Find out why consumers continue to mistake behavioral targeting for Big Brother in this excerpt from iMedia's brand new Market Intelligence Report.

Editor's Note: Next week, iMedia will release a new report, “Demystifying, Defining and Profiting from Behavioral Targeting.” The report is a comprehensive look at the impact behavioral targeting is having and contains analysis and opinions from some of the top names in the marketing industry. The following is an excerpt from the chapter examining privacy issues.

Perhaps the biggest issue currently on the minds of behavioral targeting (BT) providers, advertisers, consumers and the federal government is online privacy. The lines are being drawn on just what is acceptable and what isn’t when it comes to gathering consumer information online. Legislation is being passed and industry think tanks are developing ways to head off any consumer concerns that may come up with BT practices.

In a recent survey of online consumers conducted by BURST! Media, 20 percent of respondents were prepared to have their information tracked if it meant more relevant advertising but 56 percent would not approve data collection of any type.

One major concern is the confusion consumers seem to have when it comes to adware programs and spyware. Adware companies offer consumers free downloads of software programs in exchange for receiving highly targeted ads. In contrast, spyware does this without the consumer’s knowledge or consent.

Legislation is in the works to address the spyware situation. The SPY ACT, or Securely Protect Yourself Against Cyber Trespass Act (HR29), sponsored by representative Mary Bono of California, is designed “to protect users of the internet from unknowing transmission of their personally identifiable information through spyware programs, and for other purposes” and includes the "opt-in" provision that often makes industry advocates balk. They prefer the "opt-out" language that would allow consumers to request that programs not be uploaded to their computers, but doesn't force companies to ask permission every time. Another bill -- the Internet Spyware Prevention Act -- sponsored by Rep. Bob Goodlatte's (R-VA) would impose jail terms of up to five years on those who use software to gain access to a computer illegally. After trying to merge the two measures into a single bill, the House voted 393-4 in favor of HR29 and 395-1 for the Goodlatte bill. As of this writing, the bill is still in the Senate due to concerns over the "opt-in," "opt-out" debate

According to Andy Jedynek, senior vice president and general manager of Weatherbug, these bills are a welcome development. “I hope to see good national legislation soon. It’s only good for the industry and draws a clear line between the good guys and the bad guys,” said Jedynek.  “We have concerns about many of the less-than-fully-open practices taken by some who track surfing habits.”

Another industry concern is cookie deletions. If asked, most consumers will be unable to define what a cookie is -- a small file stored on a computer containing information for a specific website -- but that won’t stop them from believing that cookies are a nuisance. One of the side effects of consumer’s taking action and cleaning their computers of unwanted adware is the elimination of cookies. With one click after scanning with software products like Spybot or Ad-Aware, the option exists to eliminate these seemingly innocuous tracking devices from their computers.

Sometimes software solutions highlight third party cookies as “potential threats” to prove their software is extra aggressive. Jeffrey I. Cole, director of the USC Annenberg School Center for the Digital Future, and iMedia research editor-at-large, believes customers are not always aware of what they are doing when they eliminate cookies.

“I am somewhat surprised they (consumers) know what cookies are… people talk extensively about security and privacy, but are willing to give those things up if they are being compensated in some way, or that there’s an advantage for them. I think it behooves marketers to give people an advantage or a good reason to do it.” Said Cole. “People care about their privacy but are willing to surrender it if they think there are advantages to it. “

Nearly 40 percent of internet users delete cookies from their primary computers on at least a monthly basis, according to a study by JupiterResearch, an international research advisory organization specializing in business and technology market research. Based on a survey of 2,337 U.S. respondents, the study found that 17 percent of internet users delete cookies on a weekly basis, 12 percent on a monthly basis and 10 percent daily. The study has implications for advertising and marketing firms that depend on cookies for tracking and targeting, especially ad delivery networks that are relying on third party cookies (cookies placed by an internet site other than the one people are visiting). Other studies put the percentages anywhere from 38 to 55 percent.

Still, some doubt the accuracy of cookie cutting studies. One argument is that what people say they do and what people actually do are two different things. This theory is backed up by an Atlas Institute study showing 40 percent of people who claimed to delete their cookies weekly had cookies that lived longer than two weeks, while 46 percent of people who said they delete their cookies every month had cookies that lived longer than two months. The argument is also made that the vast majority of cookie conversions (70 to 90 percent) occur within a 24 hour window of the corresponding click or impression and as a result, deleting cookies weekly has little impact -- recent data is better data, so deleting these old cookies doesn’t even matter. 

Stop loss programs are beginning to sprout, including a new initiative called Safecount: a coalition of publishers, advertisers, consumer advocacy groups, agencies, market researchers, advertising technologists, and policy analysts gathered together to advocate preserving cookies and other digital media measurement mechanisms. Established by Nick Nyhan of Dynamic Logic and Cory Treffiletti of Carat Interactive, the group hopes to offer a forum where advertisers and consumers can agree on safe and accurate measurement tools.

The Internet Advertising Bureau (IAB) has begun an initiative of their own to address cookie deletion in the form of a “Cookie Committee” task force. Their goal is to focus on consumer education and policy initiatives.

A company called United Virtualities has developed a “delete-proof” cookie system called “Persistent Identification Element” (PIE) that puts a separate profile in Flash to avoid cookie cleaning. According to Omar Tawakol, the latter is a bad idea. He recently spoke at an online conference and said, "If you're going to get in a war with the consumer, you'll lose. PIE is a ludicrous concept."

In a recent article for iMedia, Rich Person of Poindexter Systems suggested changing the model of cookie usage with the consumer in mind. He used the example of a consumer who complained that websites didn’t ask for permission before putting cookies onto his computer and why it wouldn’t be unreasonable for online media to tell him what a cookie was for, what value it would have and how it would improve his online experience -- after all, it is his computer, not their playground. Persons wrote:

“Truthfully, it’s about time that marketers finally understand what consumers like that already know -- it’s about control. Consumers have it in other areas of their lives, and they can sense that it’s within their grasp here. So instead of being reactive and trying to protect our diminishing domain, why not work with consumers to make the entire process better and more beneficial for everyone?”

Bryan Rooney is iMedia's research editor.