The Social

Facebook's targeted advertising program is "materially different from behavioral targeting as it is usually discussed," Chris Kelly, the social network's chief privacy officer, said in remarks prepared for a Thursday morning hearing before two House subcommittees.

"In offering its free service to users, Facebook is dedicated to developing advertising that is relevant and personal without invading users' privacy, and to giving users more control over how their personal information is used in the online advertising environment," read the remarks for two subcommittees of the U.S. House of Representatives Committee on Energy and Commerce.

The hearing, titled "Behavioral Advertising: Industry Practices And Consumers' Expectations," was also slated to include testimonies from Jeffrey Chester, executive director of the Center for Digital Democracy; Scott Cleland, president of Precursor; Charles Curran, executive director of the Network Advertising Initiative; Edward Felten, director of the Center for Information Technology Policy at Princeton University; Anne Toth, vice president of policy and head of privacy at Yahoo; and Nicole Wong, deputy general counsel at Google.

Chris Kelly

(Credit: Kelly2010.com)

Kelly, a White House staffer under President Clinton, has announced an exploratory bid to run for attorney general in California.

Social-media sites like Facebook, where members fill out extensive personal profiles that can detail everything from their music tastes to travel plans to political leanings, are at the forefront of new developments in behavioral ad targeting. The Facebook Ads program lets advertisers fine-tune their campaigns to reach specific demographics and audiences. Kelly insisted that this does not constitute an invasion of user privacy, an Internet-wide concern that the Federal Trade Commission has been exploring at the request of privacy advocates.

"The FTC's behavioral advertising principles recognize the important distinctions made by Facebook in its ad targeting between the use of aggregate, non-personally identifiable information that is not shared or sold to third parties," Kelly's remarks read, "versus other sites' and companies surreptitious harvesting, sharing and sale of personally identifiable information to third party companies."

Privacy concerns are nothing new to Facebook. The social network went through a user backlash over the introduction of its News Feed in 2006, and a bigger one over the controversial Beacon advertising program. More recently, a revision to Facebook's terms of use prompted consumer advocacy blog The Consumerist to highlight language that it said meant that Facebook claimed ownership of user profile data and photos.

"In February of this year, we looked to revise our Terms of Use, simplifying them to cut out as much legalese as possible and explain them in plain language," Kelly's remarks explained. "When we released a first version of our new terms, a blog misinterpreted our simplification of our copyright license, claiming that it meant we were seeking to own user content. The user reaction was predictably swift and severe, and we needed to choose among weathering the storm, revising the language, and introducing an entirely new process that would directly involve users in the governance of the site."

Facebook ultimately underwent a "notice and comment period modeled in part on the federal government's rulemaking procedure...(with) a user vote at the end of the process."

The points he tried to drive home the most: that Facebook members have extensive control over their personal information and that Facebook does not allow advertisers access to "personally identifiable" data in the Facebook Ads program.

Kelly also included a general mea culpa of sorts: "Perhaps because our site has developed so quickly, Facebook may have sometimes been inartful in communicating with our users and the general public about our advertising products," he stated. "We learned many lessons about the importance of user education and extensive control from the imperfect introduction of our Beacon product in 2007. As a result, Facebook continues to be dedicated to empowering consumers to control their information in both the noncommercial and the commercial context because we believe that should be the future of advertising."

A few other interesting tidbits from Kelly's remarks: out of Facebook's 200-million-plus active users, about 65 million are in the U.S.; more than 10,000 sites are using the Facebook Connect universal log-in product; and Facebook plans to continue the discussion-and-feedback-period strategy on any future changes to its "critical site documents."

Lotame, a targeted-ad start-up that focuses on social sites, announced Tuesday that it has raised $13 million in a Series B venture round. The lead investor is Emergence Capital Partners, and existing investors Battery Ventures and Hill Crest Management also contributed. The money, per a release, will be used for "product enhancements, marketing, and business development efforts." Nothing surprising there.

The company's primary offering is a technology called "Crowd Control," which pinpoints discussions on social-media sites related to a particular brand or its niche, and helps that brand get its name on the relevant discussions.

"Forty percent of Internet use is on social networks. This is no longer a wild frontier, and will soon be the primary use of the Internet," CEO and founder Andrew Monfried said in a statement. "Until Lotame, the basics of Internet advertising had not changed to address the unique challenges and opportunities presented by social media. Now advertisers can take full advantage of the basic premises of social networks--the user sets the content agenda and connects other users to ideas." That's a lot of new-media speak, but Monfried now has $13 million backing him up.

