We are starting to see more targeted advertising. Notice that website you log on to , that has nothing to do with Australia and all of a sudden there are Australian ads on there? They’ve tracked your ISP, they know where you are surfing the web from. Now, they are checking what websites you go to, building a little profile of you and selectively directing advertising based on your history.

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Watching while you surf
Jun 5th 2008
From The Economist print edition
http://www.economist.com/displaystory.cfm?story_id=11482452
Illustration by Otto Detmer

Online advertising: New ad-targeting systems, which determine users’
interests by monitoring which websites they visit, are proving
controversial

IS IT a worrying invasion of privacy for web surfers, or a lucrative new
business model for online advertising? A new “behavioural” approach to
targeting internet advertisements, being pioneered by companies such as
Phorm <http://www.phorm.com/> , NebuAd <http://www.nebuad.com/>  and
FrontPorch <http://www.frontporch.com/html/index.html> , is said to be
both of these things. The idea is that special software, installed in
the networks of internet-service providers (ISPs), intercepts webpage
requests generated by their subscribers as they roam the net. The pages
in question are delivered in the usual way, but are also scanned for
particular keywords in order to build up a profile of each subscriber’s
interests. These profiles can then be used to target advertisements more
accurately.
Suppose a web user is idly surfing a travel blog one Sunday afternoon.
He visits pages containing words such as “holiday”, “flight” and
“hotel”. The behavioural-targeting software watching him inside the
ISP’s network registers and categorises this apparent interest in
travel. Later, when he logs on to a social-networking site to see what
his friends are up to, advertisements for an airline or hotel chain pop
up alongside the postings and photos. The depressing prospect of having
to return to work the next day prompts him to click on an advertisement
and book a minibreak for the next weekend.
To advertisers, this all sounds great. Behavioural-targeting firms are
doing the rounds in Europe and America offering the prospect of working
out what web surfers are thinking, perhaps even before they know
themselves. If this really works, advertisers will be prepared to pay
more to place ads, since they are more likely to be clicked on. That in
turn means that websites will be able to charge more for their
advertising slots. A small cut also goes to the ISP that originally
gathered the profile information.
The companies involved suggest that internet users will welcome all
this, since more accurate targeting will turn internet advertising from
an annoying distraction into a genuinely helpful service. “This idea
that we don’t provide a service by doing this is as far from the truth
as it’s possible to be,” says Kent Ertugrul, the boss of Phorm. “It
creates a situation where there’s less rubbish bombarding you.”
But not everyone likes the idea. Opponents of behavioural targeting have
kicked up the biggest fuss in Britain, which is where the technology
seems to be making the most progress: the three biggest ISPs (BT, Virgin
Media and TalkTalk), which together account for around 70% of the
market, have all signed up to use Phorm’s technology. Since news of
their plans emerged in February, over 13,000 people have signed an
online petition opposing the system. Legal and networking experts have
argued that it constitutes an unauthorised wiretap, and is therefore
illegal. Richard Clayton, a computer-security expert at Cambridge
University who has taken a close look at Phorm’s systems, did not like
what he saw. Proponents of behavioural targeting, he concluded, “assume
that if only people understood all the technical details they’d be
happy. I have, and I’m still not happy at all.”
Phorm, which is now trying to get American ISPs to adopt its technology
too, emphasises that consumers will be given the option to opt out of
the system if they do not wish to use it. It points out that information
about individuals’ surfing habits remains within the custody of the ISP
(which already has access to such information anyway), and that user
profiles merely associate keywords with an anonymous serial number,
rather than a name. Its profiling system ignores sensitive pages, such
as those from online-banking sites, and will not be used to target
advertising for pornographic sites.
Critics worry, however, that behavioural targeting fundamentally
undermines the trusting relationship between ISPs and their subscribers,
by allowing a third party to monitor what millions of people are doing.
They also worry about Phorm’s previous behaviour. Until last year it was
known as 121Media, and it gathered information about internet users’
interests by getting them to download “adware”, which was included in
bundles with other pieces of software. This software then monitored
users’ surfing habits and used the resulting data to target “pop up”
advertisements of the kind that once blighted the web.
All this was legal, but it won 121Media few friends among PC users, who
found its software difficult to remove from their machines. The
revelation that the company, since renamed Phorm, conducted a secret
trial of its new technology with BT in 2006 and 2007, monitoring
thousands of customers without telling them, has not helped its image.
As the controversy swirls, Google, the 800-pound gorilla of the
internet-advertising industry, is quietly watching. ISPs around the
world have looked on jealously as Google has grown rich on their
subscribers’ web-browsing, while the ISPs have been reduced to “dumb
pipes”, ferrying internet traffic for subscribers but unable to win a
share of their online spending.
Phorm and its ilk promise to change that, by offering ISPs a chance to
get their hands on a slice of the fast-growing online-advertising pie.
Behavioural-targeting firms also like to portray themselves as feisty
underdogs taking on mighty Google, which is itself the cause of concern
about online privacy. Phorm points out that its system does not retain
detailed information about web usage as it builds its user profiles-in
contrast to Google, which keeps records of users’ search queries for up
to two years. (The European Commission recently called upon Google to
delete such information after six months.) “If people knew what was
stored right now, they’d be shocked,” says Phorm’s Mr Ertugrul. His
company’s system, he says, is “the model for privacy online”.
Even so, most web users are happy to strike an implicit deal with
Google: it provides an excellent free search engine in return for the
ability to display relevant advertisements. The quid pro quo with
behavioural targeting, says Mr Ertugrul, is that ISPs will start making
money from online advertising, which they can then spend on upgrading
their networks, without raising prices for subscribers. “This is a way
of funding the internet,” he says.
Behavioural targeting is not necessarily a bad idea, but imposing it
without telling people is likely to annoy them when they find out about
it. Without adequate disclosure, an “opt out” system looks like
snooping; but an “opt in” system, given all the fuss, now looks like a
tough sell.