July 23 (Bloomberg) -- Yahoo! Inc., AOL Inc. and other companies dependent on Internet ad revenue are fighting Web-browser makers, including Microsoft Corp., over how to let consumers avoid being tracked online.
The lack of consensus on “do-not-track” rules could result in “a technological arms race,” in which advertisers circumvent technology designed to block tracing a user’s clicks through cyberspace, said Peter Swire, co-chairman of the Tracking Protection Working Group, a standards body that last week rejected an ad-industry-backed proposal.
“There will be increased blocking from the user and browser side, and there’ll be increasingly sophisticated tracking from the advertising side,” he said.
Do-not-track rules pose a potential threat to online advertising, which is more valuable when targeted to consumers based on their Web-surfing habits. Internet ad revenue grew 15 percent in 2012 to about $37 billion, according to the Interactive Advertising Bureau, a trade group for ad-sellers.
Swire’s group, which includes 109 experts from industry and policy groups, has until the end of July to meet President Barack Obama’s goal of establishing a self-regulating system to honor Web users’ requests that companies stop shadowing them in cyberspace. The panel rejected the latest proposal, backed by advertisers, on July 15.
How to balance privacy and commerce is a debate taking place on both sides of the Atlantic. In Western Europe, where companies including top search engine operator Google face pressure from regulators over data collection, privacy legislation could slow online ad growth by nearly 15 percent by 2017, according to an estimate by Forrester Research.
The impasse on voluntary standards shows that Congress needs to set the terms, said Senator Jay Rockefeller, the West Virginia Democrat and chairman of the Commerce Committee. “This proves my point -- that legislation is needed because industry can’t regulate itself,” he said in an e-mail.
Rockefeller has introduced a do-not-track bill. An earlier version didn’t become law.
The ad industry proposal rejected by the standards panel offered less protection to individuals than earlier drafts, according to a note from Swire and his co-chairman Matthias Schunter, a principal engineer at gear maker Intel Corp.
The proposal came from top Web portal Yahoo!, online publisher AOL, U.S. cable provider Comcast Corp. and U.S. ad firms and advertisers belonging to the Digital Advertising Alliance. The New York-based alliance lists members including Google Inc., largest U.S. automaker General Motors Co. and biggest U.S. home lender Wells Fargo & Co.
The working group was considering how advertising networks should react when a browser sends a signal, or flag, asking not to be tracked. Advertisers switched their focus to limits on how to use gathered data, according to minutes of group deliberations.
“If you’re allowed to track the consumer can benefit, and for sure ad-driven business models would benefit -- so AOL and Yahoo benefit,” Laura Martin, a Los Angeles-based analyst for Needham & Co. LLC, said in an interview.
The ad industry changed its approach because of an “explosion” of U.S. Web users sending do-not-track signals, Mike Zaneis, general counsel to the New York-based Interactive Advertising Bureau. The proportion has climbed to more than 20 percent over the past six months, from low single digits previously, Zaneis said.
Reasons for the increase include largest software maker Microsoft Corp.’s decision to release its Internet Explorer browser with a do-not-track signal enabled, and nonprofit Mozilla Corp.’s promotion of that option in its Firefox browser, Zaneis said.
Yahoo has said it won’t honor do-not-track signals from Explorer because they don’t reflect user intent. “Our goal is to find a consensus position that advances consumer privacy without harming the delivery of free content to users,” Suzanne Philion, a spokeswoman for Sunnyvale, California-based Yahoo, said in an e-mailed statement.
Yahoo isn’t alone in ignoring do-not-track signals.
“Companies don’t do anything when they see the flag,” or do-not-track signal, Zaneis said. “The DNT flag has been hijacked by these self-serving companies.”
Microsoft’s customers “overwhelmingly” say they want more control of their personal information online, General Counsel Brad Smith said in a December blog posting that said “we need” a standard from Swire’s group. Jack Evans, a spokesman for the Redmond, Washington-based company, declined to comment on the working group.
All the companies are seeking a competitive edge, Anthony Mullen, a London-based analyst with Forrester Research, said in an interview.
Microsoft and Apple Inc. -- whose representative, David Singer, objected to the advertisers’ proposal -- have browsers that give them direct contact with Web users.
That’s an advantage if do-not-block signals make it harder for rivals such as Yahoo or Comcast to discern consumer behavior, Mullen said.
“The end game is to have an explicit relationship with the consumer,” Mullen said.
The working group is to discuss how to proceed given its deadline, according a memo explaining the July 15 decision.
“Right now there seems to be a widening of divisions,” Daniel Jaffe, group executive vice president for the Association of National Advertisers, said in an interview. The New York-based trade group represents more than 500 companies with 10,000 brands.
Caroline Campbell, a spokeswoman for New York-based AOL, declined to comment as did Sena Fitzmaurice, a spokeswoman for Philadelphia-based Comcast, and James Ryan, a spokesman for Cupertino, California-based Apple.
The standards group may still succeed, Federal Trade Commission Chairwoman Edith Ramirez said in an e-mailed statement.
“I hope stakeholders resolve the remaining disputes,” Ramirez said. The consumer protection agency has endorsed do-not-track mechanisms and isn’t participating in the working group.
Obama’s administration, in its call last year for a consumer privacy bill of rights, said it would rely partly on multiparticipant bodies like the working group.
Self-regulation “is a dubious approach at best,” Jeffrey Chester, executive director of the Washington-based consumer group Center for Digital Democracy, said in an interview.
“There’s not going to be any legislation at least in the short term,” Chester said. “We’re all going to be tracked until one day there’s going to be a public outcry.”
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