Opt-Out ‘Error’ Gets Ad Firm in FTC Hot Water

The Federal Trade Commission is pushing for a browser-based do-not-track solution, but it wants more from behavioral ad firm Chitika. The commission settled with the behavioral text ad network, which the FTC claims engaged in deceptive practices and disabled user opt-outs.

The FTC alleges that the company’s opt-out cookies were set to expire after 10 days, rendering them useless at that point. As a result of the settlement, the company within 30 days is required to provide a tool enabling opt-out from collecting data that could be tied to a user or includes a unique identifier. The tool must enable opt-out through no more than one click, and it must maintain opt-outs for a minimum of five years.

According to the FTC complaint, after it was made aware of the commission’s crackdown, Chitika altered the expiration date of its opt-out cookies to expire after 10 years.

The settlement is indicative of the FTC’s intensified focus on online data tracking. Amid privacy legislation proposals calling for curbs on data tracking, the FTC itself has recently affirmed its concerns about online data tracking and usage. FTC Chairman Jon Leibowitz last week told Advertising Age the agency would like the ad industry’s self-regulatory system to “let consumers block the tracking, and not just the delivering of the ads.” The system currently does not enable tracking opt-outs in all cases.

Chitika blamed the 10-day opt-out on a bug in its system that “mistakenly” set opt-outs to expire in 10 days as opposed to the “intended 10 years,” according to a company statement. “At one point we had the 10 in there, and instead of years it was set to days,” said Daniel Ruby, Chitika’s director of research and marketing. “I wish I knew who or why or how that happened.”

The firm said the FTC notified it of the opt-out problem in February 2010 after it received a complaint. Chitika added that between May 2008 and February 2010 it received 30 opt-out requests on average per month that were affected by the early expiration.

The company also stressed that it does not collect personally identifiable information. However, FTC commissioners increasingly have voiced concerns regarding the ability for data collectors to match online and offline data points in order to create a profile that could be used to identify an individual.

The FTC has endorsed the creation of a browser-based system enabling users to opt-out from tracking and targeting by several ad networks and other ad firms or publishers at once. Yet, the opt-out mechanism required of Chitika by the FTC must be “separate and apart from any preferences or controls offered by consumers’ browsers,” the agency said in its settlement.

Browser firms including Firefox-maker Mozilla, Google, provider of the Chrome browser, and IE-maker Microsoft have introduced browser-based methods for universal opt-outs from online tracking and behavioral ad targeting.

The settlement calls for Chitika to enable opt-out notification within its ads, and enable opt-out from the system on the subsequent landing page.

“What we’ve had in place since March [2010] is fully compliant with what the FTC has required of us,” said Ruby.

Chitika has considered participating in the Digital Advertising Alliance program, a self-regulatory industry initiative intended to pacify online ad-related privacy concerns among the FTC, lawmakers, and consumers. “We really like what they’re doing,” said Ruby. “We want to make sure that whatever we implement is going to be not only effective and recognizable…but we want everything to be positive for users, advertisers and publishers alike.”

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