Privacy vs. Profit on the Internet

Internet privacy

hide captionJust how much does your ISP know about you?

Last month, Charter Communications, an Internet service provider, put forward a plan to monitor its users' activities online in order to sell more targeted advertising. If Charter gets its way, and you're one of its customers, what you do on the Internet — searches, e-mail, reading sports scores, whatever — will determine which ads are sent to you.

That means Charter could be watching everything users do online, a fact that really bothers Ari Schwartz, vice president of the Center for Democracy and Technology.

"The Internet service providers are talking about building profiles of their users. So as a condition to get broadband access, they are creating profiles about you for advertising purposes," says Schwartz. "That's a completely different world than what we've been in before."

Charter would not go on the record to discuss its upcoming ad program, but the company already makes it possible for customers to opt out.

This isn't the first time privacy and advertising have clashed online. Last year, Facebook started an ad program in which it would tell your friends if you bought something from Overstock.com or Blockbuster. To get rid of this "feature," you had to expressly opt out of the program. But after a big dust-up, Facebook finally reversed course and made the program expressly opt-in.

While many in the advertising industry would kill for the opportunity to sell highly targeted ads based on online activity, David Blum of Butler, Shine, Stern and Partners, a large ad firm in Sausalito, Calif., isn't one of them.

Blum says that ads on Facebook are mostly based on information users put in their profiles. That's more benign than what Charter and perhaps other ISPs want to do.

"The trade-off is that I'm going to put information that I choose to [online], but by doing so, I'm opening myself up to advertisers," says Blum. "That, for me, is very, very different than what the ISPs are doing, which is largely deceptive, quite frankly, in some respects."

Still, Blum adds that some of Charter's subscribers might not mind getting more targeted ads. In fact, four years ago, when Google launched its free Web-based Gmail, a lot of people were concerned that Google would be scanning private e-mails to allow targeted ads. Today, most people don't seem to mind so much and continue to use it. Just like Gmail, Blum says, some customers might not mind the more targeted ads.

"There's a lot of people who will see that as a better experience, but you'd better tell them what you're doing," says Blum. "You'd better give them the chance to opt out or you're gonna have ... a backlash that's going to be uncontrollable."

At its core, Charter's initiaive is about money, says Chris Hoofnagle, a privacy law expert at the University of California, Berkeley.

"ISPs have to find a way to become profitable," says Hoofnagle. "And they need to find ways to generate revenue on top of merely connecting people to the Internet."

Indeed, a recent filing with the Securities and Exchange Commission states that Charter is $20 billion in debt, has lost billions of dollars over the last three years, and adds that the company expects "to continue to incur net losses for the foreseeable future."

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