A trio of privacy groups want federal regulators to take a close look at ad networks that track web surfers' and sell targeted ads.

The groups want 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.

The World Privacy Forum, the Center for Digital Democracy and U.S. PIRG (public interest research groups) argue that online marketers are secretly combining online data with offline data and using that to run real-time ad auctions.

"Consumers will be most shocked to learn that 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."

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

At issue is a growing market of targeted, real-time ads, where advertisers can choose to show ads to people based on their age, gender, income and location – as well as their recent online behavior – often on unrelated sites that let third parties track users (for instance, Wired.com uses DoubleClick to serve ads and it tracks users across the web using cookies.)

Third-party cookie tracking isn't new – but as the complaint points out, marketers are increasingly trying to augment that data with other data sets – such as the social network data that Rapleaf harvests and re-sells.

Google has long held that its model of displaying ads based on the content of a web page or search term trumped the advantages of user tracking, but entered that market as well after it purchased the display ad giant, DoubleClick. However, the company says its advertising cookies and tracking are separate from users' account cookies, so its advertising database does not know your real name or Google login credentials.

Tying ad cookies to personally identifiable data would let marketers successfully combine online and offline data on website visitors to build a complete digital dossier on a user.

The groups want the FTC to investigate whether the companies are violating fair business laws. They also demand that the companies get users' permission to sell them at auction, pay them for the use of their data, and update their privacy policies to let users know that personally identifiable information is being used to sent them ads.

As for whether the FTC will investigate, it's hard to say – but it's not too likely. The complaint doesn't seem to allege any clear-cut violations of law. The practices are murky, and the laws about privacy not much clearer. The FTC does not confirm or deny ongoing investigations, announcing them only when a settlement or action has been finalized.

The online advertising industry has resisted new regulations, arguing that self-regulation works just fine. However, in their draft of new self-regulatory rules, the industry banned only collecting financial account numbers and info about a user's prescriptions, leaving all other health and financial information available for harvesting.

The FTC has shown some interest in online advertising in the last two years, holding hearings and issuing an advisory report (.pdf) in February 2009. But Center for Digital Democracy director Jeff Chester say its "inaction has encouraged the data-collection and ad-targeting industry to expand the use of consumer information for personalized advertising."

Photo: nelsonbiagiojr/flickr

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