The More Things Change…

How consumers are tracked online has been an issue for years. Until recently the main vehicle for this tracking has been the cookie, a small file placed on a visitor’s browser that identifies repeat visits and online activity. The latest chapter of this debate to reach critical media mass concerns Internet Service Providers (ISPs) contracting with companies to place hardware inside their networks to track all user online activity. This tracking produces profiles that aim to target advertising of interest to users, better supporting the online advertising market and giving ISPs a slice of the revenue.

Saul Hansell of the New York Times wrote a good article recently that has attracted over 60, mostly angry comments:

http://bits.blogs.nytimes.com/2008/04/03/can-an-eavesdropper-protect-your-privacy/

Bobby White of The Journal had it back in December: http://online.wsj.com/public/article/SB119690164549315192-9g6E0Km1JMR4eAm55Es_16QrvkU_20081205.html?mod=rss_free

The technology has progressed, yet these are the same exact issues I dealt with when I was VP of Corporate Communications at Advertising.com. It was the beginning of the pay-per-click (PPC) era, and cookies were a new and scary concept. People were upset that their travels could be seen across the Internet — recall the famous New Yorker ad with the caption “On the Internet, no one knows you’re a dog!” Well, that level of anonymity was never accurate, and it’s getting less so every day.

Back then (circa 1999-2000) we were active with industry groups like the Network Advertising Initiative and the Online Privacy Alliance and worked hard to educate consumers regarding exactly what was happening when they were online. We (and hearings at the FTC) helped put in place a set of principles that tried to balance the needs of advertisers and the rights of online users. Basically they’ve been in place since then and encompass:

1. Adoption and Implementation of a Privacy Policy

2. Notice and Disclosure

3. Choice/Consent

4. Data Security

5. Data Quality and Access

The online advertising market has grown immensely since that time, growing to $21B in 2007 according to the Internet Advertising Bureau and PricewaterhouseCoopers, who have put out the best numbers since the late 90’s. I understand and sympathize with ISPs that don’t just want to be “dumb pipes” and want a piece of the economic activity their networks support. And I get the fact that ads that are more and more relevant are a good thing for consumers in theory. But there’s a big difference between cookies — which as a web user I can delete at any time — and having my ISP share all my online activity with a third party.

Most of the media coverage on this includes claims there will be some kind of consent given, but how clearly will it be spelled out? Supposedly there will be safeguards so the data can never be personally identified with me — but what exactly are they, and how will they be enforced? Surely there will be an economic incentive to include more and more personally identifiable information to justify higher advertising rates.

And what’s the benefit to me as a user — more and more advertising, albeit the “right” advertising based on my interests? How compelling to the average consumer does the advertising industry really think that is? There isn’t enough transparency about exactly what is going on. If companies are not very clear about what’s happening, there is a huge risk for a big public backlash and resulting clumsy government regulation.

There’s a very old and established way that a free market economy assigns value to something, and I’m surprised none of the coverage I’ve seen mentions it. It’s pretty simple — PAY PEOPLE for agreeing to allow their online activity to be tracked. I pay good money every month for my broadband access, too much in fact if you compare it to what people pay in other countries.

You want my data — then take $10 off my monthly bill, or guarantee me my rate won’t go up as long as I participate. Be very clear about what’s going on — for example, as clear as my monthly bill is — and cut users in on the action. That bargain IMHO will be accepted by a good percentage of consumers, and represents a big first mover advantage (market AND PR) to whatever major ISP jumps in first.

7/1 UPDATE — ISPs are backing away, better offer that cut to end customers fast:

One week after Charter Communications voiced concerns about controversial behavioral targeting company NebuAd, two other Internet service providers appear to be distancing themselves from the company.

http://publications.mediapost.com/index.cfm?fuseaction=Articles.san&s=85791&Nid=44479&p=303102

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Google — As Dominant as Advertised?

Google didn’t have a particularly good week, despite Neilsen Online reporting on Wednesday that Google continues to widen its lead in US search share over Yahoo and Microsoft. Google now handles almost 59% of all searches here, and almost 63% globally, although that number is down slightly: http://www.reuters.com/article/companyNews/idUSN1931199720080319

More important from a revenue standpoint, the growth in paid clicks has stopped. (Marc Hausman, aka Strategic Guy looks at what this means for organic SEO and PR in a good post here)

http://money.cnn.com/2008/03/27/technology/goog_clicks/index.htm?section=money_technology

Less reported in the general business press but IMO very related is a new feature from Google that presents a search box as part of the user’s search engine response page (SERP). The box potentially keeps them from leaving Google and going to a destination site. This could result in the user never leaving Google’s internet property, and therefore Google would not have to share any resulting advertising revenue. Google says it improves the searcher’s user experience. Sue Feldman of IDC, a noted search analyst, calls it potentially “hijacking affiliate revenue” in a new report. Here’s Tom Claburn’s InfoWeek piece:

http://www.informationweek.com/internet/showArticle.jhtml;jsessionid=NNDKNR2BSUYFQQSNDLOSKH0CJUNN2JVN?articleID=206905917

Google has a lot of good will in the online community, especially when you consider how much influence the company wields in online advertising. Much of that good will stems from the wildly successful AdSense program, which allows online publishers of all sizes to quickly and easily add contextual advertising to their sites. This creates a revenue stream that simply did not exist previously. If Google is perceived as cutting out the affiliate publishers, that good will could vanish quickly. 

There may be many strategy changes to come as Google grapples with the challenge of being a public company and maintaining its stratospheric stock price (down over 30% so far this year). But its founders have fundamentally changed course before. Back when they were grad students, Larry Page and Sergey Brin wrote that advertising supported search engines would always be biased towards advertisers and not serve users well. Saul Hansell of the NY Times uncovered that nugget back in late 2005:

http://www.nytimes.com/2005/10/30/business/yourmoney/30google.html?adxnnl=1&pagewanted=print&adxnnlx=1206716647-vSbEXfp/9xdAjnHAXscMhA