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Consumerists Want FTC Probe of Online Advertising

By Martin H. Bosworth
ConsumerAffairs.com

November 2, 2006

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Web surfers and shoppers don't just have phishing scams and identity theft to worry about. Now they have to worry about ads that are actually targeted to their interests.

Industries track visitors to Web sites, categorizing every click of the mouse and unique "hit" on a site in an effort to target advertising pitches and get surfers buying their products.

Now two consumerist groups are demanding that the Federal Trade Commission (FTC) take action against companies that collect data on visitors through online advertising.

The Center for Digital Democracy (CDD) and the U.S. Public Interest Research Group (PIRG) filed a 50-page brief with the FTC, urging the agency to focus greater scrutiny on and possibly tighten regulation of online advertising.

"The emergence of this on-line tracking and profiling system has snuck up on both consumers and policymakers and is much more than a privacy issue," PIRG's Ed Mierzwinski said in a statement. "Its effect has been to put enormous amounts of consumer information into the hands of sellers, leaving buyer-consumers at risk of unfair pricing schemes and with fewer choices than the Internet is touted to provide."

The report analyzes five specific techniques advertisers and marketers use to lure "window shopping" surfers into becoming repeat customers: User tracking, data mining, behavioral marketing, audience segmentation, and industry consolidation.

"Audience segmentation," for example, involves advertisers and analysts sifting through data gleaned from Web surfers' visits and breaking them down into categories for easier marketing. Different categories include "family planners," "coupon clippers," and so on.

The brief investigated techniques used to track visits to Web sites, such as using specific "pixels" to deliver data back to observers when portions of sites are clicked on.

The report quoted extensively from filings belonging to business software company Omniture, which collects multiple levels of customer information and builds profiles from anonymous data records of Web site visits.

Omniture stated in a filing with the Securities & Exchange Commission (SEC) that complying with laws that require explicit consent for information gathering would cost it money and business.

"Even if our customers succeeded in developing new procedures, they might be unable to convince Internet users to agree to the collection and use of the users' information," the company said. "This would negatively impact our revenues, growth and potential for expanding our business and could cause our stock price to decline."

Microsoft's Watching You

Although the report also targeted the advertising and privacy practices of such Web giants as Google and Yahoo, it reserved its heaviest criticism for Microsoft, which the Center for Digital Democracy's Jeff Chester said was "rewriting the rules that govern the online marketplace."

Chester cited Microsoft's "AdCenter" digital advertising initiative, which harvests and categorizes user data from Microsoft's many services, ranging from its interactive Xbox Live online game platform, to its MSN Spaces blogging community, to Hotmail and its 30 million-plus e-mail subscribers.

The report claimed that Microsoft was using data gleaned from its services without users' knowledge to deliver "targeted and personalized advertising" in the hopes of turning users into customers, a plan Chester called "deceptive and unfair."

The consumer groups' appeal to the FTC was timed to coincide with "Techade," a series of hearings set for Nov. 6th-8th in Washington, D.C. that deal with the changes in marketing technologies and how the Internet presents both opportunity and danger to consumers.

Chester said that the FTC has largely ignored its duties as an advocate for consumers and needs to step up its efforts to regulate collection of individuals' data. "The public interest matters...[It] is the FTC's responsibility to protect and promote that vital perspective, by issuing injunctions against the most egregious of the new invasive advertising practices."

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