Some of Lotame's existing customers include the Huffington Post, Flixster, Fotolog, and ad agency Media Kitchen.

Marketers ought to be aware that some consumers are suspicious about the phenomenon known as "behavioral targeting," a new report from eMarketer says.

Called "Behavioral Targeting Attitudes: The Privacy Issue," the report released Friday explores the digital ad strategy, which collects consumer information and uses it to serve up ads that they may find interesting or relevant. This has been the basis for high-profile programs like Facebook's Social Ads and MySpace's HyperTargeting, as well as Google's extraordinarily successful AdSense. (That's why you'll see ads for vacation homes in Gmail after you've been e-mailing back and forth with your friends about wanting a weekend getaway.)

The takeaway point from the report: "Consumers want ads that are relevant to their needs, but they have mixed feelings about how that relevancy should be determined."

eMarketer cited a TrustE study which found that 70.5 percent of Internet users polled seemed to be decently aware that their browsing activity could be tracked by third parties for advertising. But only about 23 percent of them said that they were OK with having their behavior monitored, even if they were assured that the data would not be shared and no personal information would be divulged.

Targeted advertising is an extremely sensitive subject, with privacy advocates on both the left and right ends of the political spectrum voicing concerns. Internet service providers have been criticized for behavioral-targeting campaigns, questions of legality continue to arise, and top executives at tech companies have been brought into the debate.

The study suggested that advertisers should ensure that consumers are educated on the fine print of behavioral targeting, and that they're offered an opt-in choice. "One way to ensure that consumers welcome rather than reject behaviorally targeted ads is to ask them to give their consent to receive them," a release about the report wrote. "Tell them about the real benefits of saying yes, including more-relevant advertising." That's what the Internet Advertising Bureau has recommended, too.

But perhaps a more serious issue for the ad industry is accuracy. The TrustE numbers cited by eMarketer said that only 12.6 percent of respondents said that more than a quarter of the targeted ads they were delivered were relevant. Ouch.

Social media and Web-surfing habits have made it possible for advertisers to target their campaigns at the narrowest of niche audiences. But what happens when targeting goes beyond relevance and into insensitivity? That's something that a big digital-ad trade group has addressed in a new set of guidelines that effectively ban behavioral targeting pertaining to certain medical and psychological conditions.

The Network Advertising Initiative (NAI), which encompasses ad networks like AOL's Advertising.com and Tacoda, Yahoo's BlueLithium, and Google's DoubleClick, published the draft of its "Self-Regulatory Code of Conduct for Online Behavioral Advertising" guidelines on Thursday. The document was passed in response to principles proposed by the Federal Trade Commission last year.

Under the new guidelines, advertising companies are instructed not to track--and subsequently not display relevant targeted ads across the Web--behavioral practices that would indicate a history of cancer, AIDS, sexually related conditions (erectile dysfunction, or sexually transmitted diseases), abortions, or psychiatric conditions. They're also instructed not to track sexual orientation or criminal victim status.

Targeting ads to children under the age of 13 was also outlawed in the new guidelines.

Additionally, the NAI, which allows individuals to manually opt out of members' ad networks, identified a list of topics deemed potentially sensitive that would require "independent business judgment" on the part of the ad network in question. These include "age, addictions...alienage or nationality, criminal history, death, disability, ethnic affiliation, marital status, philosophical beliefs, political affiliation or opinions, pregnancy, race identification, religious affiliation...(and) trade union membership."

It could get a little rigid: this seems to restrict, for example, an advertising company using behavioral targeting to promote LGBT (Lesbian, Gay, Bisexual, and Transgender)-focused dating sites or events. There's a fine line between good taste and poor taste, as behavior advertising inherently relies on knowing some degree of personal information about Web users. And, in an interview with The New York Times, NAI executive director J. Trevor Hughes acknowledged it. "It may be a sensitive category to target someone based on their ethnicity," he told the Times, but then admitted that it's a tough call. "The Hispanic market in the United States is very large...I don't think anyone would think it is unreasonable to direct ads to Hispanics in the Spanish language."

The guidelines come at a time when targeted ad technology is still in an experimental phase, as digital-ad companies and social networks attempt to replicate the success that Google has had with its AdSense program. Facebook and MySpace.com, for example, have instituted new advertising programs that take advantage of user profile data.

The trade group has instituted a 45-day period for public feedback on the new guidelines, and will finalize them after June 12.