FTC to investigate Google, Yahoo!

FTC is set to investigate Google, Yahoo! and Microsoft advertising practices, cookie tracking

Three major privacy groups have urged federal regulators to investigate ad networks that track web surfers and sell targeted ads. According to these groups, two emerging trends in online advertising pose growing threats to user privacy. These two trends include auctioning of individual Internet users for targeted advertising opportunities and the combining of online and other sources of data about Internet users.

The World Privacy Forum, the Center for Digital Democracy and U.S. PIRG (Public Interest Research Groups) asked the Federal Trade Commission to open an inquiry into whether these networks, including Google and Yahoo!, are unfairly tracking Americans and profiting from their data. They believe that online marketers are secretly combining online data with offline data and using that to run real-time ad auctions.

"This massive and stealth data collection apparatus threatens user privacy. It also robs individual users of the ability to reap the financial benefits of their own data," according to the complaint expected to be filed Thursday with the FTC by Center for Digital Democracy, U.S. Public Interest Research Group, and the World Privacy Forum.

“Consumers will be most shocked to learn that these companies are instantaneously combining the details of their online lives with information from previously unconnected offline databases without their knowledge, let alone consent,” said U.S. PIRG Consumer Program Director Ed Mierzwinski. “In just the last few years, a growing and barely regulated network of sellers and marketers has gained massive information advantages over consumers.”

Center for Digital Democracy Executive Director Jeff Chester said in a statement that the FTC has not done enough to crack down on the burgeoning behavioral advertising industry, saying the commission's "inaction has encouraged the data collection and ad targeting industry to expand the use of consumer information for personalized advertising."

Companies named in the complaint include Google, Yahoo!, PubMatic, TARGUSinfo, MediaMath, eXelate, Rubicon Project, AppNexus and Rocket Fuel.

At the eye of the hurricane are real-time ads that are served to users based on their age, gender, income and location — as well as their recent online behavior. These ads are often served on unrelated sites that let third parties further track user behavior, for instance, Wired.com uses DoubleClick to serve ads and it tracks users across the web using cookies.

While this practice has been going on for several years, a new trend in this industry is responsible for causing all this furor. Currently, marketers are increasingly trying to overlay that data with other data sets — such as the social network data that Rapleaf harvests and re-sells.

It is too early to tell whether or not FTC will actually investigate this complaint. To begin with, the complaint does not cite any clear violations of laws. However, it should be acknowledged that privacy laws are all but clear and there are a lot of murky waters to wade through. To obscure the process further, FTC does not confirm or deny ongoing investigations, announcing them only after a settlement or action has been finalized.

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