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'Net ad targeting may lose to privacy concerns
As Congress considers tightening oversight, Internet providers get nervous
NEW YORK - It sounded like a winning proposition — free money — for Internet access providers. By tracking their subscribers' personal Web surfing habits, they could help deliver ads targeted to the consumers' interests, and claim a share of the burgeoning online advertising market dominated by Internet search companies.
But those efforts to sniff out consumers' interests are running into the ditch.
A slow-building privacy storm moved in on NebuAd Inc., the Silicon Valley startup that can facilitate the Web tracking. And its potential partners, the Internet service providers, failed to make the case that they should be in the ad business at all, rather than simply being the pipes that pass Internet traffic back and forth.
One by one, cable and telephone companies that had conducted trials using NebuAd's ad-serving system have indefinitely suspended expansion plans. In interviews, executives at the Internet access providers blamed an unfavorable climate as Congress considers tightening federal oversight.
"A bunch of them have dropped (NebuAd) like hot potatoes," said Gigi Sohn, president of the advocacy group Public Knowledge.
Annmarie Sartor, a spokeswoman for broadband provider CenturyTel Inc., said the company was ready to proceed until "Congress started questioning privacy."
"We were going to launch this summer," she said. "The trial from our viewpoint was successful."
Bresnan Communications LLC, The Washington Post Co.'s Cable One Inc. and Knology Inc. also have ended trials without immediate plans to move forward, joining the previously disclosed suspensions by Embarq Corp. and WideOpenWest. Charter Communications Inc. dropped plans for a summer pilot because of the scrutiny.
Although NebuAd claimed late last year that Internet providers representing millions of customers run NebuAd's system, it's unclear how many, if any, partners remain.
NebuAd, whose chief executive, Bob Dykes, freely spoke with The Associated Press about its plans several months ago, declined comment for this story. Spokeswoman Janet McGraw said via e-mail, "We do not have any specific business updates at this point."
Across the Atlantic, a similar company called Phorm Inc. has also faced complaints since its February announcement of partnerships with three access providers reaching 70 percent of Britain's broadband market — BT Group PLC, Virgin Media Inc. and Carphone Warehouse Group PLC's TalkTalk.
Shares in Phorm have declined about 75 percent since peaking 11 days after the announcement. A company representative said Phorm CEO Kent Ertugrul, who earlier praised his own company's commitment to privacy, was traveling and unavailable for an interview.
Both systems work with Internet service providers to scan customers' Web traffic for patterns. Then NebuAd or Phorm determines which advertisements are likely to interest those customers.
If you've visited several sites on golf, for instance, NebuAd could label you a golfer. Then Web sites that participate in ad networks created by NebuAd can be triggered to show you an ad for golf clubs or golf resorts, while someone else who frequents sites on Jaguars might see an ad from an auto dealer instead.
The thinking is that Internet users are more likely to pay attention and find advertising less annoying if the pitches are relevant to them. That's why Web sites or the networks that deliver online ads can charge advertisers more for running targeted ads, even when they use cruder methods for trying to discern people's interests.
For Internet service providers, the rise of NebuAd or Phorm means they could share in ad revenue now going mostly to the networks of Web sites affiliated with Google Inc., Yahoo Inc., Microsoft Corp. and Time Warner Inc.'s AOL.
"Naturally if there is a way to take a meager slice of that revenue in some way, it's something which companies will want to look at," said Adam Liversage, a spokesman for BT Group, which plans to start trials "pretty soon" with Phorm.
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Both NebuAd and Phorm say their systems do not register visits to sites related to "sensitive" subjects like health or sex, nor do they read e-mails or track consumers by name.
Yet questions have emerged about how well their partner Internet service providers are informing subscribers and getting their consent, and whether the ISPs need permission from Web sites as well.
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