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When an individual surfs the Web, he typically believes he is doing so anonymously and that no one knows his name or address. While that still may be the case today, 1 Web sites that people visit and the content of e-mail they send and receive are being used by more and more companies to find out their specific interests. Through what is coming to be known as “behavioral advertising,” these companies are then able to prepare targeted ads based on online habits. A consumer who searches the Web for real estate brokers, therefore, might see moving company ads; one who searches for vacuum cleaner repair shops can find ads popping up for soaps or other cleaning products. The practice goes even further, with some businesses automatically scanning the content of e-mail and then placing ads on the users’ screens that they believe will be of interest. Others use information that people provide about themselves (such as education and interests) when they register at various Web sites to decide which ads they will see. For example, Yahoo! in August launched a “Smart Ads” behavioral tracking program. 2 The company claims the program: � leverages “user demographics and interests” � automatically generates “uniquely relevant offer-driven advertising” � and carries “the personalized advertising experience from the ad to the landing page.” Behavioral tracking practices are causing some privacy concerns. Last month, the Federal Trade Commission held a two-day workshop addressing consumer protection issues raised by the tracking of consumers’ online activities and these forms of targeted advertising; this was the first public workshop held by the FTC on the use of consumer data in online ads in eight years. The conference explored a wide range of topics including the kind of data collected for behavioral advertising, the technology used to collect it, how such data is used, who has access to such data, and whether and how such data is secured. One FTC Commissioner, Jon Leibowitz, suggested that the agency will increase its regulation of online advertising. 3 The issue is an important one for consumers but it is turning into a crucial one for businesses, which have spent an estimated $20 billion on Internet ads this year, 4 including an estimated $2 billion or so on behaviorally targeted ads alone. 5 The Internet has come a long way from the days when those who first knew about it insisted that it have no commercial connection and that all content had to be free. Advertising on the Web is now not only accepted, but even expected. Generally speaking, the same ads appear on a Web site notwithstanding who is viewing it, the same way a car ad appears in a newspaper. “Mass advertising” of this type is traditionally the way marketers have reached potential customers, and it certainly has its benefits. According to theory, when people associate a duck with an insurance company or a lonely repairman with a particular brand of appliances, they will remember the advertiser and its products or services. Changes in TV viewing habits, continuing declines in the circulations of newspapers and magazines, and the growth of new media, however, are forcing advertisers to rethink their advertising philosophies. Simultaneously, technological advancements such as “cookies” permit a record to be created and kept as to an individual computer’s Internet usage, what sites are visited, how often the same site is visited, how long each visit lasts and what links are followed. 6 The result has been the explosive growth of behavioral – or individualized – advertising as the information collected causes the delivery of personalized promotions related to a history of use. This focus can help an advertiser make a sale more easily, and perhaps at a lower cost, than traditional mass advertising. It also yields ads that presumably are of greater interest to computer users than more general advertisements, helping them to optimize their Web searching time and leading to more efficient computer usage. 7 A number of companies have recognized the sensitivity that some people nonetheless have to the use of this information. For example, AOL recently announced that it would enhance its online targeting “opt out” system for consumers by the end of the year. AOL’s chief privacy officer, Jules Polonetsky, stated that the company “want[s] to make the opt-out process as simple and transparent as possible.” The company explained that it will have banner ads that will explain the tracking AOL uses and the ability of computer users to opt out, as well as the benefits of providing at least some information. AOL reported that it will rely on new technology to reach its goal. Now, computer users who opt out of behavioral targeting by using an opt out cookie “risk having their preference lost if they later delete their cookies.” According to AOL, it will be using a Web cache technique to preserve consumers’ opt out choices “even if they delete their browser cookies.” 8 Groups Urge Controls Prior to last month’s FTC workshop, a group of nine privacy organizations – including the Center for Democracy and Technology, the Consumer Federation of America, and the Privacy Rights Clearinghouse – called on the federal agency to take a formal step to protect computer users’ privacy by implementing a “Do Not Track List,” similar to the “Do Not Call List” applicable to telemarketers. 