That’s How the Cookie Crumbles

NEW YORK Like much that Google does, the release last week of its new Internet browser, called Chrome, elicited rave reviews and predictable excitement among tech bloggers. Just as predictable was the wariness expressed by some on Madison Avenue.

As with the recently updated version of Microsoft’s dominant Internet Explorer, changes in the browser affect the thorny issue of privacy. The reams of data produced by Web users present a dilemma: consumers worry they will be misused while advertisers need them to fulfill the Web’s key promise of more targeted and measurable ads. Advertisers are now concerned that Google and Microsoft can use the privacy protection built into their new browsers to control access to this valuable data.

“This is a data-ownership play,” said Dave Morgan, a former AOL executive, founder of ad network Tacoda and now chairman of The Tennis Company. “Privacy intermediation for consumers is something that’s been talked about for a dozen years.”

The immediate concern is that both browsers include a private browsing option, quickly dubbed “porn mode,” which blocks cookies. Much of the targeting information used by advertisers and networks remains dependent on the Internet cookie stored on users browsers. Consumers have long been able to block cookies, but the process is less than obvious. Both Microsoft’s and Google’s browsers will give users much more control over data collection.

Omar Tawakol, CEO of BlueKai, an Internet data exchange, was initially concerned that these options could upend the economics of online advertising. Now, he believes they could be a net benefit for advertising, which has come under fire by privacy groups and faced skeptical questioning by congressional committees about its consumer tracking. Placing control more squarely in users hands will blunt some of the calls for more stringent regulation, he believes. BlueKai plans to compensate users for use of their data and give them access to it.

“I think they’re doing it for the right reasons,” he said. “Someone has to establish a middle ground [in privacy] and the browser is a fairly smart place to do it.”

The sensitivities around privacy and targeting were on display elsewhere last week. Controversial ad targeting firm NebuAd lost its CEO Bob Dykes, and said it would put on hold its plans to deploy “deep-packet inspection” technology that monitors Web behavior through Internet service providers. While browsers would be ideal for collecting many forms of Internet data, Google will need to be careful not to step over an uncertain line, said Ian Schafer, CEO of Deep Focus, an independent digital shop.

“The question is how much goodwill does Google have?” he said. “Google’s line is they’re providing free utilities to people. But how much privacy or targeting are people willing to accept to have access to free utility?”

The doomsday scenario plays out something like this. Google and Microsoft will use their relationship with customers to ostensibly give them more control over what company is following them on the Web. Consumers that opt out of tracking will become invisible to advertisers and third-party ad networks, making critical decisions like frequency capping and behavioral targeting impossible. At the same time, Microsoft and Google, through the browser, will have access to plenty of user data and a relationship with consumers through the products it provides them free of charge. Others wishing to reach them would have to pay. Google could also end up using the browser to display ads rather than cut deals with Web sites to show them.

“I really think there’s a point at which consumers don’t tolerate that but it becomes invasive to the point of counter productive,” said Shar Von Boskirk, an analyst with Forrester Research.

Advertisers are sufficiently concerned with the implications that Microsoft presented its plans for Internet Explorer 8 to the members of the Interactive Advertising Bureau board late last week. The key concerns, according to board member Matt Wise, CEO of ad network Q Interactive, are how consumer options are implemented.

“In the past there’s been an enormous amount of collateral damage,” he said. “Q Interactive is predicated on predicting behavior. We’re fine making sure consumer has some awareness of what’s occurring. But if the consumer constantly gets challenged [with warnings of data passed to third parties], they might start turning stuff off as a default. They might hurt a lot of companies that are providing good services.”

Some agency executives are much more sanguine about the new browser war. Like much that happens between Google and Microsoft, this camp sees it as more their battles than advertisers’. For Google, Chrome is a way to blunt Microsoft’s stranglehold on the desktop by introducing a way for consumers to interact with the Web applications many believe will dominate the computing experience of the future. The notion of giving consumers more control over their data will only appeal to a hard-core few, said Scott Shamberg, svp of marketing and media at Omnicom Group-backed Critical Mass.

“I still don’t think the average user does any of that stuff,” he said. “I’m comfortable I’m going to be getting sufficient data on people.”