Web ads find unwanted attention

The Web advertising business is all about attracting eyeballs. But this time — thanks to new, uber-aggressive approaches to better targeting Web ads — it may have attracted the wrong kind of attention: increased regulatory interest and potential oversight.

The increased attention from privacy groups is in part fallout from two major Web initiatives launched in recent days: the Google-led Open Social initiative and Facebook's Social Ads product. MySpace quickly followed suit with its own targeted ad system. All of these efforts attempt to move beyond today's mainly keyword-driven advertising to create ad networks driven by profiles and the behavior of users (and their friends).

Web companies also are busy buying up behavioral advertising vendors, including Google's still-to-be-cleared $3.1 billion purchase of DoubleClick and Microsoft's $6 billion acquisition of aQuantive. America Online alone has bought up a slew of ad firms in recent weeks, including Quigo, Tacoda and Yedda.

The telecom industry knows all about regulatory scrutiny, such as tight restraints on the use of customer proprietary information. Web companies have had a much freer rein in this area. But as telecom and the Web increasingly intersect — and carriers look to deliver targeted ads on their own mobile and IPTV platforms — looming regulatory attention could be a mixed bag for incumbent carriers.

Earlier this month, the Federal Trade Commission held a workshop specifically examining online behavioral-driven advertising. At that meeting, Jon Leibowitz, commissioner of the FTC, urged Web players to protect user privacy. “The marketplace alone may not be able to solve all problems inherent in behavioral marketing,” he said.

At the same workshop, a group of nine privacy organizations asked the FTC to institute a “Do Not Track List” — similar to the telemarketing industry's “Do Not Call List” — to allow consumers to opt out of having their online activities tracked, stored or used by marketers or advertising networks. “Online opt-outs should be as well-known and as easy as the Do Not Call List,” said Mark Cooper, director of research for the Consumer Federation of America.

Online advertising groups, including the Internet Advertising Bureau and the Network Advertising Initiative, said the industry would police itself without regulatory intrusion, noting, for example, that Web browsers already have the ability to block Web tracking “cookies.”

Meanwhile several legal scholars recently claimed that Facebook's new ads, in which users endorse products to their friends, might be illegal under existing privacy laws — a charge Facebook quickly refuted. Regardless, Web users have found ways — both through Facebook settings and undocumented hacks — to turn the site's Project Beacon data-sharing features off.