' data if they do not opt in or opt out. But even aside from concerns with the current trial, the European Commission is still trying to figure out what happened with past trials. According to The Register, commission officials originally wrote to the UK government in June for an explanation, but the response from the Department for Business, Enterprise and Regulatory Reform (BERR) addressed only the potential for the Phorm system to operate lawfully with consent from subscribers. The EC has again written to the UK about the previous trials that were conducted without consent and given them a month to respond. Given this development, the behavioral advertising spotlight seems sure to stay put for at least a while longer.