Yahoo's Response to Congress on Targeting May Not be Enough

(Update with input from Catherine Holahan, who spoke with Yahoo)

Yahoo says they won’t target you… to your face.

The Internet giant’s announcement today that it will allow users to opt out of behavioral targeting on its site only applies to the ads users see. It will still collect information on the Web sites visited by unique computers, it just won’t serve ads to individual users based on the info.

“This isn’t rejecting cookies outright, you are just preferring not to see the ads,” says Anne Toth, Yahoo’s head of privacy and Vice President of policy.

So, Yahoo will still know that you looked up Fannie Mae’s stock on Yahoo finance and then checked out foreclosed homes on Yahoo’s real estate site. It just won’t serve you a mortgage ad based on that info when you’re checking email. It will also still serve ads to you based on your location and the content of the page that you are on.

Toth says Yahoo must keep the information in order to report accurate financials on advertising click through rates and visitors. It probably also wants to tell advertisers about the kind of people who visit certain pages, in aggregate, in order to sell more expensive advertising. Behavioral targeting can more than triple the price of some ads.

The move came in response to Congressional action. Last week, the House Energy and Commerce Committee sent a letter to 33 companies, including Microsoft, Google, AT&T, Yahoo, and Comcast, opening an inquiry into their practices for collecting and using data to target ads to consumers based on what they do online.

Yahoo response follows Google’s roll out of DoubleClick tracking across its network and a way to opt out of tracking on the Google content network and DoubleClick tracking. Microsoft also allows users to shut off targeted ads.

Will these moves be enough to keep Congress happy? After holding hearings about NebuAd , the committee seem pretty riled up. They’re digging into questions about how long the data is held, how consumers are being alerted to the practice, just exactly what kind of data is being collected (health, financial, and other personal data), and how many people are being tracked. And they’ve been making noise about obliging companies to ask people to opt in before collecting data.

The FTC looked into these questions last fall and came up with tentative guidelines . The industry responded with an an update of the guidelines it follows, which are set out by the Network Advertising Initiative, the industry association.

Some of the privacy folks aren’t entirely happy with either the FTC’s recommendations or the NAI’s response. They think they are too weak and don’t do enough to keep companies from collecting really sensitive data or inform consumers about what tracking is and how they can permanently opt out of it.

The Center for Democracy and Technology, for instance, put out an analysis late last month. It advocates a Do Not Target list and wants the targeting companies to sit down and come up with standard guidelines for how long they keep the information.

It’s not clear how Yahoo’s action allays privacy concerns. What worries most Web surfers about behavioral targeting isn’t just that they see ads that know a lot about them, it’s that the information is collected in the first place. People fear a data leak will expose their online activities to the public. They’re not afraid that they’ll be tricked into buying a mortgage by carefully targeted advertising. At least, not yet.

That’s one likely reason few people bother to opt out of targeted advertising. In July, Yahoo said that 75,000—a fraction of 1% of the traffic Yahoo sees on its network—visited an opt out page to refuse behaviorally targeted ads across the non-Yahoo sites on which Yahoo serves ads. (The new announcement extended the opt out to Yahoo’s own sites). Not surprising. Why bother opting out if the information is still out there anyway?

Yahoo believes most people don’t opt out because they actually like targeted ads. “It is our strong belief that a more customized experience is what users prefer,” says Toth.

Maybe. But what users really want isn’t the choice to have a customized experience, it’s the choice over whether their data is collected in the first place. That’s what Congress really wants to address. Our bet is that there is more to come.

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