2008 Brought New Firms and New Concerns to Behavioral Targeting

2008 Brought New Firms and New Concerns to Behavioral Targeting Behavioral targeting in 2008 was characterized by the introduction of controversial ISP-level technologies from firms such as Phorm and NebuAd.

Whichever way you look at it, it’s been an eventful year in the behavioral targeting space.

Although established players such as Tacoda, Revenue Science and BlueLithium have been at it for years, behavioral targeting in ’08 was characterized by the introduction of controversial ISP-level technologies from firms such as Phorm and NebuAd.

While “traditional” behavioral targeting networks only monitor consumer behavior on a select group of publisher partners, ISP-level targeting can track user activity across the entire Web. While this potentially enables far more accurate targeting, it opens a can of worms with regards to consumer privacy and data protection.

>At the start of the year, firms such as NebuAd, Phorm, FrontPorch and Project Rialto began discussions with ISPs in both the U.S. and Europe. U.K.-based Phorm announced it had penned agreements with three of the U.K.’s largest providers — BT, Talk Talk and Virgin Media — reaching a substantial portion of the U.K.’s online population. Meanwhile in the U.S., NebuAd said it had agreed contracts with “multiple tens” of ISPs.

Although both firms claim their technology tracks users completely anonymously, and that no personally identifiable data is stored, some regulators, consumers, and privacy advocates were not convinced the practice was legal or ethical.

Following announcements it was trialing its technology with major U.S. ISPs including Charter Communications and CenturyTel, NebuAd attracted a wave of scrutiny from U.S. regulators and privacy groups over the summer. That concern culminated with a congressional inquiry and a Senate testimony by then-CEO Bob Dykes.

With ISPs canceling their trials and beginning to distance themselves from the technology, NebuAd announced in September that it would begin to explore more “conventional” media channels. The firm also announced Dykes was stepping down from his role as CEO. He stayed affiliated as chairman of the firm.

Commenting on NebuAd’s technology in January, Dave Morgan, Tacoda founder and then-EVP at the firm’s new parent company, AOL, said, “The question here is will this pass the spooky test.” At this point, in the U.S. at least, it seems to be failing.

In the U.K. market however, rival targeting company Phorm is making some progress, albeit slowly. The firm’s practices have received similar scrutiny from the U.K. authorities and the European Union, but U.K. regulators eventually decided its technology could be implemented legally, providing it was presented to consumers on an opt-in basis.

Despite this, ISPs still appear reluctant to actually implement the system, presumably at the risk of alienating customers. However, after months of delays, BT recently concluded live trials of the technology, and said it plans to “move towards” rolling it out across its network.

The U.K.’s other major ISPs also appear tentative. Virgin Media has suggested it is unlikely to make use of Phorm’s service any time soon, and Sky, Tiscali and Orange have all signaled they have no plans to implement it either. Talk Talk says it remains “committed to Phorm,” but will not give any indication as to when the technology will be rolled out.

Meanwhile, the anti-Phorm movement appears to be gathering momentum. A plethora of dedicated protest Web sites have now been launched, and an ePetition on the Prime Minister’s Web site has already received in excess of 19,000 signatures.

Despite the difficulties faced by NebuAd, Phorm also maintains that the U.S. market is “of great interest.” It also confirmed recently it planned to open a series of “exploratory offices,” and that it already has “people on the ground” in South Korea.

Perhaps as a result of the media frenzy around Phorm and NebuAd, regulatory bodies in both the U.S. and Europe have hinted at closer regulation of the online ad industry, particularly in the behavioral space. In July, a Senate Committee on Commerce, Science and Transportation was held, titled “Privacy Implications of Online Advertising.” The FTC has put forth its own self-regulatory guidelines for the behavioral ad industry.

The European Commissioner for Consumer Protection Meglena Kuneva also held a roundtable event in June to discuss issues of consumer protection and privacy in relation to online advertising, and centered on the themes of targeting and profiling. Speaking at the IAB’s annual Engage conference in London in November, however, Andy Burnham, the U.K. secretary of state for culture, media and sport, said he was in favor of self-regulation, specifically singling out the practice of behavioral targeting.

As it attempts to rise to these self-regulatory challenges, the IAB U.K. hired its first head of regulatory affairs, Nick Stringer, in April. Since joining, Stringer has assembled a dedicated behavioral targeting taskforce, and is aiming to launch best practice guidelines as well as a consumer-facing information portal in the New Year.

It seems therefore that 2009 could be a make or break year for ISP-level behavioral targeting. If Phorm’s technology does indeed see full deployment in the U.K., it could be up to consumers to decide its fate.

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