Privacy groups file FTC complaint on behavioral ads

Three privacy groups have filed a complaint with the U.S. Federal Trade Commission about behavioral advertising practices, accusing Google, Yahoo and other advertising vendors of creating a "Wild West" atmosphere with few rules for protecting consumer privacy.

The complaint, filed Thursday by the Center for Digital Democracy (CDD), U.S. PIRG and the World Privacy Forum, centers around the practice of real-time trading and sale of individual Internet users' profiles, based on their interests and surfing habits. The growing and little understood practice, combined with targeted ad vendors incorporating a wider range of outside data sources to build user profiles, constitutes a major privacy violation, the groups said in their complaint.

"This is behavioral targeting on steroids, because it seamlessly merges offline and online information on a single user," said Jeffrey Chester, CDD's executive director. "A user is bought and sold for targeting and retargeting -- all without their awareness and consent."

Online advertising platform providers are able to sell user data in real time, then the bidder can add its own data about the user, Chester said.

"This massive and stealth data collection apparatus threatens user privacy," the groups said in the 32-page complaint. "It also robs individual users of the ability to reap the financial benefits of their own data -- while publishers, ad exchangers and information brokers ... profitably cash in on this information."

The groups called on the FTC to address "the moral and ethical consequences to consumers and citizens when they are subjected to an invisible system" that sells their data to third parties when they go online.

FTC inaction has allowed online advertising firms to expand their collection of personal data, Chester said.

The three privacy groups called on the FTC to take several actions, including requiring online ad vendors to get opt-in permission to trade or sell customer profiles. The FTC should also require that these companies spell out their practice of trading and selling user profiles in their privacy policies, and the agency should require that consumers receive "fair financial compensation" for the use of their data, the groups said.

But consumers already benefit from targeted advertising, said Mike Zaneis, vice president of public policy at the Interactive Advertising Bureau (IAB), trade group representing online advertisers. "They consume media, content and services, all of which are paid for because of advertising," he said.

The complaint largely focuses advertising practices that have been around for years, with the only different being that online advertisers can now more quickly target ads to individual users, Zaneis said. The real-time targeting of ads is just a "more efficient" business model that earlier attempts to deliver ads based on consumer preferences, he said.

"I don't think we should fear technology or innovation," he said. "I think consumers have embraced new technology, and it'd be nice if privacy groups did, too."

Yahoo, in a statement, said its goal is to establish and maintain trusted relationships with its users. "We work hard to be transparent in all that we do and provide our users with control and meaningful choice over their online advertising experience," the company said. "From Yahoo's perspective, self-regulation enables us to innovate at the pace of technology while adhering to our long-held philosophy around privacy."

Google said it offers its users choices about what information is used in targeted advertising, and it prohibits the use of personal information such as health and financial data. "Together with many industry participants and associations, we're working to help grow the real time bidding and display ecosystem in a way that enhances user privacy," the company said in a statement.

Google and Yahoo are two of the largest providers of online advertising services named in the complaint. Others named include PubMatic, MediaMath, eXelate and Rocket Fuel.

Copyright © 2010 IDG Communications, Inc.

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