'Do Not Track' Could Backfire

Adoption of a federal list intended to limit monitoring of Web surfers could lead to a barrage of extra advertising—on some of the most popular sites

by Catherine Holahan

Consumer protection advocates are pushing hard for the adoption of a "Do Not Track" list that would make it harder for online advertisers to monitor the surfing habits of Web users. The measure is designed to protect the privacy of consumers who don't want marketers to keep tabs on the sites they visit and then deliver ads based on what those sites say about a person's interests.

Backers of the list take their cues from the success of the National Do Not Call Registry, which put the kibosh on unwanted sales calls. "Our idea is really to take the model of the Do Not Call list and ask how you apply that to the Internet," says Pam Dixon, executive director of the World Privacy Forum, one of several interest groups that asked the Federal Trade Commission to adopt the list. "You would go to the Federal Trade Commission Web site, click on a list, it would download to a Web browser, and that would be it," says Dixon.

Maybe not. Adoption of the list could result in some unintended consequences that consumers may also find off-putting. For one, a Do Not Track list could actually increase the volume of online ads, according to Web advertising companies.

Compensating for the Loss of Revenue

The reason for the potential ad increase is related to a key difference between telemarketing and online advertising. When individual consumers add their names to the Do Not Call Registry, they stop receiving sales phone calls altogether. Web surfers who join the proposed Do Not Track list, however, would still see online ads, just not ads targeted specifically to them. Ad networks argue that, because targeting increases ad prices, each ad seen by those on the list would be cheaper than ads seen by people not on the list. Thus, a Web site probably would have to show more ads to compensate for the loss of revenue from targeted ads.

"The value of advertising on the Internet would drop because you couldn't say, 'This is a finance person. Let me show them a finance ad,'" says Tim Vanderhook, chief executive of Specific Media, one of the largest privately held behaviorally targeted ad networks. "So the only way to make as much money is a) make them pay or b) show them more ads."

The Likely Choice

Of course, Web publishers could choose option A. But that's unlikely. Consumers have demonstrated that they are more willing to go to free, ad-supported Web sites than to pay for access to sites. Take news sites, for example. The Wall Street Journal Online, one of the most successful paid sites on the Web, has about 1 million subscribers (BusinessWeek.com, 8/10/07). The number of registered users for New York Times' (NYT) free site is more than 10 times the number of WSJ Online subscribers. The willingness of consumers to see more ads, rather than pay subscription fees, is the chief reason the majority of Web sites rely on advertising.

And the sites most likely to be flooded with ads as a result of a Do Not Track list are also some of the most popular. Top news sites and social networks, such as Facebook and News Corp.'s (NWS) MySpace, where users supply a broad array of content, do not have the clear product association of, say, an autos site. They rely heavily on advertising networks or search providers such as Google (GOOG) and Microsoft (MSFT) to supply the additional targeting needed to raise the price of their advertising inventory.

A Lot Depends on Consumers

Ad targeting enables Web sites to display fewer ads than they would without targeting. "Sites like Cars.com are never going to have a problem getting advertising," says Dave Morgan, founder of Tacoda, an online ad network focused on behavioral targeting that was bought by AOL in July. "But sites like the Associated Press are really challenged for how they are going to get support. If you don't have techniques like behavioral targeting you are going to have a tough time supporting entities like the Associated Press in the future."