Are online agencies betraying their customers? Depends how the cookie crumbles

Expedia has jumped feet first into the world of online behavioral advertising (OBA). OBA involves the tracking of a consumer’s online activities to deliver targeted advertising in line with the consumer’s interests. With the dramatic downturn in travel sales during the current recession, Expedia, like other travel companies has searched for additional revenue beyond direct travel sales.

Expedia is selling their customer’s buying habits directly to advertisers, gathered through their Internet cookies. The advertisers in turn, via the purchased cookie data can send highly targeted ads to online consumers as they visit Web sites across the Internet.

It should be understood that according to Expedia, no personally identifiable information (PII) is sold to advertisers through the program, dubbed PassportAd. They strip out names, addresses, credit card numbers, and other PII.

According to Omar Tawakoi, CEO of BlueKai, the company handling Expedia’s PassportAd program, other top travel sites, including at least one major travel search engine, are also selling consumer data, stripped of PII, to travel and nontravel advertisers without public disclosure. If behavioral marketing is as benign as advertised, I’d like to know why they’re keeping their programs secret.

There really is nothing sinister about cookies per se, but they do contain data you generally might want to keep private. Cookies are small files containing a string of text stored on a user’s computer by Web browsers. A cookie can contain bits of information such as a user’s name, address, preferences, shopping cart contents, credit card and other data used by websites. Cookies can be temporary (when you leave the website they are deleted) or persistent (the cookie and its data are only deleted after a specific time period, or never deleted).

Art Sackler, Executive Director of the Interactive Travel Services Association, commented in 2008 about the FTC’s proposed guidelines, saying, “in behavioral advertising generally, no personally identifiable information is collected or used in any way. When there is no PII involved, we fail to see the harm for individual consumers.” He went on to say that OBA “offers genuine benefits to consumers without impinging their privacy.”

How does behavioral advertising benefit consumers? According to the Association of National Advertisers (ANA),

Behavioral advertising makes it possible for consumers to see the right ad at the right time about the right product, rather than simply a series of ads that may be irrelevant to them.  It also provides marketers with a more efficient and effective means of reaching consumers who are most likely interested in their offerings.  This efficiency supports competition and innovation and substantially strengthens the U.S. economy.

In addition, ANA points out the critical role that advertising plays as a major funding source and financial foundation for many services that consumers enjoy on the Internet. I don’t think there is any doubt, that at this time, advertising is critical to many worthwhile online sites and services. Here at Tripso, for example, advertising is vital to keeping us alive and serving our readers.

Dan Jaffe, Executive Vice President of ANA stated, “The privacy interests of consumers can be best protected by strong industry self-regulation and positive industry leadership.”

Two questions come to mind about OBA. What can consumers do to protect their privacy? Does behavioral advertising need regulation, and if so, how much?

You can disable cookies, but that would mean that many e-commerce sites, sites through which you do online business, won’t work. You can also delete cookies once you’ve completed your business. I advise Internet users to only visit reputable e-commerce sites, and click on advertisements only for reliable and legitimate websites. I also advise deleting all cookies on a regular basis.

Mindy Bockstein, executive director of the New York State Consumer Protection Board, has stated that mere consumer disclosures are insufficient. She said,

Consumers need to be apprised of what behavioral targeting seeks to accomplish and the fact that, if they choose to consent to being targeted, profiles will be created with their tracked personal information.

Ms. Bockstein understands that advertisers can take the information purchased from Expedia and other companies, and couple that with the personally identifiable information they can gather when consumers use their websites and click on their advertisements. Expedia does allow their customers to “opt-out.”

Dan Jaffe, showed his concern about the FTC and the statement of Ms. Bockstein, when he said,

We have serious reservations about some of the proposed principles suggested by the FTC, particularly the notion that consumers should be given the ability to opt-out of anonymous tracking and the collection of non-identifiable information across multiple websites.

I would ask Mr. Jaffe, what is ANA afraid of? If behavioral advertising is so valuable to the consumer, why are you afraid they’ll opt out?