Microsoft's 'Do Not Track' privacy effort at crossroads

A movement by privacy activists to curb tracking of Internet users' browsing habits scored a major victory last month when Microsoft launched its new browser with "do not track" as the default, or automatic setting.

But some advertisers are in revolt against the move, certain websites are skirting the Microsoft effort and the debate over online privacy and tracking is heating up.

The controversy stems from practices used by websites and marketing partners to track browsing activity to be able to deliver ads targeted to individuals.

The ad industry argues that tracking is done anonymously without violating privacy, but some say it is easy to connect the person's anonymous IP address or mobile device to a real person.

"It is trivial to make those connections," says Jim Brock, a former Yahoo! executive who now heads a venture called PrivacyFix which offers browser plug-ins for privacy and other services to consumers and businesses.

Websites and mobile device use a variety of software to determine a user's browsing habits. Marketers can then use that data for "behavioral ads" designed with people's habits in mind.

In some cases, these electronic tags can predict if a consumer is price-sensitive, allowing sellers to charge more or less for a product or service.

Privacy activists say a simple Web search can make consumers a target for marketers, and that viewing certain websites may identify them as homosexuals, AIDS patients or suffering from another disease.

"That is one of the scariest things, and it shakes people's faith in the marketing industry," Brock said. "There is very little protection for targeting based on health conditions. This is information that can get in the hands of insurance companies and employers who might not use it in a way we would expect."

Most Web browsers allow users to activate a "do not track" privacy feature, and Microsoft designed its Internet Explorer 10 with the feature as the default setting.

"We believe consumers should have more control over how data about their online behavior is tracked, shared, and used," Microsoft chief privacy officer Brendon Lynch said in announcing the move.

Advertisers see the issue differently, arguing that Microsoft should not make the decision for consumers.

The Digital Advertising Alliance, a consortium of the largest US media and marketing associations, told its members they can ignore or override the default settings in Microsoft or other browsers.

"The trade associations that lead the DAA do not believe that Microsoft's IE10 browser settings are an appropriate standard for providing consumer choice," said the alliance, which includes the Better Business Bureau.

"Machine-driven do not track does not represent user choice; it represents browser-manufacturer choice."

Yahoo! has also broken ranks with Microsoft, saying it "will not recognize" the "do not track" settings by default.

A Yahoo! blog post said Microsoft acted "unilaterally" and that "this degrades the experience for the majority of users and makes it hard to deliver on our value proposition to them."

Representatives Edward Markey and Joe Barton, who head the House privacy caucus, expressed disappointment over the actions by advertisers and Yahoo!, saying they highlight the need for better privacy laws.

"If consumers want to be tracked online, they should have to opt-in, not the other way around," the two lawmakers said in a statement.

Some analysts argue that wiping out all online tracking would undermine the economic model of the Internet.

The Information Technology and Innovation Foundation, a Washington think tank, recently modified its website to warn visitors with "do not track" enabled with a pop-up message which asks them to enable tracking.

ITIF analyst Daniel Castro said most consumers do not object to online tracking if they understand that ads support the websites they visit.

"You can't say you don't want targeted advertising but you do want free access to websites," Castro said.

"People like free content and they are willing to make some tradeoffs."

Richard Frankel, president of the ad technology firm Rocket Fuel, said that even though "everyone claims to hate online advertising" there would be very little content on the Internet without it.

Frankel said that imposing tracking restrictions would cut revenues and thereby "would stifle investigative reporting, dissuade open discussion and commentary, and muffle free speech."

Brock acknowledges that revenue will be lost if without behavioral ads, but that the industry has failed to persuade consumers of their value.

"There will be less data to monetize," said Brock, who describes himself as "a former tracker."

"But what the industry has not done is to explain why we benefit from targeted advertising."

Brock argues that with industries unable to reach agreement on privacy standards, consumers may face confusion and it may be time for the government to step in with legislation.

"I believe in ad-supported media, but the industry is giving us no choice," he said. "They need a kick in the butt from the government."