The chairman of the Federal Trade Commission says Internet sites that claim they don't collect personal information but permit advertisers to surreptitiously profile site viewers are violating consumer protection laws.
"If they say they don't collect information and they do, they are open to a charge" of deception, said FTC Chairman Robert Pitofsky, in a stance that could cast some Internet sites using third-party ad servers as outlaws.
The agency's position is less clear for Web sites if they use the same ad servers, acknowledge collecting information and say they don't share "personally identifiable" data with third parties.
Mr. Pitofsky said the FTC may need legislation to say at what point a profile of an individual's Web browsing pattern is "personally identifiable."
The FTC and the U.S. Department of Commerce today hold a workshop on some of the issues raised by consumer profiling on the Internet by database companies and ad servers. The workshop comes amid growing controversy about profiling of individual consumers' Web browsing, even as profiling itself is in its infancy.
Marketers suggest that profiling offers an opportunity to target specific niches and reach consumers with custom-tailored messages.
"Ads that are more relevant will be highly valued by consumers," said Rich LeFurgy, chairman of the Internet Advertising Bureau.
Trying to quell the controversy, 10 companies that collect data are joining together today under the banner of the Network Advertising Initiative to announce plans to develop a self-regulatory code that will require Web sites to disclose their use of ad servers and permit consumers to opt out of data collection.
The initiative includes five companies owned, controlled by or in the process of being bought by Net services holding company CMGI: AdForce, AdKnowledge, Adsmart, Engage Technologies and Flycast Communications Corp. Also included in the coalition are DoubleClick and its NetGravity unit; MatchLogic, owned by Excite@Home; 24/7 Media; and Real Media.
"I think it's interesting," 24/7 Senior VP Michael Rowson said of Mr. Pitofsky's comments. "I don't necessarily think he's wrong, but I think it's new territory and it's difficult to say what's right and what's wrong."
Contributing: Bradley Johnson.