Will Privacy Concerns Take the Boom out of Online Ads?

from GigaOM by Om Malik

The world eagerly awaits the Facebook’s social advertising platform, likely to be announced on November 6th at the Ad:Tech conference in New York. The new advertising innovation is said to be a rival to Google’s (GOOG) AdSense, prompting some to label the opportunity big enough to deem Facebook a (ludicrous sounding) $100 billion company.

Add to this upcoming announcement, recent frenzy of mergers and acquisitions, and private equity investments such as the $100 million infusion into Specific Media, what you have is a online advertising (bubble or) boom of unprecedented proportions.

Much of this fervor is inspired by behavioral targeting, where advertisers can use sophisticated cookie technology to highly target ads to individuals. The same behavioral targeting approach, however is beginning to risk the ire of privacy advocates and is coming under extreme scrutiny by the US Government.

Privacy Groups are proposing a do-no-track list, which is I guess a web version of the dubious, Do-not-call list. According to Advertising Age, “Privacy advocates say current standards for collecting such data, such as the Network Advertising Initiative, don’t do enough to safeguard consumers against the potential pitfalls of data collection, and that most consumers don’t understand how such data is being used.”

The debate, which so far seems to restricted to the Beltway crowd is starting to spill into the mainstream press. This being the political season, and privacy concerns being politically-popular fodder, expect to see more noise level, which might result in if nothing, increased headaches for online advertising companies.

The groups backing this Do-Not-Track-List are your usual suspects: the Center for Democracy and Technology, Consumer Action, Consumer Federation of America and the Electronic Frontier Foundation. The Federal Trade Commission is going to host a Town Hall entitled “Ehavioral Advertising: Tracking, Targeting, and Technology” starting today.

Google is responding by setting up a Google privacy channel, and attending the FTC Townhall. Other advertising industry executives such as Dave Morgan, chairman of Tacoda, a company owned by AOL dismisses their concerns and says this is an “advocate looking for a cause.” (What’s ironic, is that his dismissive attitude is in sharp contrast with his corporate master, AOL’s willingness to play ball. “We want to make the opt-out process as simple and transparent as possible,” Jules Polonetsky, AOL chief privacy officer was quoted by WebProNews.

He might be right - most of us are irritated by advertising and find that most of the time it is irrelevant. Better focus of advertising with certain degree of annonyminity is acceptable to many if not all Internet users.

But that kind of behavioral targeting might soon take a backseat to more individualistic targeting. Facebook’s social advertising plans revolve around leveraging user information and their relationship information - something that should give a chance to privacy/consumer advocates to get their bullhorns ready, volume turned to maximum.