"Microsoft has embarked on a wide-ranging data-collection and targeting scheme that is deceptive and unfair to millions of users," the Center for Digital Democracy and the U.S. Public Interest Research Group charge in an FTC complaint filed ahead of next week's start of a three-day FTC workshop on online issues.
AdCenter, the ad-serving platform for all of Microsoft's products including gaming, mobile applications, MSN.com, IPTV and Live search, among others, is the cornerstone of Microsoft's effort to gain a bigger share of the $15 billion online ad market. It, and other portals, often use behavioral targeting to help advertisers reach the demographic they want.
Jeff Chester, executive director of the Center for Digital Democracy, said the complaint is the first of several that will target different companies. It asks the FTC to begin a formal probe of online-ad practices involving user tracking, behavioral targeting, audience segmentation, data gathering and industry consolidation, and halt some activities.
"Microsoft is actively rewriting the rules that govern the online marketplace," the complaint says. "It is the FTC's job to make certain that these rules reflect more than corporate self-interest. It is the FTC's responsibility to protect and promote that vital perspective by issuing an injunction against the most egregious of Microsoft's new invasive advertising practices."
Mike Hintze, senior attorney for privacy matters at Microsoft Corp., responded to the complaint through a spokeswoman. "From what we have read, they have got it all wrong. Microsoft is committed to protecting consumers' privacy and we are very open with consumers about our privacy policies and practices across all of our online services and all of our advertising products."
The Center for Digital Democracy complaint, which cites heavily from the marketing materials of various ad networks boasting of their web analytics and tracking prowess, rekindles an opt-in/opt-out privacy fight between marketers and privacy critics from several years ago that ended with marketers voluntarily agreeing personally identifiable information containing a name, physical address or e-mail requires consumer consent before it could be shared.
Mr. Chester said technological advances now allow marketers to produce the same kind of personal profiles privacy groups most feared would develop -- even without the personally identifiable data -- and said it is time for the FTC to step in.
"They don't need to know your name to know you. They are using the fact they don't have your name as a political shield, but they are collecting tons of personal information and tons of information. They may not use your name or your address but they are digitally shadowing you."
He said consumers don't realize they are being targeted and evaluated on one website based on what they've done on others.
His group singled out Microsoft because the company, in merging its Passport digital profiles with its other online information, is creating "powerful profiles that are being used to engage in commercial transactions, where the content being seen and the offers being made are being purposely shaped without consumers' consent," but added that complaints directed more closely to other companies will follow.
Of course, some might argue that better and more effective advertising is what keeps most web content free and accessible to all of its users.
Added Mr. Chester: "The public needs to understand that the digital environment is being shaped. The ad industry has gone too far with the default being collection, profiling and targeting without consent of American consumers. It's time that the FTC shined a glaring spotlight on what the ad industry is doing. More than privacy is at risk. The ad industry is ushering in a system to promote the brand-washing of Americans."
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Abbey Klaassen contributed to this report.