9 It is important to recognize that a Do Not Track List, even if implemented, would not bar all Internet ads, but would only affect those ads resulting from behavioral tracking. In this sense, it is different from the Do Not Call List, which generally prohibits all telemarketing calls. The privacy groups also asked the FTC to provide information to consumers about behavioral tracking and to prohibit advertisers from collecting and using personally identifiable information (PII) about health, financial activities and other sensitive data. Some privacy advocates go further. They are concerned that information obtained from computer users can be used in negative or harmful ways, with certain consumers discriminated against in a way that would be very difficult to detect in hyperspace. Advertisers’ Position Advertisers that favor behavioral tracking point out that it benefits consumers in a variety of ways, including the increasing availability of free content supported by ad revenues, more efficient consumer experiences due to targeted ads and the ability of smaller businesses to enter and compete in the marketplace as a result of that efficiency. Many Internet ad organizations recommend self-imposed regulation that distinguishes between behavioral advertising that includes PII analysis and e-advertising that is driven solely through anonymous monitoring of the datastream. Plainly, the need for transparency as to the processes and the consumer’s ability to “opt in” or “opt out” of the advertising program grows exponentially when PII is used. The ad industry also argues that existing tools are adequate to address consumer’s concerns. These tools include privacy policies, self regulation by the industry, existing regulatory schemes, such as FTC enforcement actions to prevent deceptive online conduct, the Children’s Online Privacy Protection Act and heightened European Union privacy provisions, and standard technology that permits each consumer to set the level of “cookies,” if any, that he will permit to be placed on his computer. 10 Moreover, it is argued that direct-mail companies use as much information on individual consumers as they can acquire, from ZIP codes to purchase histories and income ranges to target their ads. The question then becomes whether providing essentially the same function – targeted communication – through behavioral advertising should or can be treated any differently. The FTC or Congress ultimately may have to strike a balance between online advertising and consumers’ privacy interests. For now, the interested parties are gathering information, exploring available technology, and setting out preliminary positions. Given the history of the Internet, it would seem unlikely that behavioral tracking will ever be eliminated. It remains to be seen whether or not it will be regulated voluntarily or by the government, which to date generally has been reluctant to interfere with the Internet’s growth. If regulation does occur, the extent of it undoubtedly will be subject to a long debate. Shari Claire Lewis, a partner at Rivkin Radler in Uniondale, focuses on Internet, domain name and computer law litigation. She can be reached at [email protected]. Endnotes: 1. Some technology experts believe it may soon become possible to discover a computer user’s identity from the user’s computer use, and that, indeed, it already is possible to do so – and that that has already occurred. See, e.g., Catherine Holahan, “Taking Aim at Targeted Advertising,” Business Week (Nov. 15, 2006), available at http://www.businessweek.com/technology/content/nov2006/tc20061115_360862.htm (“Holahan”) (reporting that people’s names and addresses were identified following release by AOL of certain search data identified only by unique numbers). 2. See http://advertising.yahoo.com/marketing/smartads/. 3. Louise Story, “FTC Member Vows Tighter Controls of Online Ads,” New York Times (Nov. 2, 2007), available at http://www.nytimes.com/2007/11/02/technology/02adco.html?ex=1194667200&en=ec6ede0e167a2363&ei=5070&emc=eta1. 4. Louise Story, “Online Marketers Joining Internet Privacy Efforts,” New York Times (Oct. 31, 2007), available at http://www.nytimes.com/2007/10/31/technology/31aol.html. 5. Holahan, supra. 6. The record that is created tracks either the history of Internet activity on the computer in general, or by user, if separate identifying accounts are set up on the computer. The record may also take note of historical activity (such as habitual use of certain news services) or session history. In the case of a multiple user computer, it may or may not, however, be able to distinguish one user from another, depending on how the computer is configured or whether the individual user provides personally identifiable information. 7. See, e.g., Jennifer Slegg, “What’s the Buzz Behind Behavioral Advertising?” (May 11, 2006), available at http://searchenginewatch.com/showPage.html?page=3605361. 8. “AOL Launches Innovative Privacy Education Program for Behaviorally Targeted Advertising,” press release (Oct. 31, 2007), available at http://press.aol.com/article_display.cfm?article_id=1327. 9. The technological aspects of the operation of the proposed Do Not Track List are illustrated at http://www.cdt.org/privacy/20071031donottrack.pdf. 10. See, generally, National Advertising Initiative Written Comments for the FTC Behavioral Advertising Public Forum, Oct. 19, 2007, available at http://www.ftc.gov/os/comments/behavioraladvertising/071019nai.pdf.

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