FTC privacy enquiry may disrupt internet commerce

The US Federal Trade Commission, (FTC) a consumer watchdog, is to investigate targeted or "behavioural" advertising.

The US Federal Trade Commission, (FTC) a consumer watchdog, is to investigate targeted or "behavioural" advertising.

If it decides that consumers' privacy is being unduly compromised, it could undermine some of the internet's commercial viability and force a revision of companies marketing strategies.

The FTC said that online behavioural advertising involves the collection of information about a consumer's activities online - the searches, the web pages visited, and the content viewed - which is then used to send targeted advertising to the consumer.

In theory, this should reflect the consumer's interests, cut out "advertising clutter", and thus increase the effectiveness of the advertising.

Firms such as Google, Yahoo and Facebook have software engines that "serve" advertising on web pages. Although this does not necessarily use personal information, it depends on the result of a consumer's search activity.

Last week, Vodafone and others stopped advertising on social networking site Facebook after their ads appeared on the home page of the right-wing British National Front.

The Vodafone display ads that appeared on Facebook ran in rotation with others such as Pipex and AOL. A Vodafone spokesman said the firm was not able to specify where its ads appeared on Facebook. However, the company is now trying to rectify that.

"We are working with our media buyer, OMD, to ensure that more robust controls are in place before we agree to any potential re-investment," Vodafone said.

A Facebook spokesman said, "Facebook is committed to giving advertisers more control over the placement of advertising on the site. For those UK advertisers who do not want ads displayed alongside content that they find objectionable, we are working with them to find alternatives. UK advertisers now can choose whether or not to run their banner ads alongside group pages on Facebook. We are continuing to look into ways to apply our technology to give advertisers even more options in the future."

The UK's Information Commissioner's Office (ICO) has issued guidance notes that cover the use of cookies (small applications that collect information about a web surfer's use of the web) and related privacy policies, as well as unsolicited marketing. Some firms insist users enable cookies before they allow them on to the home page.

An ICO spokesman said if a firm uses cookies, it must say so and how it uses the information it collects. Regarding e-mail messages, firms must first get consent to send, she said.

The UK's Advertising Association has set up a working group to look at issues arising from new media marketing practices. A spokesman said the group is still being formed.

The Advertising Association's June Quarterly Survey showed internet advertising was spending up 42% to £648m, whereas spending on TV, radio and direct mail all dropped to £962m, £127m and £615m respectively.

A spokesman for the advertisting industry regulator, the Advertising Standard Authority, said its remit was to see if advertisments are legal, decent, honest and truthful. It was not immediately clear whether it would be concerned with the issues the FTC is to explore.

The FTC first looked at similar issues in 2000, and issued two reports on the practice of online profiling. "Technology advances and the evolution of business models since that time have raised concerns by consumer advocates, privacy experts, and others about the implications of data collection in online advertising now and in the future," the FTC said.

It added several consumer privacy advocates, as well as the State of New York, had urged it to examine the effects of behavioural advertising on consumer privacy.

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