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Behavioral Advertising: Thumbs Up or Down?

By Eric Sinrod

Behavioral or target advertising seeks to direct ads to Internet users based on information collected from their prior online browsing. The goal is to customize the Internet experience so that Internet users receive content that reflects their own interests and preferences. For example, someone who is an avid golfer may want to be shown advertising relating to golf clubs but not about knitting, gardening or other matters unrelated to his or her interests. While such a customized experience may have perceived advantages, there can be privacy worries, as the online world may seem a much smaller place when individual browsing habits are tracked, collected and used to place a person within certain categorical boxes.

At this point, many Internet users are aware of behavioral advertising. Indeed, according to a recent survey by TRUSTe, two out of three are aware that their browsing information may be collected for advertising purposes. Does this mean that there is more discomfort about this form of advertising? No, actually. Consumer discomfort with this form of advertising actually has gone down from 57% in 2008 to 51% this year. But nevertheless, more than half of consumers still have some discomfort.

While this discomfort with behavioral advertising persists, 72% of survey respondents report that they find online advertising to be intrusive and annoying when the product and services advertised are not related to their interests. This suggests that a more customized approach reflective of user preferences would be less intrusive and annoying.

But just because some Internet users may favor a customized experience over generalized Internet advertising, this does not mean that they do not have privacy concerns relating to behavioral advertising. Indeed, not only do about half of surveyed consumers have discomfort with targeted advertising, many of them undertake affirmative actions to surf the Web as anonymously as possible. For example, the percentage of people who delete cookies from their computers at least once a week has increased from 42% in 2008 to 48% this year.

An interesting aspect of the TRUSTe survey is the finding that while about 75% of respondents report that they know how to protect their personal information online, 39% concede that they do not do so consistently. This proves the point that privacy is like oxygen. Just like we can state that privacy and oxygen are important to us in the abstract, we can become complacent and only care about them when they are impacted and disappear.

The failure to take steps to protect one's own privacy can contribute to problems like identity theft. Of survey respondents reporting on the last year alone, 35% believe that their privacy has been invaded based on information they provided online, 6% report that their identity has been stolen, 11% state that they have experienced credit card theft, and 13% indicate that they have suffered from unauthorized sharing of sensitive information such as health or financial records.

As in other areas, the law is struggling to catch up with technology. Technology advances out of the box at warp speed, and the wheels of justice grind slowly in an effort to grapple with new realities. When it comes to behavioral advertising, we still do not have crystallized laws or regulations on the books.

The Federal Trade Commission (FTC) recently issued a set of guidelines called Self-Regulatory Principles for Online Behavioral Advertising, however. Your author has summarized those principles in a prior column. In essence, these principles recommend transparency and customer control, as well as reasonable security and limited time periods for retention of customer data. Companies that adhere to these principles will be more likely not to find themselves in legal hot water when it comes to their behavioral advertising practices.

Probably, over time, behavioral advertising will become an expected, and perhaps even greatly desired, part of the Internet experience, with more developed legal regulations to ensure greater consumer privacy protection.

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