March 18, 2008

Internet sites collect personal data on their visitors. Thanks to a front page article in the New York Times by Louise Story (*), consumers can no longer ignore the extent of this phenomenon. 2,520 times per visitor per month on average at Yahoo, for a round total of 400 billion events. Converted into behavioral advertising revenues, all those bread crumbs amount to some real dough at the expense of consumer privacy.

One issue with consumers is that, ostrich like, they believe what they do not see cannot hurt. Remember how Facebook beat a quick tactical retreat in the face of user protests? Its only error with Beacon had been to make its users aware of the link between behavioral advertising and data collection. Since Internet data aggregators are on average better versed in hypocrisy and obfuscation, why not take this opportunity to review here some of the misinformation on the subject?

Privacy policies work, say the companies engaged in data aggregation. Given their conflicts of interest, they would say that, would they not?. As AOL already proved in 2006, anonymous search patterns are enough to identify their originators. If ad targeting is so valuable, it is precisely because cumulated profiles can be so accurate. Yahoo may claim to obfuscate user IP's and Microsoft user names, what if a poor soul has used their search engines to google him or herself a few times?

If privacy violation is so dangerous, where are the victims? First privacy violation is a perfect theft, which blinds victims to their economic losses. But more on that later. There is another downside to profile aggregation. While Yahoo mines and processes low yield ore on a large scale, enterprising individuals may look for buried nuggets. The Department of Homeland Security collects much data on all airline passengers. The same techniques used to spot terrorists will enable hackers to zero in on high profit targets. According to Demetri Sevastopulo, "the US military is increasingly concerned about cyberespionage" (**). Is Yahoo more secure? Just wait for targeted scams to creep up behind targeted advertising.

Europe, more protective to privacy issues, will tackle the problem. Unfortunately Europe is all bark and no bite. Nikki Tait and Richard Waters have just reported the European Commission cleared Google's acquisition of DoubleClick (***). As long as several companies can boast about violating my privacy, it's not a crime, it's competition. Lovely. The competition commissioner's real bite is carefully muzzled. Privacy protection depends on another who, all bark, is currently busy buying Munich maps prepared by Google. No need to be a general to know that possession of the military crests opens the country down below. No matter the level of protection imposed, consumer data is exposed as soon as collected.

Competition will solve all problems. This assumes competition thrives. Yet Louise Story shows convincingly how far advanced concentration already is. At the scale achieved by Yahoo, MySpace, AOL, Google, Facebook and Microsoft, vertical integration between data collection and targeted advertising shuts off smaller players. "Some advertising companies will have little choice but to outsource their ad sales to companies like Microsoft and Yahoo to benefit from their data". The disappearance of DoubleClick as an independent company is another nail in this coffin. Given the few remaining contenders, I fault both the FTC and the EU Commission for ignoring the built-in advantage Google derives from its current dominance of Internet search

Free markets will solve all problems. No error is more egregious. Read Louise Story's study of Nielsen (****). "[Its] goal is eventually to coax all its television households to agree to Web monitoring as well". As she makes clear, "coaxing" is the operative word as "Nielsen households" prove reluctant. Any economist can price this reluctance to part with privacy, which in view of current Nielsen practices must run in the hundreds of dollars per year on average. So we have a price but where is the market? What Nielsen tries to buy, web monitoring, Google and its gang get for free! Don't reply users get free services in exchange. Existing modes of advertising already pay for them. The FTC and the EU Commission have in effect allowed data aggregators to steal a few billions dollars per year from hoodwinked consumers. A perfect theft pure economics is powerless to stop.

My only hope? An Al Gore for eprivacy. Ralph Nader, wake up! You don't even need to run for President and lose.

Philippe Coueignoux

• (*) .............. To Aim Ads, Web is Keeping Closer Eye on What You Click, by Louise Story (New-York Times) - March 10, 2008
• (**) ........... US raises concerns over cyber attacks, by Demetri Sevastopulo (Financial Times) - March 12, 2008
• (***) ......... Google cleared to buy online advertiser, by Nikki Tait and Richard Waters (Financial Times) - March 12, 2008
• (****) ...... Every Move You Make , by Louise Story (New-York Times) - February 26, 2008